Deed Forms in Oregon

BooksIntroduction.  Sellers and buyers of residential property are frequently confused over what type of deed they should use in making a conveyance as a “grantor,” or accepting a conveyance as a “grantee.” There are four basic deed forms, the General Warranty Deed (or “Warranty Deed”), the Special Warranty Deed, the Bargain and Sale Deed, and the Quitclaim Deed.  Each one has been codified in statute, meaning simply that if the deed is identified as one of the statutory forms, it automatically carries with it the level of buyer title protection defined in the applicable statute. These deeds, in regular non-statutory form [i.e. containing the full text of the applicable warranties, if any] or in statutory form [i.e. containing by implication, the protection afforded by the applicable statute] differ based upon the degree of title protection afforded the grantee, and the degree of exposure created for the grantor.  In descending order of protection to the grantee, the statutory deed forms are as follows:

The greatest protection to the grantee is the General Warranty Deed, which contains the three major covenants, or warranties, of title.[1] The Special Warranty Deed limits the three covenants to the period of time the grantor held the property – not before.  The Bargain and Sale Deed and Quitclaim Deed make no warranties, and are alike in most – but not all – respects. Besides conveying all of the grantor’s right, title and interest in the described property, the Bargain and Sale Deed [as well as the General and Special Warranty Deeds] include what title officers call “after-acquired title”; the Quitclaim Deed does not. Any interest that can be conveyed by a Bargain and Sale Deed can be conveyed by a Quitclaim Deed.  (ORS 93.110)  Most title officers would prefer to see a Bargain and Sale Deed rather than a Quitclaim Deed in the chain of title, and most buyers should, as well [if given a choice between these two].

How do These Different Deed Forms Work in Real Life?  First, a warranty of title is a sort of “guaranty” regarding the quality of the title, made by the grantor to the grantee.  So if the grantor conveys title to his or her property by General Warranty Deed, under one covenant of title, known as the covenant of “seizen” or “seisen,” he or she is guarantying that they actually own the property they are conveying, i.e. the property legally described in the deed.

But suppose that, by virtue of an old fence that had been on the grantor’s property for 30+ years, the neighbor acquired title to a three foot strip of the grantor’s land via adverse possession years earlier. Thus, at the time of conveyance, the grantor would be in breach of the covenant of seizen, since he was actually conveying title to less than that described in the deed; the grantor’s neighbor, or their successor in interest, actually acquired title to the three foot strip, years earlier.  Technically, this means that the grantor is on the hook for a breach of warranty, if the grantee wanted to bring one. The grantee’s damage claim would probably be for the fair market value of the three foot slice of property that was never conveyed.[2]

Since a standard owner’s policy of title insurance does not insure against claims that would have been disclosed had the parties had a survey, the grantee has no recourse against the company – thus he or she is forced to look to their grantor for recovery.  If the grantor also took their title via General Warranty Deed, they could look “upline” to their grantor for recovery, and so on.

But if the grantor conveyed by a Special Warranty Deed, their warranty is only limited to claims arising during their ownership.  The grantee may or may not have a claim, depending on when title by adverse possession had vested [i.e. when the ten year period ran]. If it vested before the grantor acquired title, there would be no claim against the grantor by the grantee, since title was not lost during that grantee’s ownership.  [For more on adverse possession, go to my post, here.] If the grantor conveyed title to the grantee by a Bargain and Sale Deed or a Quitclaim Deed, there would be no claim, because neither deed warrants the quality of title to the grantee.  The grantee gets full title to the property conveyed, but no assurances by the grantor as to the quality of that title.

In most real estate transactions in Oregon, sellers customarily convey title by General Warranty Deed.  Essentially, that means that if there is a title defect that is not covered by title insurance, the current owner of the property has a claim “upline” against their grantor, and that grantor will have a claim “upline” against their grantor, and so on – so long as everybody took their title through a General Warranty Deed. [3]

The Take-Away: If a seller does not want to convey title by a General Warranty Deed, ask “Why?”

[1] For a discussion of them, see link here.

[2] Note, there is a countervailing argument that the buyer has not been damaged at all, since, assuming their lender had an appraisal, the property appraised out at the fair market value; the buyer got exactly what they bargained for, i.e. the property running to the old fence.

[3] Note, there may be statute of limitations defenses that may prevent going very far “upline.”