A deed is a signed legal document that transfers ownership of an asset to a new owner. Deeds are most commonly used to transfer ownership of property or vehicles between two parties.
The purpose of a deed is to transfer a title, the legal ownership of a property or asset, from one person or company to another. A deed to real property must be properly filed with the local government for its owner to be able to sell it, refinance it, or obtain a line of credit on it. This task is usually undertaken by the property buyer’s attorney or title insurance company.
Key Takeaways
- A deed is a signed legal document that grants its holder ownership to an asset but may set a number of conditions on the transfer of the title.
- The deed is not a title. It is the vehicle for transferring a title.
- If the deed is not written, notarized, and entered into the public record, it could be open to legal challenges and delays.
- There are three main deed types: the grant deed, the warranty deed, and the quitclaim deed.
Understanding a Deed
A deed is a binding document in a court of law only after it is filed in the public record by a local government official tasked with maintaining documents. The signing of a deed must be notarized. Some states also require witnesses.
If a deed is not written, notarized, and entered into the public record, it may be referred to as an imperfect deed. The document and the transfer of title are valid, but the related paperwork may need to be on file with the register of deeds to avoid delays if there is a legal challenge. Other types of documents that confer privileges comparable to deeds include commissions, academic degrees, licenses to practice, patents, and powers of attorney.
The register of deeds is available for public viewing and is usually maintained at the town, county, or state level.
Types of Deeds
There are many different types of deeds, each of which serves a different purpose. They are generally categorized in the following ways:
- Grant Deed: Contains two guarantees: that the asset has not been sold to someone else and that it is not burdened by any undisclosed encumbrances such as outstanding liens or mortgages. The deed is “free and clear” of defects. Grant deeds do not necessarily need to be recorded or notarized, but it is generally in the best interests of the grantee to ensure that this is done.
- Warranty Deed: Sometimes called a special warranty deed, declares that the grantor has not caused any title defect while owning the property. It provides the greatest amount of protection to its holder. A warranty deed offers the same guarantees as a grant deed plus a promise that the grantor will warrant and defend the title against any claims.
- Quitclaim Deed: Releases a person’s interest in an asset without stating the nature of their interest or rights. The grantor could be a legal owner or not, and makes no promises. Quitclaims are often used in divorce settlements and in transfers of property between family members.
Content Requirements of a Deed
The exact requirements vary from state to state, but they are relatively basic. In California, for instance, the property being transferred must be described adequately. The grantor (the person transferring title to the property) and the grantee (the person accepting title) must be named. The deed may be void if the grantor is found to be not mentally competent, was signed by a minor or was forged.
A deed does not have to be filed with the local government in order to be valid, but this routine step can avoid trouble and delay if the deed is embroiled in a legal case or the property owner wants to sell the property.
Deeds often have a precise and detailed description of the property being transferred. This description typically includes the property’s address, boundaries, lot number, and any other relevant identifiers. The more accurate this description can be, the more reliable and helpful the deed will be.
Deeds and Consideration
Consideration is a foundational concept in contract law that embodies the idea of value exchanged, representing what each party gives up. In the context of a deed, consideration plays a pivotal role in signaling the seriousness and intention behind the transfer. By including consideration in the deed, both the grantor and grantee acknowledge that the transaction is not merely a gift.
Consideration also provides a benchmark for assessing the value of the property being transferred and the fairness of the transaction. While a deed itself signals a transfer, it doesn’t evaluate or measure the nature of the transaction. There are legal and tax implications if the transfer of a deed does not include consideration. In some states, a mortgage for a house entails the creation of a deed of trust. A trustee holds the deed of trust until the loan for the property is paid in full.
Deed Limitations
A transfer of ownership can get muddled even when a perfected deed has been filed. There could be a cloud on title for a variety of reasons. False deeds or deeds that contain errors can be filed, requiring clerical clearance.
There also can be probate issues. For example, if the property owner passes away without defining in a will who should gain control of some property, the heirs might challenge one another in court for the property title.
Conferring a title through a deed does not necessarily grant the new owners the right to use the property in any way they choose. A deed may include restrictions on the owner’s actions, such as the rules imposed by a homeowner’s association.
An individual who signs a deed for a parcel of land has a legal right to possess that land, but may not be able to build a shooting range on it due to potential risks. In other cases, the holder of the title to a piece of property may own the land but be unable to develop it for environmental reasons.
Deed Restrictions and Covenants
Deed restrictions, also known as restrictive covenants, are limitations or conditions imposed on the use or development of a property. These restrictions are typically outlined in the deed.
Deed restrictions aim to preserve the integrity, value, and aesthetics of a property. For example, selling a house in a neighborhood may come with restrictions to maintain the character of the area. Common examples of restrictions include prohibitions on building additional structures, exterior modifications, or land use.
Deed covenants refer to agreements or promises made by property owners to abide by certain rules or conditions. These are more likely to be voluntary compared to restrictions. Deed restrictions are typically tied to the property deed and are specific, while covenants may be part of your community’s rules and vary in application and enforcement.
Deed vs. Title
A deed and a title are not the same but they are inextricably linked:
- A deed is a document that transfers the title to property from one owner to another. It describes the property being transferred and names all parties to the transaction. It is signed by all parties and filed on official record.
- The title may not even exist in any physical form. It’s the concept of property ownership that gives its owner the rights of possession and use. The deed is the proof of that ownership.
Does a Deed Mean You Own the House?
A deed is proof that you are the owner of the house (or other property). You hold the title to that property.
What Is a Deed of Trust?
A deed of trust is a real estate transaction that involves a lender such as a bank, as well as a buyer and a seller. It inserts a fourth party into the transaction: a trustee, usually a title company, which receives an interest in the property. If the buyer defaults on the payments, the trustee can seize the property and sell it.
The deed of trust process is a substitute for a mortgage agreement and is used in many states. From the buyer’s viewpoint, it makes no difference. You pay your mortgage or you lose the house.
What Is a Deed in Lieu?
The term, in full, is “a deed in lieu of foreclosure.” A homeowner facing the loss of the property for nonpayment of a mortgage may choose to just transfer the deed to the house to the lender rather than face the repercussions of foreclosure proceedings. In a deed in lieu agreement, the lender agrees to accept the property and release the borrower from any other payments of the debt.
How Long Is a Deed Valid for?
It depends. A deed of trust, as noted above, works the same as a mortgage and has a time limit in which the money loaned for the property must be repaid in full. At that time, the trustee should handle the paperwork to replace it with another deed that transfers the title to the owner. Unless a deed has an expiration date on it, it doesn’t expire.
The Bottom Line
Deeds are legal documents that transfer ownership of real property from one party to another, containing essential information such as property descriptions, parties involved, and consideration exchanged. They serve as tangible evidence of property ownership rights and obligations.
Related Terms: title, grant deed, warranty deed, quitclaim deed, public record, notarization, mortgage.
References
- Davis Upton & Palumbo. “What Are the Three Most Common Types of Deeds?”
- Viva Escrow! “What Makes a Deed Good and Valid?”
- Nolo. “Double Check That Your Home Deed Was Recorded - Or Else!”
- Homelight. “Property Deed vs. Title: Don’t Confuse the Two When You Sell Your House”.
- Legal Information Institute. “Deed of Trust”.
- Companies Inc. “Mortgage States and Deed of Trust States”.
- Rocket Mortgage. “Deed In Lieu Of Foreclosure: What To Know”.
- Pocket Sense. “Does a Deed of Trust Expire?”
