At early English common law, a landowner classically owned his property horizontally by the calls of the deed and vertically from the heavens to the center of the earth. Each cross-section of potential ownership (the surface, oil, gas, etc.) constitutes an estate, and the summation of all divided estates constitutes a piece or parcel of real property. Real property title can be described as the “bundle of rights” associated with a parcel of real property. This bundle largely consists of ownership, leasehold, and easement rights to the surface estate, including rights to land, water, air, timber, and crops, as well as rights to the subsurface estates, including all layers of oil, gas, coal, shale, rock, gems, metals, and other minerals. Many of these rights can be artfully severed from the surface estate and then sold, leased, contracted, conveyed, devised, inherited, partitioned, and even mortgaged. One property owner can hold all of these estates and rights together at once, or multiple interest holders can hold any number of these estates and rights at varying degrees of ownership and interest. Real property title is an account of ALL interest holders’ rights held on a parcel of real property.
With potentially hundreds of interest holders exchanging property interests century after century on any parcel of real property, title must be understood as a fluid concept. Being the repetitive “quantum moment” of this fluidity, a conveyance is the legal process of transferring title to real property from one person(s) or entity(s) to another person(s) or entity(s). Using the classic example of a contract-for-deed property transaction, both equitable title and legal title pass at different stages of the transaction “directly” from the vendor/grantor (the seller) and “indirectly” to the vendee/grantee (the buyer). Equitable title is the enforceable contractual right to acquire legal title (perfected title) to the property under contract.
First, the vendor and vendee sign and execute a sales agreement for real property that the vendor claims to own, and the vendor promises to deliver marketable title to the property at closing (marketable title is title that is free and clear of all or most defects; being acceptable to a reasonable, prudent, educated buyer). The sales agreement is the initial binding contract between the vendor and vendee, and its execution begins the executory contract period of the transaction. The sales agreement has consideration (typically a down payment on the purchase price held in escrow) and the agreement defines the executory contract period, describes the property being conveyed, and expresses the negotiated purchase price and all other contractual terms of the transaction. The transaction is closed when the purchase price is paid in full and after the deed is executed and recorded. Once the transaction is closed and the executed deed is recorded, the vendee holds full title to the property conveyed and is considered the property owner.
The vendor is the party who holds title before the conveyance, and the vendee is the party who holds title after the conveyance. During the contract-for-deed conveyance process, there is a staggered transfer of equitable title and legal title to the property. Equitable title vests in the vendee upon execution of the sales agreement, as the sales agreement is the contract that identifies the expressed and implied rights and duties of the parties during and after the executory contract period. After the exchange of full consideration, legal title vests in the vendee upon the occurrence of two events: (1) the vendor executing the deed, and (2) the timely recordation of the executed deed in the county deed recorder’s office. In short, equitable rights to real property vest by contract and legal rights to real property vest by deed. This is the essense of the doctrine of equitable conversion.
Full legal title vests in the vendee upon executing and recording the vesting deed. There are three basic types of deeds offered by vendors in negotiated property transactions: (1) general warranty deeds, (2) special warranty deeds, and (3) quitclaim deeds. These deeds are categorized by the degree of warranty that the vendor offers the vendee in order to protect the vendee against possible third party title attacks or encumbrances on the property being conveyed.
A general warranty deed carries the highest degree of warranty that any vendor can offer to any vendee in any conveyance. By executing a general warranty deed, the vendor promises to warrant and forever defend the vendee against any third party claims affecting the property’s title, including claims against the property that arose before the vendor’s ownership period. Practically speaking, the vendor generally warrants title back to the first preceding general warranty deed in the chain of title (the chain of title is an account of historical land ownership covering a parcel of property as recorded in deeds and files at county courthouses). In other words, each recorded general warranty deed in the chain of title must defend against claims arising between the instant-recorded general warranty deed and the closest preceding general warranty deed.
Contrast a general warranty deed with a special warranty deed. By special warrant, the vendor promises to warrant and forever defend the vendee against third party claims to the extent that those claims arose during the vendor’s ownership period. In other words, after the property is conveyed to the vendee, the vendor is only liable to the vendee for attacks on title that occurred under the vendor’s watch. Under special warranty, the vendor is not liable for claims adverse to title that arose before the vendor owned the property. Conversely, under general warranty, the vendor is liable for all attacks on title throughout the chain of title.
Holding no warranty, a quitclaim deed offers no form of protection for the vendee because the vendor does not warrant title to the property being conveyed. By quitclaiming real property, the vendor does not promise to warrant or defend against attacks on title. Instead, the vendor merely conveys whatever the vendor states is owned, and the vendee receives whatever the vendor actually owns. When quitclaimed, third party claims adverse to title run with the affected real property. A quitclaim deed is akin to an “as is” purchase—you get what you see.
THIS ARTICLE DOES NOT CONSTITUTE LEGAL ADVICE. This blog post is written and published for informational and educational purposes only and is not intended to constitute legal advice. Every client’s case is different, and a general synopsis of an area of law can be neither complete in its scope, nor specifically tailored to the unique facts of an individual’s case. If you need legal advice, you should contact an attorney regarding your specific factual and legal circumstances.