By John Frederick “Fred” Kempf, Jr.
Whether one is a buyer or a seller, one of the most important parts of a real estate transaction is the deed. Deeds are sometimes prepared by attorneys, title companies handling the closing, or lay persons who work in the real estate field. However, at the end of the day, the deed will speak for itself, for better or for worse. You hope whoever prepared the deed “got it right”. As an Oklahoma real estate attorney, I am often engaged to correct problems that began because the deed the parties exchanged at their real estate closing does not reflect what one or the other of the parties intended, or because there is a title issue that the deed did not resolve. Here are several suggestions on things we should all consider when we execute a deed as the grantor to convey our property to another, or when we are on the receiving end of a deed as the grantee.
Types of Oklahoma Deeds. First, consider what type of deed should be used. Several of the most common varieties of deeds can be summarized as follows:
1. A Warranty Deed conveys title to the grantee, and the grantor also gives a warranty of title that the property is being conveyed “free, clear and discharged of and from all former grants, charges, taxes, judgments, mortgages and other liens and encumbrances of whatsoever nature”. Most warranty deeds do include limited exceptions to the warranty, and say that the warranty is subject to such things as “all easements, rights of way, covenants and restrictions of record, plats, public roadways and zoning”. For illustration, if a grantor gives a warranty deed, but it is later discovered that the grantor had still had an unreleased mortgage against the property, in most instances, the grantee would be entitled to have the warranty in that deed enforced, and could require the grantor to take appropriate steps to get the mortgage released.
2. A Quit Claim Deed conveys all right, title and interest the grantor has in the property, if any, to the grantee. It does not include any warranty of title. It does not assure that the grantor owns any interest to convey, but to the extent grantor owns any interest in the property, the grantor is conveying it by this deed.
3. A Special Warranty Deed conveys title from grantor to grantee, and the grantor gives a limited warranty which in essence says that the grantor will give a limited warranty of title as to any and all former grants, charges, taxes, judgments, mortgages and other liens and encumbrances of whatsoever nature created by, through or under the grantor, but not otherwise. With this type of deed, if a defect in title was created by the grantor, the grantee could enforce the limited warranty of title against the grantor. However, if a title defect was created by a prior owner, and not the current grantor, the limited warranty under this type of deed does not require the current grantor to address it. In that circumstance, the grantee will be on their own to deal with the title defect.
Pay Attention to the Purchase and Sale Agreement. Whether as a buyer or a seller, the Real Estate Purchase and Sale Agreement is an important part of the real estate deal, and particularly with regard to the deed to be used. Parties on both sides of the transaction should be certain that the Agreement properly describes the deed each side is willing to give or accept. If a seller does not know about the history of the title to the property, and does not want to be exposed to warranty obligations, they may want to give either a Quit Claim Deed or a Special Warranty Deed. In that case, if a buyer wants to have protection, they may wish to purchase a title insurance policy. In that scenario, the seller conveys title to whatever interest they may have in the property, but gives no warranty. However, the title insurance policy insures the buyer against losses covered by the title policy due to defective title. If a seller or buyer does not pay attention to what goes into the Agreement, they may end up giving or receiving a deed with more or less features than their expectations. Before the parties sign, they should check the Agreement to see what it says about the type of deed to be provided at closing, and make sure it matches their expectations.
Husband and Wife Both Need to Sign the Deed. If both spouses were grantees on the deed when they acquired the property, they will both need to sign the deed when they sell it. We often see situations where one spouse or the other owns real property in their own name, but not in the name of both spouses. However, when that spouse wants to deed their separately owned property to another, it is important that both spouses must sign the deed. This is because of Oklahoma’s history of trying to protect the rights of a spouse to remain in the homestead, including when the other spouse has died. If one spouse deeds property in their own name, but does not have their spouse join, that deed can be void if the other spouse has not joined. The legal theory is that if the non-owner spouse still lives in that house as their homestead, even though they do not own the house, they have the legal right to remain in that house for the remainder of their days, or until they move to a new homestead. Best policy is to always have both spouses execute the deed.
Oklahoma Minerals and Deeds. In Oklahoma, if one owns or acquires any interest in the minerals under a given property, that can be a big deal. When a tract of land was first deeded out from the government to a private party, the deed covered both the surface estate and the minerals under the tract. Over time, minerals have often been “severed” from the surface rights, or conveyed away. Parties to a real estate transaction should consider whether the transaction is intended to involve the conveyance of any mineral interests along with surface rights. If no minerals are intended to be conveyed, both the purchase and sale agreement as well as the deed could refer to the land being conveyed as “surface rights only in and to the following described property …” That will exclude the conveyance of any minerals in the deed. If a deed simply states that it conveys the property, and describes the property without any mention of the minerals, then whatever mineral rights the seller owns in that property are likely to pass to the buyer by that deed. If a seller owns minerals but does not want to convey them, the seller can state that he is conveying the property “less and except all oil, gas and other minerals, all of which are hereby reserved to the grantor”. Also, to avoid issues as to warranties relating to oil, gas and minerals, a grantor can include in their deed at the end of the warranty language the phrase “less and except all oil, gas and other minerals heretofore conveyed or reserved of record”. That phrase would not prevent grantor’s minerals from being conveyed, but it would prevent the grantee from making any claim against the grantor for minerals that were previously conveyed away to others, or reserved to a prior owner in the land records.
Before you sign or accept a deed, make sure it says what you believe it should. If you have questions, you should seek professional help, either from the title company working with the transaction or an attorney, or a realty specialist who is truly well-versed in deeds and how they work. No matter which form of deed is used, when a buyer is acquiring property, they would be wise to get help in having a title company or any attorney examine the title and let them know if there are any such title defects. If so, the buyer would be wise to require the grantor to correct the title defect before the parties close on the purchase and sale of the property. This arrangement should be addressed in the purchase and sale agreement. Title issues which the parties identify after they close on the sale can sometimes be addressed through correction deeds, but sometimes require other title curative measures, such as a quiet title action or a probate. Many times these curative measures require the use of attorneys and the legal fees and costs that go with them. A deed can determine who will need to address these title issues. The best answer is to use the deed that best fits the intentions of the parties going into the transaction. Our hope is that you will not need help correcting problems created by a deed, but if you do, or if you need an attorney to help with your deed, our firm stands ready to assist.
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Posted on Tue, May 9, 2017
by Andrews Davis