6. How do individuals establish and document an ownership interest in real property?
Interests in real property are subject to an instrument of title. A deed is the primary manner of establishing ownership and transferring an interest in land. The deed contains a precise legal description of the land and specifies the exact location and boundaries according to a mapping or surveying system. Some types of property interest, such as an easement, can be created through a legal document other than a deed; however, a deed is still required to subsequently transfer an established ownership interest in the property. There are several types of property deeds:
• Warranty Deed – This is a deed that purports to transfer any ownership that an individual has in the real property. The seller warrants that she holds title to the property free and clear of any liens or encumbrances and that she is legally entitled to transfer the property. A warranty deed may be divided into “general warranty” and “special warranty” deeds.
⁃ Note: Individuals providing warranty deeds often purchase title insurance to protect themselves against warranty liability in the event of a defect in title.
⁃ General Warranty – The general warranty deed warrants the title against any defects that have ever existed in the title.
⁃ Special Warranty – A special warranty deed warrants the title against any defects caused by or relating to actions or omissions of the seller.
• Grant Deed – A grant deed is a deed in which the seller guarantees to the purchaser that the property has not be previously sold and that there are no liens, encumbrances, or restrictions that are not disclosed. She also guarantees that there are no current ownership claims by third parties. Unlike the warranty deed, the grant deed does not warrant title against all claims by third parties. That is, the seller will not defend the title if anyone else claims an interest in the property. The recipient is left to rely upon her own search of title to the property to identify potential claims.
• Quitclaim Deed – A deed that purports to transfer the ownership that an individual has in the real property without warranty. That is, the seller or transferor does not warrant that she has any particular ownership interest in the subject property. These types of deeds are commonly used in disputes over real property and in situations where title history is very uncertain.
⁃ Note: This type of deed is commonly used in complicated divorce or inheritance situations.
• Discussion: Why do you think that the law requires a special legal document to transfer an ownership interest in land? Why do you think a simple contract to transfer land insufficient to transfer ownership?
• Practice Question: Hannah, along with her five sisters, inherits land from her grandfather. There is a bit of uncertainty as to each daughter’s inheritance rights, so Hannah is not certain of her ownership percentage in the land. Ted is a developer who wants to build condos on the land. He works out a deal with Hannah and her five sisters to purchase all of their interests in the land. As part of this transaction, what type of deed would you recommend that Hannah use in transferring her interest to Ted? Why?