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June 10, 2018

Why Quitclaim Deeds Stink!

A quitclaim deed (also known as a quick claim deed) is used transfer title on real property. People on their own use them all the time and almost always create future problems. Quitclaim deeds stink, first and foremost because the deed doesn’t even say whether or not the person even owns the property and offers no guarantees as to his or her ownership interest.

Because there is no need for strong guarantees, plenty of people use them to transfer property into and out of trusts, LLCs, between husbands and wives and family members. That can be a recipe for disaster. For example, a father quitclaim’s a property to his oldest son, then dies a few months later. Upon seeing a notice in the paper, the other owner of the property shows up to claim his share. Unfortunately, the son knew nothing about another owner and now finds himself hip deep in legal problems.

Some people believe that a quitclaim is necessary if a property has lien on it. This is not true. In point of fact, a Warranty Deed and Special Warranty Deed have a “subject to” statement that says all existing claims have been disclosed, which doesn’t prevent them for being used in property transfer. A “subject to” looks something like this:

“SUBJECT TO: Current taxes and other assessments, reservations in patents and all easements, rights of way, encumbrances, liens, covenants, conditions, restrictions, obligations and liabilities that may appear of record.”

That means any liens that are publicly recorded are part of the deed. When you purchase a title insurance policy, the title company will do a search and list every commitment they find during the search.

So we’ve listed a lot of reasons why quitclaim deeds stink, but here’s the nail in the coffin. Title companies hate them! Many title companies won’t accept a quitclaim deed without additional documentation signed by the grantor. The title company has every right to question whether or not the owners actually had legal claim to the property before continuing on with the sale. Naturally, this puts a kink in the escrow process and can hold up the purchase until previous grantors (owners) have been tracked down.

In short, when in doubt, contact an experienced attorney to help you draw up a deed (Warranty Deed or Special Warranty Deed) that won’t gum up the works!

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