Legal Myths

Waranty Claim instead of Quit Claim

Myth #3 - Consider - - - why would you even have a Warranty Deed if a Quit Claim Deed is just as good? There must be a reason. Look carefully - - the word "Warranty" is contained in the description of one type of deed. Why do you suppose that is?

The answer is simple: the transferor is providing a warranty. This is not an appliance, so what is the warranty? The transferring party is specifically claiming some quality of ownership of that property, is describing that quality of ownership (for example, an undivided one-half interest therein), and warranting both the title and agreeing to defend at the transferor expense the title of the new owner in the interest being transferred.

In a Quit Claim Deed, the party transferring simply states "Whatever interest I have in the property I'm transferring to you." Notice that there is no interest or quality of title ever warranted or represented, nor any agreement to defend. A Quit Claim Deed could very well be the most expensive thing you have ever done in the wrong set of circumstances. If anyone is interested, I am willing to sell by Quit Claim Deed my interest in the Brooklyn Bridge (an ancient scam done in New York to new immigrants to America). Any takers?

Even in a friendly, within the family transaction, a Quit Claim Deed can be quite damaging. You see, that warranty language really means something. It means that the title insurance possessed by the transferor will now benefit the transferee. Let me try that again - - usually the owner of a property has received a title insurance policy that provides for an amount of money or a defense of title should some defect later be found. The title is searched quite carefully before that title insurance is issued, and it is rare that a defect is found later. However, it does happen, and while usually correctable, it can be expensive to file suit to "Quiet Title." Since a Quit Claim Deed has no warranty, the benefit of the title insurance DOES NOT TRANSFER. Of course, the transferor by Quit Claim Deed has no obligation to "defend" your title - it isn't part of the Quit Claim Deed!

So, even in an instance where Dad says to Son and Daughter: "How about Mom and I give you the mountain cabin. It is hard for us to travel, but maybe you could let us use it once in awhile." Dad and Mom, having a title insurance policy for the $100,000 they paid for the cabin, transfer it to Son and Daughter by Quit Claim Deed. Later it turns out that access to the property has been cut off by the new neighbor, who built his home and blocked the access. Oops! Now Son and Daughter have a major problem. If the transfer had been done by a warranty deed that contained no exception for access, and assuming that the title insurance policy had no exception regarding access, the title insurer is likely to pay all the costs of establishing the right to access across the neighbor's property. Note that when Dad and Mom purchased the property, the title company would have given them in writing that access was an exception or, more likely, declined to insure the purchase until that was cured.

We have acted to repair numerous title defects for clients, and can assure you that they are not easy or inexpensive. It is much preferred to have the title insurance company work on your behalf to resolve the problem. That is their purpose, what they were paid to do.

Oh, and one more thing. The preparation costs of a Warranty Deed and a Quit Claim Deed are no different, one from the other, and the recording costs and documentary stamps required are the same. Which type is the least costly? RIGHT!