The concept of a property deed is relatively familiar to most people. Whether buying or selling real estate, the transfer of a deed is an important part of changing ownership. However, it’s important to understand that deeds are a little more complex than altering who is named as the owner of a property.
Indeed, in Florida real estate law, there are different types of deeds that are issued, each serving specific purposes and establishing certain types of protection against claims on a property’s title. Two of the most common forms of deed in the state are general warranty deeds and special warranty deeds. Taking the time to better understand the differences between these tools can help you make more informed decisions when pursuing a real estate transaction.
What Is a General Warranty Deed?
General warranty deeds are usually the preferred type for Florida real estate buyers. This is because they’re the legal instruments that offer the most protection under Florida law. In essence, it’s a deed that sees the seller confirming that they own the property in its entirety and also that the title has not been subject to any defects or encumbrances at any point in its history.
The result of this is that if any potential title problems present themselves, including those that may have been in place prior to the current seller’s ownership, it is the seller who is legally responsible for defending the buyer against any claims.
When a general warranty deed is created, there are usually various legally-binding covenants. These may include:
- Covenant of Seisin – The seller confirms that they own the property outright and that they are legally able to convey it.
- Covenant of Right to Convey – The seller promises that they have the authority to transfer ownership without any restrictions.
- Covenant Against Encumbrances – The seller guarantees that the property is free from all liens, unpaid taxes, or undisclosed easements. The only exception to this is any encumbrances specifically mentioned in the deed.
- Covenant of Quiet Enjoyment – The seller promises that the buyer’s ownership will not be disturbed by title claims.
- Covenant of Warranty Forever – The seller guarantees that they will defend the buyer’s ownership rights against any lawful claims, regardless of when they arose.
These represent quite broad and robust protections to buyers. As a result, this type of deed is commonly required by lenders before they agree to provide mortgage financing. This is because the protections help to ensure the security of the property’s title as collateral. Importantly, general warranty deeds provide significant peace of mind to buyers.
What Is a Special Warranty Deed?
Special warranty deeds tend to be less broad than their general warranty counterparts. Effectively, this type of deed involves the seller guaranteeing that they personally have not taken any actions during the period of their ownership to cause title defects.
In these instances, the seller isn’t providing any guarantees about potential issues that could have arisen before they took possession of the property. Therefore, the seller is not responsible for the effects of any unpaid property taxes, easement grants, or other encumbrances that a previous owner caused. The buyer takes the burden of risk entirely.
Special warranty deeds are most common in:
- Commercial real estate transactions
- Estate transfers
- Sales by financial institutions following foreclosure
Naturally, as these transactions are typically managed by corporate entities, they usually want to limit their liabilities, as they won’t typically have personal knowledge of the entire title history. A special warranty deed is often the most appropriate tool.
The Key Differences Between the Deeds
There are various differences between general and special warranty deeds. To provide a little extra clarity, the primary distinctions can be divided into four key areas.
| Area of Difference | General Warranty Deed | Special Warranty Deed |
|---|---|---|
| Scope of warranty | The entire chain of the title is covered. Guarantees are provided for the entire history of the property’s ownership. | Only the seller’s period of ownership is covered. Any issues that were caused outside of this period are excluded. |
| Level of liability | The seller is liable for all costs or actions required to defend against any title claims. | The seller is only responsible for actions and costs for claims related to their period of ownership. The buyer is liable to defend all others. |
| Buyer confidence and recourse | Typically provides the highest level of buyer confidence, due to the broad scope of covenants and seller’s responsibility for legal defense. | More limited level of buyer confidence, although the situations in which these deeds are used tend to involve buyers accepting the potential risks. |
| Due diligence expectations | Buyers are required to perform very little due diligence, due to the seller’s comprehensive guarantees. | The reduced warranty usually needs to be compensated for through more extensive due diligence performed by the buyer. This helps to create a more balanced risk profile. |
When Should You Use a General Warranty Deed?
For the most part, general warranty deeds are a broadly appropriate tool to use in real estate transactions. Indeed, they’re often considered to be the standard option. They’re most common in traditional residential real estate transactions in which unambiguous title ownership and robust protections are vital.
That said, general warranty deeds are especially appropriate when:
- The buyer is using a lender to finance the purchase. Mortgage providers will usually require comprehensive title protection.
- The property is being purchased for long-term ownership or as a family residence.
- The seller wants to offer buyers full transparency and is fully confident that the title is clear.
- Both parties want to ensure smooth transfer and minimal post-closing disputes.
When Might a Special Warranty Deed Be Appropriate?
Despite the narrower scope and more limited protections, special warranty deeds certainly have a useful role to play in certain types of real estate transactions. Generally speaking, situations in which the seller’s relationship to a property is more administrative or institutional in nature often mean that a special warranty deed makes more sense for everyone involved.
Some common circumstances in which special warranty deeds can be appropriate include:
- Commercial property sales, on the condition that both parties commit to extensive due diligence and use title insurance to mitigate risks.
- Estate sales, where executors or trustees are transferring property on behalf of a deceased individual and don’t necessarily know its prior title history.
- Foreclosure or real estate owned (REO) sales, where banks or lenders sell repossessed properties without clear title history knowledge.
- Corporate or trust transfers, where property is part of a broader business portfolio and not individually reviewed for prior title issues.
The key takeaway here is that both types of deed are valid and valuable tools in Florida real estate transactions. Taking the time to understand the differences helps buyers and sellers alike to manage the risks involved in the process more effectively. When all parties have clarity on the extent of title integrity and recourse in the case of issues, more informed transactions can take place.
