There are several types of deeds used to convey real estate in Maine, all of which can have significantly different consequences for the buyer and seller should a problem with the seller’s title to the property later come to light. In particular, sellers of property should understand the risks associated with warranty deeds.
By giving a warranty deed, a seller makes certain covenants or promises to the buyer. In essence, the seller promises that he or she has the interest in the property he or she is purporting to convey to the buyer; that there are no encumbrances on the property, such as mortgages, liens, or easements, other than those referenced in the deed; and that the buyer’s possession of the property will not be interrupted by someone with a superior interest in the property. Crucially, the seller promises that his or her title to the property is free of defects, and that he or she will defend the buyer’s possession of the property against the claims of “all persons,” even with respect to defects or claims that may have arisen years before the seller acquired the property. By giving a warranty deed, then, a seller takes on potential liability not just for what the seller has done during his or her period of ownership, but also for claims arising well before he or she acquired the property, of which he or she likely has no knowledge.
There are, however, other types of deeds that pose considerably less risk to the seller while also offering some assurance to the buyer. In a quitclaim deed with covenant—called a special or limited warranty deed in some states—the seller promises to defend the buyer only against the claims of persons claiming “by, through, or under” the seller. In other words, the seller guarantees the title only against defects or claims arising since he or she acquired the land, not claims that arose before that time. This is sometimes called a “personal warranty deed” because the seller essentially promises only that he or she has done nothing to damage the title to the property since acquiring it.
Although a warranty deed theoretically offers a buyer more protection than a quitclaim deed with covenant, all a warranty deed gives the buyer, practically speaking, is a broader right to sue the seller in the event of a problem with the title. Lawsuits are, however, costly and time consuming. Buyers are often better served by engaging a real estate attorney to thoroughly check the seller’s title to the property and purchasing title insurance rather than relying on deed covenants for protection.
Because of the liability risks involved, sellers should agree to convey property by warranty deed only after consulting with a real estate attorney. Although there may be situations where warranty deeds are necessary or appropriate, sellers should be aware of the risks they pose and act accordingly.