The Differences Between Trust Deeds and Grant Deeds
A deed is a written instrument which conveys an interest in property from the grantor to the grantee. In order to be valid, a deed must be signed by the grantor and contain a description of the property being conveyed. Grant deeds and trust deeds serve completely different purposes.
What is a Grant Deed?
A grant deed is used to transfer ownership of real property from the grantor to the grantee. A grant deed implies the following warranties or covenants:
- The Covenant Against Conveyances is a warranty that the property has not been transferred to another, except as disclosed in the deed; and
- The Covenant Against Encumbrances is a warranty that the property has not been encumbered, except as disclosed in the deed.
Examples of How a Grantor Might Breach the Covenants Contained in a Grant Deed
If a grantor enters into a contract whereby he agrees to sell a tract of land, along with the timber rights, to a grantee, but before delivering the grant deed to the grantee, sells the timber rights to a third party and fails to disclose that fact in the grant deed, the grantee may have a claim for breach of the implied warranty against conveyances. Likewise, if the grantor fails to disclose any encumbrances against the property, the grantee may have claim for breach of the implied covenant against encumbrances. The following encumbrances must be disclosed in a grant deed:
- Tax liens;
- Tax assessments;
- Mortgages and deeds of trust;
- Mechanics liens; and
- Judgment liens.
What is the Difference between a Grant Deed and a Warranty Deed?
A grant deed differs from a warranty deed in that the warranties contained in it are implied; they are not written into the deed as they are in a warranty deed. Nevertheless, if the warranties contained in a grant deed are breached, the grantee may sue the grantor for breach of those implied warranties.
What is a Trust Deed?
A trust deed, also known as a deed of trust, is similar to a mortgage and is used in some states to secure real property pledged as collateral for a loan. A trust deed transfers title to the property to a trustee who holds the property in trust until the loan is paid in full. If a borrower defaults on the loan, the trustee has the right, pursuant to the terms contained in the trust deed, to foreclose and use the proceeds of the sale to repay the lender.
Getting Legal Help
To ensure that a deed is properly drafted, it is best to hire a qualified real estate attorney. He will ensure that you are using the correct type of deed, that it is properly executed, and that it is filed with the appropriate county recorder’s office.