Which Deed Should I Use?, 0119 COBJ, Vol. 48, No. 1 Pg. 34

Author:by EBEN P. CLARK
Position:Vol. 48, 1 [Page 34]
 
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48 Colo.Law. 34

Which Deed Should I Use?

Vol. 48, No. 1 [Page 34]

The Colorado Lawyer

January, 2019

REAL ESTATE LAW

By EBEN P. CLARK

This article discusses the four basic deed forms used in Colorado and when to use each form.

Which deed should I use? This is the inevitable question in any transaction in which real property is conveyed, regardless of the form of the transaction or the property to be transferred. Every lawyer, realtor, or other real estate professional has faced this question at some point in time.

This article provides an overview of the different types of deed forms available in Colorado. It describes the basic characteristics of each type of deed, and its appropriateness for various circumstances. This article does not advocate for the use of a single form of deed for a certain transaction. Nor does it seek to provide a formula for determining the appropriate deed form in any specific situation. Such an approach is not realistic, because the decision of which deed to use depends on the property, negotiation positions of the parties, and specific facts in each such transaction. The goal of this article is to guide practitioners in identifying the relevant considerations for choosing which form of deed to use.

Basic Colorado Deed Forms

The four basic deed forms in Colorado are general warranty, special warranty, bargain and sale, and quitclaim.1 In this order, each provides a decreasing number of title warranties to the buyer.

General Warranty Deed

In Colorado, a general warranty deed includes four statutory warranties.2 Citing CRS § 38-30113, the Colorado Court of Appeals in Upton v. Griffitts articulated these warranties as "a promise from the grantor that, at the time of its execution, he was lawfully seized of the estate conveyed, that the estate was free and clear from all encumbrances except as stated, and that he warrants to the grantee the quiet and peaceful possession of the property and will defend the title against all persons who may lawfully claim title."3

CRS § 38-30-113(2) lists the warranties afforded by a general warranty deed as:

a. That at the time of the making of such instrument he was lawfully seized of an indefeasible estate in fee simple in and to the property therein described and has good right and full power to convey the same;

b. That the same was free and clear from all encumbrances, except as stated in the instrument; and

c. That he warrants to the grantee and his heirs and assigns the quiet and peaceable possession of such property and will defend the title thereto against all persons who may lawfully claim the same.

While Upton and the Colorado Revised Statutes lay out with particularity the warranties included with a general warranty deed, for comparison purposes it is worth noting that at common law, the standard warranties of title were referred to as six covenants:

1.the covenant of seisin (that the grantor has the very estate it purports to convey);

2. the covenant of right to convey (that the grantor has the right to convey the promised title);

3. the covenant of freedom from encumbrances (warranty by the grantor against encumbrances);

4. the covenant of quiet or peaceable possession (warranty that the grantee will not be evicted by the grantor or another claiming superior title);

5. the covenant of further assurances (covenant of the grantor to execute any document necessary to properly vest title); and

6. the covenant of warranty (warranty that the grantee has title and possession to the property and will not be deprived of possession by persons asserting superior claims of possession or title, and that the grantor will defend title conveyed against such lawful claims).4

While many residential transactions are closed using general warranty deeds, in commercial transactions the general warranty deed is relatively rare because of the breadth of these warranties by the grantor.

Special Warranty Deed

In Colorado, the distinction between a general warranty deed and a special warranty deed lies not in the number of warranties provided, but rather in their scope. A Colorado special warranty deed includes the same four statutory warranties as a general warranty deed; however, the warranty against encumbrances is limited to claims made by or through the grantor. There is no warranty against claims made by or through prior owners or others. This can be understood as the grantor providing a defense against rights or claims made based on interests or defects that arose during the period of the grantor's ownership of the property.[5] Special warranty deeds are customarily used in commercial transactions and, as discussed below, in areas of the state where there are special title considerations.[6]

Bargain and Sale Deed

A Colorado bargain and sale deed is a grant without covenants or warranties, unless covenants or warranties are expressly stated therein. Put another way, a bargain and sale deed is a deed without implied warranty of any kind. A bargain and sale deed is distinguished from a quitclaim deed (described below) in that a bargain and sale deed conveys both the grantor's interest in the property as of the date of conveyance, as well as any interest in the property that the grantor acquires after the closing. These interests are referred to as "after-acquired" interests or property. For example, after-acquired property might include mineral rights not vested at the time of the grant, or reversionary interests that vest after the grant.7 In such cases, the grantor's after-acquired interests are deemed held in trust for the grantee.8

Several nuances to the bargain and sale deed merit further explanation. While a bargain and sale deed is generally considered a deed without covenants, there is an argument that it includes a covenant of seisin.9 However, the plain language of CRS § 38-30-115 states that a deed with the words "sell and convey" has the same effect as a "bargain and sale deed, without covenants of warranty, at common law." In Colorado, the question whether a bargain and sale deed includes a covenant of seisin remains unresolved and is relevant when considering using this form of deed.

In addition, at common law and under the Statute of Uses (1535), a bargain and sale deed also required consideration (hence the name "bargain and sale"). The Colorado Court of Appeals has held that the Statute of Uses is in effect in Colorado.10 However, Colorado courts have also held that a conveyance reciting consideration is valid even though there is no consideration, and the sufficiency of consideration cannot be challenged by a person with no interest in the transaction.11

Bargain and sale deeds are rarely used in arm's-length transactions in Colorado. They are most often used in...

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