Deeds In The State Of Washington
Note: This podcast is no longer available, but please see below for the transcript of the podcast.
We are talking about deeds today. You have to use them to sell land. In the United States, the law has always been that a sale of land has to be in writing, and that writing is typically on a deed. Some places absolutely require that a transfer of land be by deed, so even if someone tries to bet the farm during a hand of poker—I’d say get it in writing.
I will discuss three types of deeds today that are used in the State of Washington. The first is a warranty deed, the second is a special warranty deed, and the third is a quitclaim deed.
A warranty deed is probably one of the more common deeds. The warranty deed is a favorite of those entering into an agreement to purchase and sale property, because it provides seller warranties. Buyers can buy with assurance that they can hold the seller responsible should title to the land turn out to be not what was represented in the sale. Sellers like warranty deeds because they can usually get more money for the property. But okay–Just what exactly are these warranties? Under the common law, there are six seller warranties. Three exist before ownership of the land transfers and three exist hereafter into the future. But, most States have changed the common law.
In Washington State, the Revised Code at section 64-04.030 states a Warranty Deed in the proper form carries these implied covenants of the seller: “(1) That at the time of the making and delivery of such deed he or she was lawfully seized of an indefeasible estate in fee simple, in and to the premises therein described, and had good right and full power to convey the same; (2) that the same were then free from all encumbrances; and (3) that he or she warrants to the grantee, his or her heirs and assigns, the quiet and peaceable possession of such premises, and will defend the title thereto against all persons who may lawfully claim the same.”
The first warranty seems obvious, because it means the person selling the land warrants that they possess and own the land. However, I have heard of situations where sellers tried to sell property under a long-term lease, meaning that they did not actually possess the land. Practically, many leases have provisions that the lease would terminate should the owner sell, but if that clause isn’t in the contract—so watch out. Another example of danger is when a seller tries to sell property on behalf of another without the authority to do so, which can easily happen in a situation where trusts or business entities are involved.
The second warranty is nested in as part of the first warranty listed in the Revised Code, which is that the person selling the land warrants that they can legally transfer the title of the land to the buyer. Again, this warranty could be broken quite easily when someone tries to sell land when they do not have the authority to do so.
The next warranty, unless the seller says otherwise, is that the seller warrants that the land is free of any liens or encumbrances.
Encumbrances include things like mortgages, liens, judgments, and other monetary claims. Sometimes it is argued that easements are encumbrances, because they burden the land. However, this definition for encumbrances is too broad, and encumbrances should be limited to monetary claims.
Now this part is especially important because even if a document has the title “warranty deed” at the very top, it is very possible that all of the warranties we are discussing are stripped away. One type of stripping occurs frequently with liens or encumbrances.
The danger is that the property might actually have a number of liens or other encumbrances. However, as long as the seller tells the buyer, in some manner, then a buyer cannot come back and seek recourse against a seller. So, the warranty against encumbrances is really more like a warranty against any encumbrance that I, as the seller, don’t tell you about. Disclosures about encumbrances remaining on real property after a sale should be made in writing as part of the seller’s disclosure.
One way of knowing how the encumbrances effect a particular piece of property is to take advantage of the TIER service offered by Timely Contract, but these are the three warranties that a seller makes about pre-sale matters.
Once the title is transferred, the buyer and seller sign the warranty deed, and the buyer goes home and places the deed in a drawer somewhere because that is what people do with their property deeds right?—wait, what?–NO!! I meant to say the buyer goes and records the signed deed in the county recorder’s office! Its’ incredibly important to record your deed, because that is the best evidence of your ownership and as a defense of your title from to claims by other people.
So, let’s start over. According to the Washington Revised Statute, once the title is transferred and recorded a seller warrants by issuing the warranty deed that they ONE will defend the a buyer from a claim against the buyer’s interest in the property, and TWO that the buyer will have the right of quiet enjoyment. The defense of the title means the seller will provide further assurances to correct any defect in the buyer’s newly acquired title.
Let’s look at a scenario where the warranty may be useful. We start with the first future warranty, where a seller defends the buyer against a legitimate claim against the buyer’s interest in the property. In this scenario, let’s say there was a secret mortgage out there, as if the seller gave a family member a mortgage on the property in exchange for a loan. This family member and mortgage holder then attempts to foreclose on the property now owned by the buyer. In this case, the seller gave a warranty deed that they would step in to defend the buyer from the foreclosure by the seller’s family member.
For our second scenario, we discuss the next future warranty, the warranty of quiet enjoyment. This warranty states that the seller will warrant that the buyer can reasonably and legally use the property as they would like, and if something or someone does interfere with the buyer’s use the seller will defend the buyer. For example, say a dog trainer purchases property near a factory and the trainer builds a dog training facility. The trainer then realizes that nearly every hour the dogs start behaving erratically. Come to find out the factory is producing dog whistles and the factory’s quality control is testing a few whistles out of each batch every hour. The dog trainer probably doesn’t have a case against a seller for a breach of quiet enjoyment because the trainer can still use the property, although it may not be the best place to train dogs.
Finally, the last warranty in a warranty deed is the warranty of further assurances, which is implied in the duty to defend the title. This warranty tells a buyer that the seller will do what is necessary to correct the seller’s title if it turns out something is wrong. For example, say that person that somehow confused their role in the trust shows up again. They really thought they were the trustee of the trust and that they had the legal ability to sell the land. That person then sells the land to the buyer. The fake trustee could purchase the land from the trust and provide the title to the buyer and all would be well again. That’s an example of the warranty of future assurances in action.
Okay, so that is warranty deeds. Let’s talk about “special warranty deeds.” A special warranty deed is a form of warranty deed where the seller modifies the warranties in such a way that the seller is only warranting against problems that they caused to occur or that may have occurred during their ownership – and not before. This type of deed might show up in a purchase of property currently in foreclosure, or at a tax sale, or similar proceeding; however it is usually where a seller wants to limit their liability. However, it may show up in other type of transactions a transaction between private individuals too. It is just something one of the many things an attorney reviewing a transaction should look for and explain if encountered.
For our third type of deed, we have the quitclaim deed. A quitclaim deed will generally transfer whatever property interest the granting person has to the receiving person – even if they have none at all. For instance, I can quitclaim our office’s favorite lunch place to Greg and Greg will receive absolutely nothing, except for a pretty cool autograph on the quitclaim deed that I provided him. I can objectively state that my signature is pretty neat. But unfortunately for Greg, he would get no property interest in the restaurant because I did not have any interest in the property when I signed over my interest to Greg. That is, I gave him exactly what I had—which was nothing.
This is not to say all quitclaim deeds are bad. They can be very useful. If a town is relocating a water main that currently runs down a shared driveway to a public road, it may use a quitclaim deed. With the relocation, the new water main is running along the front of the street instead of between two homes. The town may want to quitclaim the rights that they had to dig up the driveway and repair the water main, because the town doesn’t need that right any longer. The water line isn’t under the driveway. A quitclaim deed is a great mechanism to give back a right or interest in property, which is what that example is demonstrating. Another common use is to transfer property from individuals to a trust and it is pretty good for that purpose too. A person has land, they create a trust to hold assets and help support them during their life, and to transfer the asset to the trust a quitclaim deed is probably sufficient.
Finally, to clear up some potential confusion, let’s talk about the difference between those three deeds and a deed of trust. This financial instrument has the word deed in it, but it really is not a deed because it does not transfer complete title the way an actual deed would. The deed of trust is actually more like a mortgage. It’s a mortgage of the west if you will, because most western states apply what is known as the lien theory of mortgages. That is, a borrower keeps the title, and the lender puts a lien on the property as security for the loaned money. In actual mortgages, which usually occur in eastern states, the lender actually keeps the title to the property until the loan is paid off. It’s not terribly important to today’s topic, but the biggest difference between the lien theory of deeds of trust and the title theory of mortgages is how foreclosures are handled. What is important for today is that you know a deed of trust isn’t really a deed, but it gives a lender a lien on the land for security to pay a debt. A trustee for the deed of trust can foreclose if the lender is not paid. We might be able to turn financing of property into an episode of its own, but until then. . . thanks for listening.
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See related article about real estate contracts in Washington State.
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