Advertising Material

Advertising Material


A Caution About Deed Forms in Real Estate Purchases

Usual practice calls for a purchaser of real estate to get a warranty deed at closing. When a deed recites that the seller “conveys and warrants” the property to the buyer, if there is a problem with the title or right of possession after the closing, the seller has to make it good, except as to any problem or encumbrance identified in the deed and excluded from the operation of the warranties. This gives the buyer a claim against a seller for any problems with the title to the real estate that were not revealed by the title insurance commitment or other title search, or even if no title search or title insurance commitment was obtained (which is a bad idea for any purchaser, but that is another article). 

But a word of caution about acquiring property from an estate or a trust. Frequently after the sale or distribution of the real estate, an estate or a trust will distribute its assets to its beneficiaries and will close.  In order to provide finality to the termination of a trust or the closing of an estate, the form of deed given by a personal representative or a trustee simply calls for the seller to “convey” as opposed to “convey and warrant” the property. This means that the estate or trust, as the case may be, makes no warranty whatsoever of the title conveyed. 

This provides two different areas of concern, depending upon the circumstances under which the deed was delivered. In the case of a beneficiary acquiring title on distribution of the estate or trust, this form of deed simply means that that beneficiary will receive all but only the interest that the estate or trust had – be that an undivided one-4th interest, title to the real estate but with a large power company easement running through the middle of it, or with whatever other defect affected the owner of the property when he put the property in his trust or when he passed away. The beneficiary of an estate should not assume that title received is a good and marketable title, or that it will permit any particular use on the property after distribution.  Additional title search is essential before the beneficiary receiving the property invests in improving the property or otherwise acts in reliance upon having good title. 

A similar situation is involved when a person purchases real estate from an estate or trust. Just like with the beneficiary of the estate or trust, the purchaser gets a personal representative’s deed or a trustee’s deed without warranty. Again, all the buyer gets is whatever the trust or estate owned. This makes it even more important than usual that a title search made and title insurance acquired (and survey work to determine encroachments and locations of encumbrances) before purchase of real estate. The attorney coordinating the purchase of the real estate for you will be aware of these things, but if you are not using an attorney there is likely no one in the transaction that will point out this potential pitfall. 

Be alert.