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Types of Deeds There are four types of deeds that are used today in conveying real estate; namely, general warranty deed, special warranty deed, deed without warranty, and the quitclaim deed.
General Warranty Deed The deed most commonly used today, and the one much preferred by title companies, is the general warranty deed. By the use of appropriate language in the deed, a covenant of warranty is created. This covenant is said to be the broadest and most effective covenant. In effect, it is a contract with reference to the title, under which the grantor or convenator agrees to pay damages if the title fails.
Express Covenants. Generally, the grantor’s warranty extends to all cases involving a failure of title to land purportedly conveyed by the deed. The covenant of warranty in a deed is an express covenant, and a Texas statute provides that no person shall be obligated to insert a covenant of warranty in any conveyance.
Implied Covenants. The seller, by the use of the word "grant" or "convey" in any conveyance of land, will give rise to two implied covenants. The first such covenant is that the grantor warrants to the grantee that he has not previously conveyed the same estate, or any right, title, or interest, to any person other than the grantee. Second, the grantor warrants that the estate conveyed is at the time of the execution of such conveyance free from encumbrances. The term "encumbrances" includes taxes, assessments, and all liens upon real property. Although these implied covenants arise by operation of law when the words "grant" or "convey" are used in the conveyance, the grantor nonetheless may negate or restrain the covenants by express terms contained in the conveyance. Thus, a grantor intending to negate any warranty in his conveyance may use language similar to the following: "Grantor herein makes no warranty as to the title to the property herein conveyed either express or implied." Title companies favor the warranty deed because it gives them subrogation rights against the seller and allows the buyer benefits of the after-acquired title doctrine. Illustration: "A" sells to "B" by warranty deed. There are outstanding taxes against the property that are not collected at closing. A claim for the payment of the taxes is made against "B". The title company pays the delinquent taxes and is subrogated to "B’s" cause of action against "A" for breach of warranty. Title company may sue "A" for recovery of the loss. At this point for the benefit of claims personnel it should be pointed out that a covenant against encumbrances is breached when made. But the cause of action does not accrue until the encumbrance has been paid. In the above example, should taxes be due for say 1980, "B" has no cause of action against "A" until the taxes are paid. Thus, the statute of limitations does not begin to run until the taxes are paid by "B", or the title company, whichever the case may be. Phillip D. Wolff, Jr. v. Commercial Standard Insurance Company (CA Houston, 1961) 345 S.W. 2d 565 writ ref. n.r.e. The applicable statute is RS Art. 5527, which is the four year statute.
Special Warranty Deed
The special warranty deed is one where the seller limits the covenant of warranty. He does this by limiting the warranty against all persons claiming the title "by, through, or under him, but not otherwise." The net effect of this limitation is to relieve the seller from any liability for claims that do not arise through him. Thus, the warranty of title against those claiming by, through, or under grantor is not breached by assertion of prior and superior title. Special warranty deeds are insurable when given by a lien holder after foreclosure and by a financial institution acting as the representative of an estate or trust. In other circumstances, consent of the underwriter should be obtained before insuring a transaction where title is passing by a special warranty deed.
Deed Without Warranty
This is simply a deed that does not contain any covenant of warranty. A deed without warranty may convey all the right, title, and interest of the grantor at the time of its execution, as fully as one with a warranty, as the covenant of warranty adds nothing to the deed insofar as it operates as a conveyance of an existing right. However, as hereinafter pointed out, a deed without warranty will pass after acquired title like general and special warranty deeds do, but on a different theory.
Quitclaim Deed
A quitclaim deed is one where the grantor only conveys the right, title, and interest of the grantor. The distinguishing feature that sets it apart from the deed without warranty is that it does not purport to convey the land itself but only whatever interest the grantor may have in the land. A deed that goes so far as to convey the land itself, even though quitclaim language is used, will be interpreted to be a deed without warranty. But the classification of a particular deed as a quitclaim or a deed without warranty, in some cases, may be quite difficult, as this is a question of intent to be gathered from the four corners of the instrument itself. Few, if any, title companies would or should insure the title when the grantor conveys by quitclaim deed, as a purchaser in such cases cannot be an innocent purchaser. It is not even desirable that a quitclaim deed appears anywhere in the chain of title Further, when a title company insures the title based on a quitclaim deed from the seller there is also the possibility of exposure under the Texas Deceptive Trade Practices Act in the event of a failure of title.
Exceptions and Reservations
Two terms that are often used indiscriminately in deeds, though they have a distinct legal meaning, are the term’s "exception" and "reservation." Strictly speaking, an "exception" excludes from the operation of the deed some part of the land described, whereas a "reservation" refers to the estate retained by the grantor. Where the grantor makes a reservation in connection with the thing granted, he creates a new right in favor of himself that, until the grant, did not exist as an independent right. Illustration: "A" owns a tract of land and conveys it to "B" reserving unto himself a life estate. Here, the reservation by "A" of a life estate creates a new right, which prior to the grant did not exist. On the other hand, an exception eliminates or excludes from the operation of the terms of the grant that which is set out in the exception and which would, in the absence of the exception, pass by the terms of the grant. Illustration: "A" owns a square 10-acre tract, which he conveys to "B" by metes and bounds description. He desires to retain the West 200 feet. In his description, he describes the entire 10-acre tract, but at the conclusion of the description, he states "Less and except, however, the West 200 feet thereof." The West 200 feet retained by "A" constitutes an exception. Few, if any, title companies would or should insure the title when the grantor conveys by quitclaim deed, as a purchaser in such cases cannot be an innocent purchaser. It is not even desirable that a quitclaim deed appears anywhere in the chain of title. A quitclaim deed does not pass after acquired title, nor does it give any subrogation rights.
What About Taxes?
Benjamin Franklin
Real Estate Taxes in the Houston Metropolitan Area In the greater Houston metropolitan area, there are more than one thousand taxing authorities who assess and/or collect ad valorem real estate taxes. Within incorporated areas, like the City of Houston, there are generally two tax collectors;
In unincorporated areas outside the city limits there is also a Water District or Municipal Utility District (MUD) under whose authority real estate taxes are collected for water and sewage services. While the Texas Constitution provides for uniformity of taxation on like properties, there can be a substantial disparity in the annual taxes paid on one property in comparison to another similar property located elsewhere in the area. These differences generally relate to three primary factors:
Below is a comparison of the taxes on three properties, each with an appraised value of $150,000.00.
*Taxes With Exemptions An exemption removes part of the valuation of your property from taxation and thereby lowers your taxes. If the home is your residence, you will qualify for a $5,000.00 homestead exemption on your home’s value for school taxes. In addition, any taxing unit may offer an additional homestead exemption of up to 20% of the home’s value; each taxing unit decides whether it will offer the exemption and at what percentage. Spring Branch I.S.D., for example, offered a 20% homestead exemption ($150,000.00 — 30,000.00 = $120,000.00) + an additional $5,000.00 exemption on its 1993 taxes. That homestead exemption resulted in a tax savings of $623.00. Harris County presently offers a 20% homestead exemption. The total savings in this Memorial Cove subdivision example as a result of homestead exemptions was $818.00. The homestead exemption savings in Kelliwood Terrace, however, was only $279.20. In order to qualify for a homestead exemption for a particular year, an individual must own the home as of January 1, and the home must be used as the principal residence as of January 1.
Water Districts, MUDS, UDS and DDS In each of the above tax examples there is at least one MUD or other Water District taxing authority. The need for a Water District or MUD arises when a municipality is unable to provide water, sewage and drainage services either because of physical capacity or because the development is so remote that the cost to provide services would be prohibitive. A MUD (Municipal Utility District) or an UD (Utility District) or a DD (Drainage District) may provide such diverse services as water supply, conservation, drainage, fire fighting, solid waste collection and disposal, sewage treatment and/or recreational facilities.
Additional Information In the Houston area, taxes are paid in arrears. The taxing authorities generally mail their tax bills in October and the deadline for the payment of same is January 31 of the following year. Taxes for the previous year that remain unpaid on February 1 are considered delinquent and penalty and interest charges are added to the original amount. Most mortgage companies pay taxes in October, and the amount required in the escrow account will be computed as if taxes were paid in October.
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