By Jackson, Landrith & Kulesz, PC on March 8th, 2022 in Real Estate Law
When it comes to deeds, individuals often automatically assume deeds relate to real property or vehicles. Yet, what does a deed do? Why is that piece of paper so important? Throughout this article, we will investigate what a deed is, the minimum requirements for a deed, as well as the different types of deeds in Texas.
A deed is a legal document that transfers ownership of an asset to a new owner. A deed is not the title itself; it is the mechanism for transferring title.
Minimum Requirements for a Deed in Texas
There are certain baseline requirements to meet for a deed to be valid in Texas.
First, the deed must be in writing and signed by the grantor (the person selling the land).
Second, the language used must show a present intent to transfer the property. For example, you cannot state, “I hope or want to transfer this property in the next 20 years.” The words used indicate unambiguously that the grantor intends to transfer the land.
Third, the deed must identify the land’s recipient, or grantee, with reasonable certainty. This does not mandate that you use the grantee’s actual name. For instance, you may transfer a deed to “my sister” if you only have one sister. However, if you have more than one sister, the deed does not identify the grantee with reasonable certainty because it is uncertain what sister the deed is referencing.
Fourth, the deed must contain a valid description of the land. This description does not have to perfectly describe the land; rather, it must provide a good lead to allow a person familiar with the locale to distinguish the parcel identified in the deed. For example, a deed conveying “all of grantor’s land in Travis County” would be a valid prescription.
Fifth, the grantor’s signature must be acknowledged, usually done via a notary public. The grantee’s signature is not required, but it is advisable to obtain their signature when the deed contains specific agreements or obligations that are binding on the buyer.
Finally, a deed becomes effective when the grantor “delivers” it to the grantee, and the grantee accepts such delivery. This does not require the grantor to physically deliver the deed to the grantee; instead, the grantor is free to deliver it via mail or an escrow agent. However, the grantee must accept the deed in its entirety for the delivery to be valid, so the grantee cannot reject any provisions in the deed it does not like.
Implied Covenants of a Deed in Texas
At common law, a deed comes with six implied covenants:
- Seisin: that the grantor owns the property being sold or transferred;
- Against Encumbrances: the land is owned free and clear of liens;
- Right to Convey: grantor has the right to convey the property without the joinder of others;
- Quiet Enjoyment: signifies an assurance that the grantee’s title will not be disturbed by third-party claims;
- Warranty: grantor pledges to defend the title against challenges by others; and
- Further Assurances: grantor will take any further action as necessary to vest title in the grantee.
However, the Texas Property Code § 5.023 only recites two of the common-law covenants: the covenant of seisin and the covenant against encumbrances.
Reservations and Exceptions
Property Code Section 5.022(a) states that a deed conveys a fee simple interest, or absolute interest, in estate unless the property is limited by express or words or a lesser estate is conveyed. This refers to how most deed formats cite whether or not there are reservations and exceptions on the property. A reservation must always be in the grantor’s favor, whereas an exception is a mere exclusion from the grant. For instance, a person can convey property to someone but retain the land’s mineral rights as a reservation. The language in the deed must clearly indicate that an exception or reservation exists.
Community Property Considerations
Texas is one of the nine states that follows the community property regime for property acquired during the marriage, so there are special considerations to appreciate in this context. Under a community property regime, any income or real property acquired by either spouse during a marriage is community property, and thus, both spouses share ownership equally.
Therefore, it is recommended practice to state the marital status of the parties in the deed to avoid problems down the road. A title company could attempt to clear the title in a subsequent action, asking any prior owners in the title’s chain to execute a marital status affidavit to assure all community property interests are resolved.
Do Deeds need to be Recorded to be Valid?
In Texas, whether a deed is recorded in the county clerk’s real property records or not does not affect its validity. A deed only must be executed and delivered to the grantee, which makes the transfer fully effective. However, recording a deed is still recommended best practice because it gives notice to everyone else that you own the land.
This is because Texas is a “notice” state. Therefore, once you record a deed, you obtain priority and are protected from third-party claims of ownership. Also, recording informs taxing authorities where to send ad valorem tax bills and significantly helps title companies ensure the chain of title. Overall, the answer is that deeds technically do not have to be recorded, but you are incurring some substantial risk if your deed is not recorded.
What Happens if I Lose my Deed?
If your deed becomes lost or destroyed, don’t panic. There are several options for replacing it. If the deed is lost shortly after purchase and before it could be scanned electronically, you can request a deed from the county’s land registrar. Other options include contacting the title company that verified the deed during the property’s closing or contacting the seller to see if they have a copy.
Potential loss of a deed is another reason to record, so that evidence of the transfer exists with the state office where the deed is recorded. If the deed hasn’t been recorded, other documents and evidence can be admitted proving the contents of the original deed. You will have to adequately show that you searched for the deed and could not find it to establish that the deed was lost or destroyed.
Different Types of Deeds in Texas
There are eight primary types of deed that you will likely encounter in Texas:
General Warranty Deed
The General Warranty Deed warrants that the title is good and free of any defects. The seller is not only warranting that there are no defects with their ownership of the land but also past owners. This type of deed gives the buyer legal recourse against the seller if a future claim arises concerning the property. A thorough title search must be conducted to obtain a warranty deed, which means you can purchase a title insurance owner’s policy for added protection.
Special Warranty Deed
A Special Warranty Deed only warrants that the seller’s ownership of the property has not affected the status of the title but does not make any warranties as to past owners, unlike a general warranty deed. Commercial properties are typically conveyed with this type of deed.
Deed without Warranties
This deed’s name pretty much explains it all; a deed without warranties is a conveyance of property without any warranties, expressed or implied, as to anything. These deeds are typically used when the parties are unaware of the grantor’s interest in the property. A lower purchase price frequently accompanies them due to the risk that the entire interest in the property might not transfer.
The quitclaim deed is the least valuable and sometimes dreaded form of a deed. A quitclaim deed is technically not even a true deed because all it does is quit any claim or interest the grantor might have in the property, if any, in relation to the grantee. Sometimes title companies will reject the usage of a quitclaim deed and require a proper deed instead due to the uncertainty in the chain of title a quitclaim creates.
There are two main reasons to be alarmed and consider walking away from a deal when a buyer suggests a quitclaim. First, a quitclaim contains no covenant of seisin or warranty of title, meaning the grantee is buying the property with an acknowledgment that the seller might not even own the land and forfeits any claims that can be brought against the seller. Second, the grantee of a quitclaim deed cannot become a bona fide purchaser for value against unrecorded interest holders because accepting a quitclaim deed implies notice of potential defects in the property’s chain of title. Therefore, the buyer runs the risk of a third party claiming priority over the property and most likely winning.
However, there are several reasons why using a quitclaim might be practical: (1) to fix typographical errors in a warranty deed; (2) to remove or add someone to the title; or (3) to gift someone a property without having to conduct a traditional sale. Before using a quitclaim deed, you should discuss the decision with a real estate attorney and title insurer, as it may have adverse consequences for title insurance coverage.
Assumption deeds are like special or general warranty deeds. However, a grantee will assume liability for existing debts and promise to discharge one or more liens on the property under an assumption deed. This obligation is built into the deed’s consideration clause. The grantee only assumes the debt related to the grantor, not the lender, since the grantee is not privy to contract with the lender. Furthermore, the grantor will remain liable to the lender because lenders seldom approve assumptions and release a grantor. These deeds can be granted without the lender’s consent as well.
Transfer on Death Deed
The Transfer on Death Deed (“TODD”) is one of the newest type of deed on the Texas real estate scene, becoming legal in 2015. The TODD was implemented to create an easy way to transfer real estate to a beneficiary when the owner dies without having to go through the costly and time-consuming process of probate.
However, this type of deed has been subject to confusion and criticism. The standard form of the deed was repealed from the statutory provision in 2109 after complaints that it was poorly written. Also, the TODD leaves creditors a two-year window after the owner’s death to drag the property into probate and force a sale, potentially dispossessing beneficiaries who have already established their homes on the property for over a year.
Finally, title insurance companies have refused to write title insurance property during this two-year window, leaving those who receive property via a TODD unable to sell or refinance.
Deed Incident to Divorce
A Deed Incident to Divorce is issued in conjunction with a final divorce decree. A transfer of property from one spouse to another is stated as a consideration in the deed for a decree. These deeds are usually special warranty deeds and may include liens in favor of the grantor to secure payment from the other spouse. The deed must be in addition to a final divorce decree because decrees cannot convey ownership of property.
Trustee’s Deed/Foreclosure Deed
Unlike other forms of deeds, a Trustee’s deed or foreclosure deed involves three parties: the lender, borrower, and the trustee, which is usually a title company. The trustee will collect monthly payments, basically a mortgage, from the buyer on behalf of the lender. The trustee is empowered to foreclose on the property, allowing lenders to avoid the courts during the foreclosure process.
If you are buying, selling, or own real estate, it is crucial that you understand the different types of deeds in Texas that exist that may affect your property.
Our legal team of knowledgeable real estate attorneys can help answer any questions you might have. Contact us today.