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Which Deed Should I Use?

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Which Deed Should I Use? FEATURE | TITLEREAL ESTATE LAW Which Deed Should I Use? BY EBEN P. CLARK 34 | COLORADO LAWYER | JANUARY 2019 Tis article discusses the four basic deed forms used in Colorado and when to use each form. hich deed should I use? Tis is c. Tat he warrants to the grantee and his the inevitable question in any heirs and assigns the quiet and peaceable transaction in which real prop- “ possession of such property and will erty is conveyed, regardless of The four basic defend the title thereto against all persons theW form of the transaction or the property to be who may lawfully claim the same. transferred. Every lawyer, realtor, or other real deed forms in While Upton and the Colorado Revised estate professional has faced this question at Statutes lay out with particularity the warranties some point in time. Colorado are included with a general warranty deed, for This article provides an overview of the general warranty, comparison purposes it is worth noting that at diferent types of deed forms available in Col- common law, the standard warranties of title orado. It describes the basic characteristics of special warranty, were referred to as six covenants: each type of deed, and its appropriateness for 1. the covenant of seisin (that the grantor various circumstances. Tis article does not bargain and sale, has the very estate it purports to convey); advocate for the use of a single form of deed for 2. the covenant of right to convey (that a certain transaction. Nor does it seek to provide and quitclaim. the grantor has the right to convey the a formula for determining the appropriate In this order, promised title); deed form in any specifc situation. Such an 3. the covenant of freedom from encum- approach is not realistic, because the decision each provides brances (warranty by the grantor against of which deed to use depends on the property, encumbrances); negotiation positions of the parties, and specifc a decreasing 4. the covenant of quiet or peaceable pos- facts in each such transaction. Te goal of this number of title session (warranty that the grantee will article is to guide practitioners in identifying not be evicted by the grantor or another the relevant considerations for choosing which warranties to the claiming superior title); form of deed to use. 5. the covenant of further assurances buyer. (covenant of the grantor to execute any Basic Colorado Deed Forms document necessary to properly vest The four basic deed forms in Colorado are title); and general warranty, special warranty, bargain 6. the covenant of warranty (warranty that and sale, and quitclaim.1 In this order, each ” the grantee has title and possession to provides a decreasing number of title warranties the property and will not be deprived of to the buyer. defend the title against all persons who may possession by persons asserting superior lawfully claim title.”3 claims of possession or title, and that the General Warranty Deed CRS § 38-30-113(2) lists the warranties grantor will defend title conveyed against In Colorado, a general warranty deed includes aforded by a general warranty deed as: such lawful claims).4 four statutory warranties.2 Citing CRS § 38-30- a. Tat at the time of the making of such While many residential transactions are 113, the Colorado Court of Appeals in Upton instrument he was lawfully seized of an closed using general warranty deeds, in com- v. Griffitts articulated these warranties as “a indefeasible estate in fee simple in and mercial transactions the general warranty deed promise from the grantor that, at the time of its to the property therein described and is relatively rare because of the breadth of these execution, he was lawfully seized of the estate has good right and full power to convey warranties by the grantor. conveyed, that the estate was free and clear the same; from all encumbrances except as stated, and b. Tat the same was free and clear from all Special Warranty Deed that he warrants to the grantee the quiet and encumbrances, except as stated in the In Colorado, the distinction between a general peaceful possession of the property and will instrument; and warranty deed and a special warranty deed JANUARY 2019 | COLORADO LAWYER | 35 FEATUREFEATURE || TITLEREAL ESTATE LAW lies not in the number of warranties provided, In addition, at common law and under after-acquired property. As a result, a quitclaim but rather in their scope. A Colorado special the Statute of Uses (1535), a bargain and sale transfer can be characterized as: “I don’t know warranty deed includes the same four statutory deed also required consideration (hence the what I have, but whatever it is you can have it.” A warranties as a general warranty deed; however, name “bargain and sale”). Te Colorado Court quitclaim deed can also be viewed as a release the warranty against encumbrances is limited of Appeals has held that the Statute of Uses or waiver of rights (for example, sometimes a to claims made by or through the grantor. is in efect in Colorado.10 However, Colorado quitclaim deed may be provided to effect a There is no warranty against claims made courts have also held that a conveyance reciting release or termination of an easement).12 Despite by or through prior owners or others. This consideration is valid even though there is no the lack of representation or warranty by the can be understood as the grantor providing a consideration, and the sufciency of consid- grantor, in Colorado a quitclaim deed does not defense against rights or claims made based on eration cannot be challenged by a person with put a grantee on inquiry notice of potential title interests or defects that arose during the period no interest in the transaction.11 defects, and a grantee by quitclaim deed can of the grantor’s ownership of the property.5 be a bona fde purchaser for value.13 Special warranty deeds are customarily used in commercial transactions and, as discussed Which Deed Should I Use? below, in areas of the state where there are As stated above, deeds are not one-size-fts-all. special title considerations.6 However, each deed is commonly used for “ certain types of transactions, and one deed Bargain and Sale Deed As a result, may be preferred over others by a grantor or A Colorado bargain and sale deed is a grant grantee in some situations. without covenants or warranties, unless a quitclaim covenants or warranties are expressly stated General Warranty Deed therein. Put another way, a bargain and sale transfer can be Many assume the general warranty deed is the deed is a deed without implied warranty of any characterized standard deed for real estate transactions. In kind. A bargain and sale deed is distinguished practice, however, the general warranty deed from a quitclaim deed (described below) in as: ‘I don’t know is rarely used in commercial transactions and that a bargain and sale deed conveys both is increasingly disfavored in residential trans- the grantor’s interest in the property as of the what I have, but actions. So, when should a practitioner select date of conveyance, as well as any interest in whatever it is you this deed form? When representing the grantor, the property that the grantor acquires after the answer is only when you absolutely must, the closing. These interests are referred to can have it.’ which generally means only when the grantee as “after-acquired” interests or property. For demands it. When representing the grantee, example, after-acquired property might in- the answer is “always,” and the request for a clude mineral rights not vested at the time of general warranty deed should be the starting the grant, or reversionary interests that vest point for negotiations. 7 ” after the grant. In such cases, the grantor’s As noted above, for simple residential after-acquired interests are deemed held in transactions, the general warranty remains the trust for the grantee.8 Bargain and sale deeds are rarely used in standard deed. For relatively simple commercial Several nuances to the bargain and sale arm’s-length transactions in Colorado. Tey are transactions (those without much potential for deed merit further explanation. While a bargain most often used in transactions among related competing claims), the general warranty deed and sale deed is generally considered a deed parties. Tey are also used where the grantor may also be used, though doing so is relatively without covenants, there is an argument that is not willing to ofer warranties, but the buyer uncommon and likely only appropriate where it includes a covenant of seisin.9 However, the anticipates some after-acquired interests. unique circumstances exist (e.g., inability of the plain language of CRS § 38-30-115 states that a grantee to obtain title insurance). It would be deed with the words “sell and convey” has the Quitclaim Deed highly irregular for a grantee to demand, much same efect as a “bargain and sale deed, without A Colorado quitclaim deed conveys only the less for a grantor to agree to give, a general covenants of warranty, at common law.” In grantor’s then-present interest in the real prop- warranty deed in a commercial deal of any Colorado, the question whether a bargain and erty, without warranty of any kind. It is the most complexity. sale deed includes a covenant of seisin remains basic form of transfer and provides grantees A general warranty deed is also sometimes unresolved and is relevant when considering with little or no assurance as to what they will used for transactions between related entities using this form of deed.
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