New Jersey Special Warranty Deed Form
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What Is a New Jersey Special Warranty Deed Form?
A New Jersey special warranty deed is a legal document that transfers real estate ownership from the grantor (seller) to the grantee (buyer) with limited warranties.1 Where a general warranty deed guarantees a good, clear title, a special warranty deed guarantees only that the grantor has not encumbered the property during his or her period of ownership. This means that the grantor is responsible for defending the title against claims that arose during his or her ownership, but the grantor makes no guarantees about issues that may have occurred before that time.
New Jersey has statutory form language that can be used to create a special warranty deed.2
What Is Warranty of Title?
A warranty of title is a guarantee provided by the grantor that the property being transferred has a clear and marketable title. The extent of the warranty of title depends on the type of deed being used for the transfer. The limited warranty of title a New Jersey special warranty deed provides differentiates it from a New Jersey general warranty deed.
A general warranty deed provides a complete warranty of title. A grantor who signs a general warranty deed guarantees that he or she has clear title to the property, free from any liens, encumbrances, or other title defects (even those that may have arisen before the grantor’s ownership).3
A special warranty deed offers the grantee protection against title problems that arose during the grantor’s period of ownership, but it does not provide the same level of assurance as a general warranty deed (or warranty deed). The grantor guarantees that there are no title problems that arose during the grantor’s ownership of the property. But the grantor does not provide any guarantees for issues that may have occurred before he or she owned acquired the property.4
Other Names for a New Jersey Special Warranty Deed Form
The document known as a special warranty deed in New Jersey is also used in other states but may be referred to by different names. The underlying concept of a deed that provides limited warranties covering the grantor’s period of ownership is consistent.
Some alternative names for a special warranty deed in other states include limited warranty deed (used in Ohio), covenant deed (used in Michigan) and grant deed (used in California, where a grant deed implies certain limited warranties). Each of these deeds serves a similar purpose to a New Jersey special warranty deed, offering limited protection to the grantee regarding the property’s title and any encumbrances that may have arisen during the grantor’s ownership.
How Do New Jersey Special Warranty Deed Forms Relate to Other Forms of Deeds?
In New Jersey, special warranty deeds offer limited protection and guarantees to the grantee when compared to other types of deeds. New Jersey recognizes two other types of deeds—warranty deeds and quitclaim deeds—that provide complete protection and no warranty (respectively).
- New Jersey warranty deed form. A New Jersey warranty deed form provides the grantee with the highest level of protection and guarantees concerning the property’s title. The grantor warrants that he or she has clear title to the property, free from any liens or encumbrances, and promises to defend the grantee’s title against any future claims, even those that may have arisen before the grantor’s ownership. Warranty deeds keep all risk of title problems with the grantor (the current owner making the transfer).
- New Jersey quitclaim deed form. A New Jersey quitclaim deed form offers the new owner the least protection against title problems. The grantor transfers whatever interest he or she may have in the property with no warranties or guarantees about the title.7 The grantee assumes the risk of any title defects or encumbrances, and the grantor has no obligation to defend the grantee’s title in case of a future claim. Quitclaim deeds are commonly used in situations where the parties have an existing relationship, or when there is no exchange of money, such as transferring property between family members or to correct a title issue.
New Jersey special warranty deeds provide less protection than warranty deeds but offer more protection than quitclaim deeds. This protection comes at the cost of more risk to the grantor than under a quitclaim deed.
New Jersey Title Insurance and Special Warranty Deeds
Title insurance protects the policyholder, usually the buyer or lender in a real estate transaction, against financial loss due to problems with the property’s title. The title insurance company has a contractual duty to defend the policyholder’s ownership rights against adverse claims and to cover the costs associated with resolving a title problem (up to the policy limit).
Title insurance is often used in conjunction with special warranty deeds to provide additional protection for the grantee. A title insurance policy helps safeguard the grantee against potential title issues that are not covered by a special warranty deed’s warranty. Since a special warranty deed only provides limited warranties, the grantee could be at risk for title defects or encumbrances that arose before the grantor’s ownership.
Title insurance policies typically come in two types: owner’s title insurance and lender’s title insurance. Owner’s title insurance protects the grantee’s financial interest in the property, while lender’s title insurance protects the mortgage lender’s interest. When obtaining a special warranty deed, it is common for the grantee to purchase an owner’s title insurance policy, as it ensures a reliable source of compensation if a title issue emerges.
New Jersey Special Warranty Deed Forms and Other New Jersey Deeds Used in Estate Planning
Special warranty deeds in New Jersey are named based on how they transfer real estate ownership with limited warranties. Other New Jersey deeds are named for how they can be used to avoid New Jersey probate.
A New Jersey life estate deed is a legal document that allows an owner to keep lifetime ownership of the property and give a beneficiary the right to own the property after the owner dies. When the owner dies, the property automatically passes to the beneficiary without going through probate. A life estate deed may be prepared with or without warranties, depending on the specific circumstances and the grantor’s preferences. Thus, the names life estate deed and special warranty deed may sometimes both apply to the same New Jersey deed.
Transfer-on-Death Deeds in New Jersey
New Jersey does not currently recognize transfer-on-death deeds, a type of deed that allows the grantor to designate a beneficiary who will receive the property upon the grantor’s death without going through probate. Instead, individuals in New Jersey may use living trusts, life estate deeds, or other estate planning tools to achieve similar objectives.
Common Uses of New Jersey Special Warranty Deed Forms
Special warranty deeds in New Jersey are used when the grantor wants to provide some protection to the grantee, but not the comprehensive warranty of a warranty deed. Special warranty deeds are often used in New Jersey property sales. A special warranty deed lets the grantor provide some warranty even if he or she cannot provide a full warranty due to lack of complete knowledge of the property’s title history.
Special warranty deeds are also useful in transfers by fiduciaries. A trust’s trustee or an estate’s executor, for example, typically wants to limit his or her liability to the period while the fiduciary was responsible for managing the property. Using a special warranty deed with a living trust may also help preserve title insurance coverage.
Similarly, when a property is sold as part of a foreclosure or a bank-owned sale, the financial institution may use a special warranty deed to transfer the property, limiting the bank’s liability to the period while it held title.
How to Create a New Jersey Special Warranty Deed
As with any deed, a New Jersey special warranty deed should be customized to reflect the specific terms and conditions of the transaction. Reliance on fill-in-the-blank forms can lead to invalid documents and future title issues.
A special warranty deed must meet all New Jersey requirements and include the essential information for a New Jersey deed. It must contain the names of the grantor and grantee, the property’s legal description, the consideration (usually the purchase price), and the language needed to create the limited warranty. Under New Jersey law, a deed is considered a special warranty deed if it says that the property is transferred “with special warranty.”8
The grantor must sign the special warranty deed in the presence of a notary public, who then notarizes the deed to confirm the grantor’s identity and the authenticity of the signature. Once the special warranty deed has been executed, it should be recorded with the county recording officer (the county register or county clerk) for the county where the property is located. Recording the deed provides public notice of the property transfer and protects the grantee’s ownership rights against subsequent claims or conveyances.
New Jersey imposes transfer taxes on the sale of real property. Transfer taxes and the necessary recording fees must be paid when recording the deed.
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