A California Warranty Deed form is a special form of deed that guarantees that the transferor has clear title to the property being conveyed. A California Warranty Deed form contains special language that spells out the warranties of title.
A Warranty Deed differs from a Quitclaim Deed form. It includes a full warranty of title that guarantees that there are no title defects. By contrast, a Quitclaim Deed includes no warranties of title.
A Warranty Deed also differs from a Grant Deed form (known in some states as a Special Warranty Deed) in two ways. First, a Warranty Deed includes a blanket guarantee that the transferor has clear title. A Grant Deed has a more limited warranty. A Grant Deed only guarantees that the transferor has done nothing to cause a title defect. The warranty in a Grant Deed does not apply to anything that happened before the transferor acquired the property.
Assume that Jake owns a parcel of real estate in Alameda County. Jake does not know that the person Jake bought the property from did not own it. This means there is a defect in title that arose before Jake acquired the property. Jake later sells the property to Brett.
If Jake conveys the property to Brett using a Grant Deed form, Brett would not have a claim against Jake for the title problem. Because the problem arose before Jake acquired the property, and because the warranty in a Grant Deed does not cover issues that arise before the transferor acquired title, Brett has no legal recourse against Jake.
If Jake conveys the property to Brett using a Warranty Deed form, Brett would have a claim against Jake for breaching the warranty of title. A Warranty Deed form covers all defects—even those that arose before the transferor acquired the property.
The second difference between a Warranty Deed and a Grant Deed is the nature of the warranty. When a person transfers California real estate using a Grant Deed, the terms of the warranty are not specified in the Grant Deed itself. Instead, the warranty of title is implied under California Civil Code Section 1092. But when the transfer is by Warranty Deed, the warranty is spelled out in the Warranty Deed. This is known as an express warranty.
Because the warranties in a Warranty Deed are stated in the deed itself, Warranty Deeds can be custom-designed to include only the warranties that the drafter wants to include. These warranties are often called covenants. Common covenants include:
- Covenant of Ownership – A guarantee that the transferor legally owns the property being transferred.
- Covenant of Right to Convey – A guarantee that the transferor has the right to transfer the real estate.
- Covenant of Warranty and Quiet Enjoyment – A guarantee that the transferor will ensure that title is clear and that the recipient may use (enjoy) it.
- Covenant Against Encumbrances – A guarantee that the real estate is free from all deeds of trusts (mortgages), liens, or other encumbrances other than those that are specifically disclosed.
- Covenant of Further Assurance – A guarantee that the transferor will take any future action needed to give effect to the other covenants.
Title insurance provides a substitute for the assurance provided by Warranty Deeds. Title insurance insures against any financial loss that the transferee may incur due to defects in title to the property. Title insurance is usually a win-win for both the transferor and the transferee.
- Transferors like title insurance because it shifts risk from the transferor to the title insurance company. If it turns out that there is a problem with title, the title insurance company bears that risk instead of the transferor.
- Transferees like title insurance because it provides more financial security. Instead of having to track down and sue the transferee (who may declare bankruptcy or otherwise lack resources to honor the warranty), the transferee can file a claim against a title insurance company. Unlike
In commercial real estate transactions, buyers will often insist that the transferor convey title by Warranty Deed. But outside of the commercial setting, the assurance provided by General Warranty has largely been replaced by title insurance.
When transferring California real estate by Warranty Deed, it is important to use the correct language. Incorrect language can result in contradictions in language (known as patent ambiguities). Patent ambiguities usually require legal action to clear title. This risk can be avoided by using a Warranty Deed form that meets the requirements of California law.