Colorado recognizes two types of warranty deeds for transfer from seller to buyer. While both types of deeds contain warranties from the seller to the buyer, there is one major difference.
What are the warranties?
The warranty deed form is actually dictated by statute, at C.R.S. 38-30-115. In substance, it’s a transfer by the grantor (seller) that warrants three things:
(1) that the grantor is the owner with full power to sell,
(2) that the property is transferred free and clear of encumbrances (except those specifically identified), and
(3) that the grantor will defend title against anyone claiming an interest in the property.
The third promise is what differentiates a general warranty deed from a special warranty deed.
General Warranty Deed
With a general warranty deed the warranty clause in the deed states “and warrants title to the same.” This means that the warranty of title provided by the seller extends back in time to people who might claim an interest in title before the seller ever bought the property. In other words, the seller is warranting title for all prior owners as well as the seller.
Special Warranty Deed
With a special warranty deed, the warranty language is changed to limit the duration of the seller’s warranty. The warranty clause will state something like: “and warrants title to all persons claiming under me.” This “under me” part means that the warranty is limited to claims against title only for the time the seller owned the property, and not before.
Which should be used?
If you’re a seller, you’ll prefer to limit the extent of your warranties with a special warranty deed. On the other hand, the buyer will desire the more extensive warranties provide by a general warranty deed. As the parties negotiate the type of deed, they should also consider the role of title insurance. The purpose of the owner’s policy of title insurance is to provide cost of defense of claims against the title, whether those arose under the seller, or under prior owners. Similar to the seller’s warranties under a general warranty – the owner’s title insurance covers matters prior to the seller’s ownership.
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