By Gary L. Blacklidge, AttorneyThis article originally appeared in the June 21, 2019 edition of the Daily Journal of Commerce Oregon.
Since 1973, Oregon has recognized four statutory deed forms. The warranty deed is the most commonly used in arm’s-length transactions. The other deed forms are the special warranty deed, the bargain and sale deed, and the quitclaim deed. This article discusses the distinctions among these deed forms.
As the name implies, a warranty deed conveys a grantor’s interest in the described property and also warrants that the property is free of encumbrances, except those specifically described in the deed. Moreover, a warranty deed conveys the entire interest in the described property as of the date of the deed that the deed purports to convey. It also conveys all after-acquired title and estops the grantor and the grantor’s heirs, successors, and assigns from asserting they had an estate or interest less than what the deed purports to convey.
A warranty deed also includes statutory covenants of title, even though not expressed in the deed. First, at the time of delivery of the deed, the grantor covenants that grantor is seised of the estate in the property that the deed purports to convey, meaning that grantor owns the property (derived from the medieval covenant of seisin), and that grantor has a good right to convey the property. Second, the grantor covenants that at the time of delivery of the deed, the property is free of encumbrances except those specifically set forth in the deed. Finally, the grantor warrants and will defend the title to the property against all persons who may lawfully claim the same. However, courts have declined to enforce this warranty in case of unlawful or frivolous claims.
A grantor must expressly exclude from the warranty deed anything not included in the conveyance. Otherwise, the property conveyed is free of encumbrances if none are set forth in the deed. For instance, if the grantee is taking title subject to an encumbrance or obligation, like a mortgage against the property, the deed must state that the conveyance is subject to that mortgage.
Special Warranty Deeds
Special warranty deeds are the same as a warranty deed with one big exception: the covenant of freedom from encumbrances is limited only to those encumbrances created or suffered by the grantor. Thus, the grantor warrants and must defend the title only against those persons who may lawfully claim the same by, through, or under the grantor. Accordingly, if there was something like a judgment lien against a prior owner of the property, a grantor under a special warranty deed would not have to defend the title against that judgment lien since it was not created or suffered by the grantor.
Special warranty deeds have historically been used as fulfillment deeds for land sale contracts since the deeds may be delivered many years after the sale closed and possession was transferred. Likewise, grantors who obtained title to property through a foreclosure may choose to convey by special warranty deed since they would know what encumbrances they may have created or suffered, if any, but may not know what else may encumber the property.
Bargain and Sale Deeds
Bargain and sale deeds are similar to warranty deeds, except they do not contain any warranties or covenants. They convey the entire interest in the property that the deed purports to convey as of the date of the deed, they pass after-acquired title, and they estop the grantor and grantor’s heirs, successors, and assigns from asserting they had an estate less than the deed purports to convey as of the date of the deed. As with the other deed forms, a grantor must still expressly exclude any retained property or interests.
Bargain and sale deeds are useful in conveying interests in property to family members or related entities; but the parties should confirm with their title company that such a conveyance will not invalidate any existing title policy on the property. Bargain and sale deeds are also used to convey lesser interests in property, such as easements. But, the deed must expressly state that the property interest conveyed is limited to an easement.
A standard title insurance policy does not cover the broad covenants of title that are in a warranty deed. Therefore a grantee taking title through a bargain and sale deed who wants the additional protections of a warranty deed should consider an extended coverage title policy.
Quitclaim deeds are commonly used to release interests in or claims to property. A statutory quitclaim deed “releases and quitclaims” a grantor’s property interest to grantee, but does not imply that the grantor has any interest at all. Quitclaim deeds do not operate as an estoppel on the grantor. Neither do they convey any title or interest that the grantor may thereafter obtain (after-acquired title). A quitclaim deed may be used to convey all of the estate that a grantor could convey under a bargain and sale deed, but to be equivalent, the grantor would need to add language including any after-acquired title of the grantor.
A quitclaim deed could be used to resolve a boundary line dispute by releasing all claims one party may have to the other party’s specifically described property. A quitclaim deed could also be used to release easements or other rights to or liens on real property by describing the right or interest being released in the deed. Parties should avoid using quitclaim deeds to transfer or convey title to third-party purchasers, as many title insurance companies refuse to insure title acquired through a quitclaim deed.
The statutory forms of the four Oregon deed forms are permissive, meaning they may be modified to fit specific situations. However, it is important to obtain situation-specific legal advice to choose the proper form of deed and language to achieve the goals of a transaction.
Gary L. Blacklidge is a real estate attorney at Jordan Ramis PC. Contact him at email@example.com or (503) 598-7070.