It’s important to know which warranty you are getting with your new home to avoid issues in the future.
In real estate, there are several types of deeds that act as vehicles to pass on ownership. These documents track the sale and purchase of any given property over the years. Deeds also convey to the grantee, or the buyer, from the grantor, or the seller, guarantees or warranties of specific rights that go hand in hand with the property. Not all deeds pass along the same rights or promises.
Types of Covenants
There are two basic types of covenants regarding property: covenants that run with the land and covenants of title that transfer ownership. A covenant that runs with the land is a condition that belongs to the property and is passed on to each successive owner, such as a condition that the property can be used only for school purposes. There are several types of title covenants, including, a covenant of seisin, by which the grantor guarantees ownership of the property and that she has the right to sell it; a covenant against encumbrances warranting that the property is free of liens; a covenant of the right to convey, which is similar to the covenant of seisin; and a covenant of quiet enjoyment, which gives the grantee peaceful ownership without hostile claims of title from others. A warranty deed contains several of these covenants.
A warranty deed contains names and addresses of the buyer and seller, the legal description of the property, the amount that was paid for the property, the signatures of the parties involved, and a notary stamp. There are two types of warranty deeds: a general warranty and a special warranty. A general warranty conveys the covenants of seisin, quiet enjoyment, and further assurances, and a covenant against encumbrances. It also binds the seller to ensure that the title is clean no matter when or where a claim emerges. A special warranty only binds the seller to guarantee a clean title during the period that they owned the property. A covenant deed is a type of special warranty.
A covenant deed is a less comprehensive warranty deed. It still conveys title but may contain any number or types of covenants. A covenant deed may contain restrictive covenants that prohibit the grantee from using the property in a certain way, or it may be tailored for a certain transaction. For example, a covenant deed may restrict the use of aluminum siding on any buildings on the property in a certain subdivision. A covenant deed also only warrants that the grantor owns the property and guarantees that there are no title defects during her ownership.
When purchasing a property, check the type of deed and covenants that are conveyed with it. Mortgage lenders usually require borrowers to purchase title insurance to protect the lender against any claims to the property.