But What About the Deed?

Arguably, the most important document in a real estate transaction is the deed.

After all, what the seller wants to sell and what the buyer wants to buy is ultimately accomplished with the deed. While it may appear simple on its face, often no longer than a couple of pages, the deed is a very complex document. Given its importance, a quick primer on deeds can be helpful.

Deeds are generally divided into three sections. The first section, among other things, identifies the parties, sets forth the granting clause and describes the property.

The legal names of the parties must be used to identify them. For example, a college friend was known by everyone but his family as Mike. His family called him by his legal name, Miguel. When he later purchased property with his wife, the deed had to identify him as Miguel, not Mike.

It is important to state how the property is being held by the buyers. With married buyers, the default is to hold title as tenants by the entireties. For unmarried buyers, tenancy in common is generally the default. Varying from the default requires specific language. When buyers have questions about how to hold the property, it is best to refer them to an attorney to explain the various options.

The granting clause indicates the nature of the title conveyed. Fee simple is the most common title conveyed. While there are no mandatory words, the words “grant and convey,” “grant” or “convey” are generally enough to transfer fee simple title. If a fee simple title is not conveyed, different language will be necessary along with the guidance of an attorney.

An accurate and correct description of the property is vital. At a minimum, the description must allow a surveyor to locate and properly identify the property. Usually, this is through the metes and bounds or referencing a recorded plan that includes the property being conveyed. Any error in the description can create a cloud on the title. I have seen more than a few instances of improper descriptions leading to a lot of time and expense to fix.

Next is the recital section. The recital provides a brief history or story about the ownership of the property. At a minimum, this usually includes identifying the predecessor in title, along with the recording information of the prior deed. Other information that can be helpful to include are name changes (both for individuals and business entities), deaths, divorces and changes in the legal description.

This section also includes any warranty the seller is providing to the buyer. Special warranties are the most common since they only provide a warranty covering title defects arising during the seller’s ownership. Less common are general warranties that cover all title defects because they are riskier for a seller, often resulting in sellers demanding additional payment for a general warranty. The PAR standard Agreement of Sale provides that a seller will grant to the buyer a special warranty in the deed.

The recital section also identifies any covenants on the land, such as easements. Covenants can be real, meaning those that bind subsequent owners, or personal, those that only bind specific individuals.

The final section is aptly known as the conclusion. The conclusion includes the signature of the seller, the acknowledgment and the certificate of residence. Only the seller needs to sign the deed, but must do so in the same form as identified in the deed. So, if the deed has a middle name instead of just an initial, the person needs to sign using the middle name.

The certificate of residence is required to identify the mailing address of the buyer. Most often, but not always, this address will be the same as the property conveyed. This address is where the real estate tax notices will be mailed, so it is important to ensure the address is correct.

In the acknowledgment section, an authorized person acknowledges the person who signed the deed is really that person. Most often the person taking the acknowledgment is a notary public. While the acknowledgment section is not required for a valid deed, it is required by law for the recorder of deeds to accept and record the deed.

This is only a very cursory overview of the most common components of a deed. Thousands of pages, in both educational materials and court decisions, have been written about deeds. Given the importance of the deed, it is critical to get it right. If there are any questions or concerns about a deed, the best advice you can give clients is to speak with a real estate attorney to answer any questions and to resolve any concerns before trying to close the transaction.