SEPTEMBER 20, 2002 When it comes to , it pays to pay attention By Evan L. Randall protection against encumbrances upon or inter- seller later acquires to the , the Old habits die hard. And they can be expen- ests in the property unknown to the seller and seller’s after acquired title will automatically sive, especially when buying property in Colo- created before the seller acquired title. transfer to the buyer by virtue of the previously rado. Blindly agreeing to the commonly used Thus, the general warranty provides delivered deed. general to seal your transaction the greatest protection to the buyer. If the buyer may come back to haunt you in later years. (or a successor in interest) suffers a loss because Quitclaim Deeds Similar to a bargain and sale deed, a quitclaim When buying property in Colorado, it pays to of an adverse title matter covered by the seller’s deed does not contain any warranties. A quit- pay attention to what kind of deed you’re sign- warranty, the buyer has the right to bring a claim against the seller. claim deed, however, will not transfer the seller’s ing. after acquired title in the property. Because of Whether you’re a buyer or a seller, it’s im- Special Warranty Deeds these limitations, buyers are usually reluctant portant to understand the types of deeds avail- In residential transactions, it is still common to accept a in a normal property able, since the typically will specify to convey property by general warranty deeds. transfer. Quitclaim deeds are frequently used the type of deed to be used at closing. Colorado In commercial transactions, however, special for other purposes, such as to remedy bound- recognizes the following four types of deeds: warranty deeds are becoming more common. ary or title ownership problems. (i) general warranty deeds, (ii) special warranty With a special warranty deed, the seller war- deeds, (iii) bargain and sale deeds, and (iv) quit- rants title to the property (again to the buyer The Importance of Title claim deeds. While each type of deed is effective and to its successors in interest) against only to convey the seller’s title and interest in the Insurance those matters created by the seller. Unlike with property to the buyer, there are significant dif- The warranties in a deed are now commonly a general warranty deed, the seller does not war- ferences between each. supplemented by a title insurance policy. This rant title to the property against matters created title insurance policy insures that the buyer is Pay Attention to Warranties before the seller acquired the property. From now the owner of the property and lists as ex- the buyer’s perspective, a special warranty The main differences between these types of ceptions to coverage specific matters, encum- deed is not as desirable as a general warranty deeds are the warranties provided by the seller to brances, or other interests in the property that deed. the buyer. Such warranties cover title matters the title company has identified through the county records, the survey, or visual inspections. that may negatively affect the property, such as Bargain and Sale Deeds unknown , encroachments, or other If a title problem arises and is shown to have By contrast, a bargain and sale deed usually interests in the property. Because a buyer does existed as of the date of the title insurance policy, contains no warranties at all, not even a warranty not want to be surprised at a later date by claims and so long as the problem was not excepted that the seller actually owns the property. With a of ownership or other rights to or occupy all from coverage, the title policy should provide bargain and sale deed, the seller conveys its inter- or a portion of the property, the seller is typi- protection for the buyer. This gives the buyer est, if any, in the property to the buyer. Some- cally expected to provide some warranties of title. two-fold protection against adverse title matters, times, a bargain and sale deed may contain a Having warranties in the deed reduces the risk of in part through warranties in the deed and, addi- limited warranty that the seller did not encumber these types of uncertainties. tionally, by way of the title insurance policy. the property (similar to a special warranty deed), Mr. Randall, an associate in the Colorado General Warranty Deeds but such warranty is typically for the buyer’s Springs office of Hogan & Hartson L.L.P., prac- benefit only and is not passed on to the buyer’s With a general warranty deed, the seller war- tices in and land use and has successors in interest in the property. rants title to the buyer and to any person or worked with clients in various transactional and A general warranty deed, a special warranty litigation matters, including commercial leasing, entity that acquires title after the buyer (some- deed, and a bargain and sale deed will each also financing, commercial property sales, environ- times called a successor in interest) against all transfer the seller’s interests in what attorneys mental remediation, environmental regulation, matters that exist prior to the conveyance (ex- call “after acquired title” to the property. This construction, institutional controls, zoning, and cept matters specifically excepted from the war- means that if the seller did not actually own the subdivision. He can be reached at 719/448-5953 ranties in the deed). This warranty even includes property at the time of the conveyance, but the or [email protected].