Special Warranty Deed

Aspecial warranty deed is a deed to real estate where the seller of the property—known as the grantor—warrants only against anything that occurred during their physical ownership. In other words, the grantor doesn't guarantee against any defects in clear title that existed before they took possession of the property.

Special warranty deeds are most commonly used with commercial property transactions. Single-family and other residential property transactions will usually use a general warranty deed. Many mortgage lenders insist upon the use of the general warranty deed.

Special warranty deeds go by many names in different states, including covenant deed, grant deed, and limited warranty deed. The guarantee covers only the period when the seller held title to the property with a special warranty deed. Special warranty deeds do not protect against mistakes in a free-and-clear title that may exist before the seller's ownership.

Thus, the grantor of a special warranty deed is only liable for debts, problems, or other encumbrances to the title that they caused during their property ownership. The grantee assumes responsibility for any issues that arise from the previous owners.

A warranty deed provides the transfer of ownership or title to commercial or residential real estate property and comes with certain guarantees made by the seller. These guarantees include that the property title is being transferred free-and-clear of ownership claims, outstanding liens or mortgages, or other encumbrances by individuals or entities other than the seller.

A general warranty deed covers the property's entire history and guarantees that the property is free and clear from defects or encumbrances, whether they happened or under whose ownership. The general warranty deed assures the buyer they are obtaining full ownership rights without valid potential legal issues with the title.

A special warranty deed—also known as a limited warranty deed—is a variation of the general warranty deed. While the word "special" may communicate to a buyer the idea that the deed is of higher quality, the special warranty deed is less comprehensive. It offers less protection due to the limited timeframe it covers. In residential property, special warranty deeds are frequently used in foreclosures and the forced sale of the property to satisfy a debt.

As an example, imagine a home that has had two previous owners before you. The first owner was a hoarder, and soon the house and yard fell into disrepair. The city's code enforcement department issued fines against the owner, which were attached to the property. The owner fell behind on their mortgage, and the bank foreclosed, selling the home to the second owner.

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