Title Insurance v Warranty Deed
Not the Force of a Deed
A warranty deed is a document executed by the vendor selling the property, in assurance that the property has clear and valid title.
This is sometimes implicit in contracts for sale as a covenant of Right to Convey, but is often expressly stipulated in a contract for sale, depending on the appropriate jurisdiction.
However, a covenant of this sort that is present in a contract itself does not have the force of a deed which the law attributes a particular honor and solemnity. Deeds are enforced strictly, and are also guarded by statutory penalties for strengthening their enforceability, particularly in demanding that deeds be executed in good faith, and requiring their registration with a governmental authority.
Still, the warranty offered in a deed needs to be specific and ensure that a remedy exists within the deed in the event of a defect in title. If for example the remedy is one of pure compensation, it is hardly a comfort to the holder of a defective title, when the other party to the deed is found to be insolvent.
Specifications within the warranty deed will invariable visit the issue of defects presently encumbering the property title and those that may appear in the future.
These covenants that are present in the deed are those of traditional application and may well serve to remove any apprehension associated with the transaction; however it is important to recall that age old maxim, so old that it needs no authority to support its validity - nemo dat quod non habet. A person simply cannot convey property they have no right to convey.
The same is applicable to a warranty deed. Warranting the same fact is only of value when a person does indeed have the right to warrant against defects in title.
Certainly the principle behind acceptance of a warranty deed by purchasers is that the vendor or present owner of a property may be fixed with constructive knowledge of all matters relating to the present defects in the title, however, as to those and also to future defects in title that may present themselves, this is heavily reliant on the assumption that the right to make such a representation exists and also that the warranty is able to be supported by a remedy.
A quit claim deed is a rarely considered a deed at all, and is merely a covenant by a vendor that they are releasing their claim to the property.
Apart from the fact that a contract for sale is the foundation for such a release, the only usefulness of the quit claim deed is when provided along with the results of a title search. If presented during this investigation, it may serve to signify with more certainty that a title is indeed clear, however given the very nature of the instrument, is not to be considered of more than cursory value.
In a comparison of warranty deed versus the acquiring of title insurance the results are undeniably in favor of the latter alternative.
The principle of transferring risk is a distinctive feature of modern commerce and apart from exhibiting logical advantages; the distribution of risk to parties that possess the relevant expertise is second to none as a procedure for achieving ones objectives.
Certainly a warranty deed may be offered at no cost, but when no more than a casual glance and consideration is had to the pitfalls that are possible to be experienced when defects in title manifest themselves, the express warranty within an insurance policy that is provided by the title insurer, to indemnify the purchaser in the event of defect in title, is of a quality that far exceeds the premium of such an insurance policy, and one that clearly outperforms a warranty deed.