New York Bargain and Sale Deed With Covenant Form
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What Is a New York Bargain and Sale Deed with Covenant Form?
A New York bargain and sale deed with covenant is a legal document used to transfer real estate from the grantor (seller) to the grantee (buyer). A bargain and sale deed with covenant transfers property with a limited warranty. The grantor guarantees that he or she has done nothing to impair the property’s title but makes no promises about anything that happened before the grantor acquired the property. In other words, the grantor warrants that there are no undisclosed liens or encumbrances from while the grantor held title, but does not offer any guarantees about anything earlier in the property’s chain of title.
New York has statutory model bargain and sale deed with covenant forms for individuals and for corporations.1
What Is Warranty of Title?
A warranty of title refers to the grantor’s promise that the property being transferred has a clear and marketable title, free from any title defects, liens, or encumbrances. The extent of the warranty of title depends on the type of deed being used in the transaction. A New York deed that provides a complete warranty—called a deed with full covenants—guarantees that:
- The seller has good title and can sell the property to the new owner;
- The new owner’s ownership will not be disturbed by third-party claims;
- There are no liens, assessments, taxes, or other encumbrances that impair the property’s title;
- The seller will be responsible for any title problems and will defend the title against third-party claims that arise; and
- The seller will take actions or sign documents needed to confirm the new owner’s title.2
A New York bargain and sale deed with covenant provides a limited warranty of title, with just one covenant. The grantor promises only that he or she has not done or allowed anything to cause a problem with the property’s title.3 The grantor does not absolutely guarantee a clear and marketable title.
Other Names for a New York Bargain and Sale Deed with Covenant Form
The term bargain and sale deed with covenant is specific to New York state—though some other states (like New Jersey) use similar terms. In most states, a deed that provides a limited warranty of title—comparable to a New York bargain and sale deed with covenant—is called a special warranty deed. Other states use the names limited warranty deed or grant deed or covenant deed for that type of deed with limited warranty.
How Do New York Bargain and Sale Deed with Covenant Forms Relate to Other Forms of Deeds?
In New York, a bargain and sale deed with covenant provides a warranty that splits the risk of title problems between the grantor and the new owner—depending on when a particular issue arose. New York has two other common deed types that put all risk on the grantor (deeds with full covenants) or on the new owner (quitclaim deeds).
- New York deed with full covenants form. A New York deed with full covenants form provides a complete warranty of title. A deed with full covenants gives the new owner comprehensive protection by absolutely guaranteeing a clear and marketable title, free from any liens, encumbrances, or title defects—except only to the extent a specific issue is disclosed in the deed.4
- New York quitclaim deed form. A New York quitclaim deed form offers the new owner the least protection among New York’s common deed types. A grantor who signs a quitclaim deed transfers whatever interest he or she has in the property with no warranty or guarantees about the title.5 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 when the parties have an existing relationship or when there is no money exchange, such as transferring property between family members or correcting a title issue.
New York bargain and sale deeds with covenant provide a weaker warranty than deeds with full covenants but more protection than quitclaim deeds. A bargain and sale deed with covenant offers a warranty that covers the grantor’s ownership period, and the grantee bears the risk for any issues before the grantor took title.
New York Title Insurance and Bargain and Sale Deeds
Title insurance is a form of insurance policy that protects the policyholder—usually the buyer or lender in a real estate sale—against financial loss due to problems with a property’s title. If a title defect is discovered after the property transfer, the title insurance company defends the insured owner’s title or covers the costs associated with resolving the issue (up to the policy limit).
Title insurance can serve as an extra layer of protection for the grantee in a New York real estate transaction involving a bargain and sale deed with covenant. The title policy may cover issues that are not within the deed’s limited warranty. Title insurance also ensures a reliable source of compensation (i.e. the insurance company) if the grantor is not able to fully compensate the grantee for financial loss caused by a title problem.
New York Bargain and Sale Deed with Covenant Forms and Other New York Deeds Used in Estate Planning
Bargain and sale deeds with covenant in New York are primarily used to transfer title with a limited warranty during the owner’s life. Other deeds have the primary purpose of transferring property efficiently upon the owner’s death.
A New York life estate deed form allows real estate to avoid probate. A life estate deed splits ownership of real estate into two interests: a life estate (which gives the interest holder the right to own the property for life) and a remainder (which gives the beneficiary the right to take title when the life estate holder dies). Owners often create life estate deeds for estate plans that keep the life estate with the current owner. This allows him or her to keep the property for life and then transfer it to the beneficiary without going through probate.
A life estate deed can transfer title with or without a warranty. The same deed may be both a life estate deed and a bargain and sale deed with covenant if the deed creates a life estate and also includes a limited warranty.
Transfer-on-Death Deeds in New York
New York does not currently recognize transfer-on-death deeds—a type of deed that allows the owner to designate a beneficiary to receive the property upon the owner’s death without going through probate. New York property owners can use living trusts, life estate deeds, or other estate planning tools to achieve similar objectives.
Common Uses of New York Bargain and Sale Deed with Covenant Forms
A New York bargain and sale deed with covenant is commonly used for real estate sales where the grantor and grantee agree to a limited warranty. Some common uses for a bargain and sale deed with covenant forms include.
- Residential real estate transactions. A bargain and sale deed with covenant supplemented by title insurance can be a good choice for residential property sales.
- Commercial real estate transactions. Commercial property sales often use a bargain and sale deed with covenant when the buyer and seller negotiate a warranty that covers some, but not all, risk of title issues.
- Property transfers with known title issues. When the grantor and grantee are aware of existing title defects or encumbrances, they may choose to use a bargain and sale deed with covenants to provide limited protection, while acknowledging the known title issues.
- Transactions with a degree of trust between parties. In situations where the grantor and grantee have an existing relationship or trust, a bargain and sale deed with covenant can provide a balance between protection and flexibility for both parties.
How to Create a New York Bargain and Sale Deed with Covenant
As with any deed, a New York bargain and sale deed with covenant 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 bargain and sale deed with covenant must satisfy New York’s deed requirements and include the information needed to sufficiently describe the transfer. Necessary information includes the names of the grantor and grantee, the property’s legal description, the consideration (usually the purchase price), and any legally required disclosures.
A bargain and sale deed with covenant must also have the language the deed needs to provide the limited warranty. To use New York’s statutory short-form language for the covenant, the deeds must state that the grantor “has not done or suffered anything whereby the said premises have been incumbered.”6
The grantor must sign the bargain and sale deed with covenant in the presence of a notary public, who will then notarize the document to confirm the grantor’s identity and the signature’s authenticity. The signed, notarized deed should then be recorded with the recording office (the county clerk or county register) for the county where the property is located. Recording provides public notice of the property transfer and protects the grantee’s ownership rights against subsequent claims or transfers.
New York charges transfer taxes on the sale of real estate. Transfer taxes and any required recording fees must be paid when the deed is filed for recording.
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