Title Insurance for a Quitclaim Deed?
Title insurance is a way of protecting the real estate you buy or own from claims of creditors, prior owners, and third-parties against your real estate. A quitclaim deed is a way of transferring an interest in real property that essentially says the seller isn’t sure what rights he/she has – but whatever interest the seller has, the seller is willing to transfer it for a negotiated price.
Titles versus Deeds
Deeds and titles are not the same. A deed is evidence of ownership of a parcel of land and the property on the land. Deeds typically include a formal description of the parcel of land, the names of the people transferring the interest, and the names of the people buying the interest in the real property. Real estate deeds are typically recorded in the local recorder of deeds off in the county where the property is located. Deeds should be in writing and properly signed and executed.
Title is a legal concept that establishes the relationship between people and real property. Clear title to real property means that the person with the title has the right to control the land and homes on the land, to live on the real property, and to sell the property. Title to property also enables the owners of the title to obtain mortgages against the property as security for an loans.
Different types of title
Owners of property generally have title to the property in different ways. The different ways depend on the number of owners, the relationship of the owners, and the rights of multiple owners when one owner dies. The three basic types of title in Florida are:
- Tenancy in common. Here, each owner owns an interest in their proportional share of the property but not all the property. If an owner dies, the heirs are entitled to the decedent’s proportional interest. This type of title is often used when owners aren’t related.
- Joint tenancy. Here, each owner owns all the property along with the other owners. When someone dies, the decedent’s interest is transferred to the other owners through a principle called “right of survivorship.”
- Tenants by the entirety. This is essentially a joint tenancy where the owners are husband and wife. On the death of one spouse, the decedent’s interest is transferred to the other spouse.
Two other ways to hold title are as a sole owner and as owner in a community property state.
Types of deeds
The main types of deeds are these:
- General warranty deed. Here, the seller essentially warrants that the title (ownership interest) that is being transferred is free and clear of any encumbrances – claims against the property. The seller agrees to be responsible for any liens or third-party claims. The seller also warrants that he/she has the authority to transfer title. In Florida, generally, the seller buys insurance to protect against any outside claims.
- Special warranty. The seller warrants that the property is free and clear of encumbrances – but only for the time the seller had title to the property. The seller doesn’t make any warranties regarding prior owners.
- Deed without warranty. Essentially, the seller says he/she has title but isn’t making any promises or guarantees about additional claims.
Here, the seller isn’t even guaranteeing or giving any warranty regarding any aspect of title . The seller is just selling his/her interest – whatever that may be. Quitclaim deeds must comply with the terms of Florida Statute Section 695.26. A quitclaim deed is sometimes used in divorce settlements, to transfer single ownership to joint ownership, as part of a living trust, and for other reasons a Florida real estate lawyer can explain. They can also be used in tax sales.
Existing title insurance
Sellers who have title insurance should check with their lawyer and their title company whether a quitclaim deed can affect the title insurance. In many cases, title insurance is not transferrable.
Generally, new owners can purchase title insurance for property transferred through a quitclaim deed. As a practical matter, while the law may allow the seller to buy new title insurance, the title insurance company may not be in hurry to provide that insurance if the seller isn’t willing to provide any warranties as to ownership and encumbrances.
Quitclaim deeds do need to be signed and filed in the county courthouse.
Deeds of trust
This is essentially a legal document the protects lenders and lienholders if the buyer/borrower can’t pay the loan. The lender, mostly mortgage companies, and the borrower essentially agree to let a third party, typically a title company, hold title until the loan is paid in full.
Quiet title action
One remedy buyers of quitclaim deeds may use to clear their title is a quiet title action. This is a court case that a property owner then brings in the county where the real property is. Quiet title actions allow a buyer to claim that he/she has full ownership free of encumbrances. There are many formality requirements to protect anyone with a legitimate claim so they can object to the claim of ownership. Quiet title actions may have limitations that an experienced Florida real estate attorney can explain. For example, quiet title actions generally don’t protect a new owner against claims by prior owners.