Definition
A Special Warranty Deed is a legal document used in real estate transactions where the seller guarantees that the property has had no title defects or encumbrances during their ownership period but makes no guarantees about any issues before that time. It differs from a General Warranty Deed, which guarantees a clear title for the entire history of the property.
Explanation
Special warranty deeds are commonly used in:
- Commercial real estate transactions
- Foreclosures and estate sales
- Transfers of property between businesses
Unlike a General Warranty Deed, which ensures that no past owner had title issues, a Special Warranty Deed only covers the period of the seller’s ownership. This means the buyer assumes responsibility for any claims, liens, or disputes that may have existed before the seller took possession.
Key Differences Between Special Warranty and General Warranty Deeds:
| Feature | General Warranty Deed | Special Warranty Deed |
|---|---|---|
| Guarantees a Clear Title for All Owners | ✅ Yes | ❌ No (Only the seller’s period of ownership) |
| Common in Residential Transactions | ✅ Yes | ❌ No (More common in commercial deals) |
| Protects Buyer from Past Liens & Title Defects | ✅ Yes | ❌ No |
| Used in Foreclosures & Estate Sales | ❌ Rarely | ✅ Often |
When is a Special Warranty Deed Used?
- Bank-owned properties (REO sales)
- Commercial real estate deals
- Property transfers between family members or corporate entities
- Situations where a full title history guarantee is not required
Example
A real estate investor buys a property from a foreclosure auction with a Special Warranty Deed. The deed guarantees that no title issues occurred while the bank owned the property, but the investor later discovers an unpaid tax lien from a previous owner. Since the Special Warranty Deed only covers the bank’s ownership period, the buyer must resolve the issue themselves.