What is the Difference Between a Title and a Deed?
If you are wondering what the difference is between a deed and title, you are not alone. Real estate attorneys and quiet title lawyers are often asked what the difference is between the two. Although these two terms are interrelated and commonly confused, they are entirely different legal concepts with several important distinctions. So, how exactly is a title different from a deed?
What is Title to Real Property?
A title refers to a person’s legal rights to use a property and the actual lawful ownership of the property. A title may be transferred from seller to buyer if the property is sold. Titles must also be clear in order to be sold, meaning that the owner of the property has undisputed claim of the property and it is free of all liens and encumbrances. Furthermore, a title is a conclusion or a concept rather than a physical document.
California Insurance Code § 104 explains that:
Title insurance means insuring, guaranteeing or indemnifying owners of real or personal property or the holders of liens or encumbrances thereon or others interested therein against loss or damage suffered by reason of:
(a) Liens or encumbrances on, or defects in the title to said property;
(b) Invalidity or unenforceability of any liens or encumbrances thereon; or
(c) Incorrectness of searches relating to the title to real or personal property.
Title insurance protects both lenders and homebuyers from financial loss due to defects in title. A one-time title insurance fee covers administrative costs of searching the title data. Title insurance usually covers areas such as ownership disputes, incorrect signatures (including forgery and fraud), flawed records, restrictive covenants (such as unrecorded easements), and encumbrances or judgments on the property (such as lawsuits or liens). Virtually all real estate transactions in California require title insurance.
Certificate of Title
A certificate of title is an opinion issued by a title insurance company identifying the owner(s) of property based on public records research. Bear in mind that a certificate of title is an opinion of ownership status and not a guarantee.
What is a Deed?
By contrast, a deed “is a written instrument that conveys or transfers the title to real property. It is an executed conveyance and acts as a present transfer of the property.” Miller & Starr, 3 Cal. Real Est. (4th ed.) § 8:1. In other words, a deed is a physical, legal document that must be signed by both parties. It shows a transfer of ownership when transferring title from one party to another. Deeds include a description of the property as well as naming both the grantor (seller) and grantee (buyer) of the property.
A grant deed is a legal instrument used to transfer title to real property. A grantor must follow two important guarantees, called implied covenants, when conveying an asset to a grantee:
(1) that prior to the execution of the conveyance he or she has not conveyed the same estate, or any right, title, or interest therein, to any person other than the grantee, and
(2) that such estate is, at the time of the execution of said conveyance, free from any encumbrance that is done, made, or suffered by the grantor, or any person claiming under the grantor, such as his or her agents, employees, or representatives.
Miller & Starr, 3 Cal. Real Est. (4th ed.) § 8:6.
“A grant deed is presumed to convey the grantor’s entire interest in the property conveyed, including any interest acquired by the grantor subsequent to the date of the deed.” Miller & Starr, 3 Cal. Real Est. (4th ed.) § 8:5. A grant deed must contain the name of the grantor, a legal description of the property, the name of the grantee.
Deeds of Trust
A deed of trust, also known as a trust deed, is a document used in financed real estate transactions when a party has taken out a loan to purchase a property. It is an agreement between the borrower (trustor) and lender (beneficiary) to have the legal title transferred to a third party (trustee), such as a bank, escrow company, or title company, until the loan is paid off.
A warranty deed, which is the standard deed used when transferring title, provides protection for the purchase of a property. “In addition to the covenants that are implied in a grant deed, a warranty deed expressly warrants the title to the property and the quiet possession of the property to the grantee. The grantor thereby agrees to defend the premises against any unlawful claim to the title or possession of the property conveyed by any third person.” Miller & Starr, 3 Cal. Real Est. (4th ed.) § 8:12. “The modern practice of securing title insurance has virtually eliminated the warranty deed from California practice.” 12 Witkin, Summary 11th Real Prop (2020), § 269.
General Warranty Deed
A general warranty deed provides the grantee with the most protection because it holds the grantor responsible for any breach of warranty, even if it occurred without the grantor’s knowledge or when the grantor did not own the property. In other words, a grantor guarantees against any defects in clear title with a general warranty deed. Most residential property transactions use a general warranty deed.
Special Warranty Deed
By contrast, a special warranty deed only warrants against problems or encumbrances that occurred during the grantor’s ownership. Furthermore, a special warranty deed only guarantees that the grantor owns and can sell the property and that there were no encumbrances on the property during the grantor’s ownership; there are no protections against title claims for the period of time in which the seller did not hold title to the property.
A quitclaim deed transfers to the grantee all of the right, title, and interest that the grantor had at the time the deed was executed and delivered which are capable of being conveyed by a deed. It transfers whatever interest the grantor may have in the property, whether legal or equitable, and is as effective as any other form of conveyance to transfer the grantor’s title to the grantee.
Miller & Starr, 3 Cal. Real Est. (4th ed.) § 8:13.
Indeed, a “quitclaim deed transfers only the interest that the transferor has at the time” of the conveyance. 12 Witkin, Summary 11th Real Prop (2020), § 266. A quitclaim deed conveys interest in a property “as is” without a warranty. It does not state that the grantor has ownership rights, but rather that ownership interest in the property (if any) is released to the grantee. Many quitclaim deeds are used to transfer property between trusted family members or friends due to their lack of assurances when ownership is transferred.
Bargain and Sale Deed
Lastly, the bargain and sale deed is not used in California but is still worth noting. It has similar properties to a quitclaim deed but instead indicates that the grantor has title and can transfer it, encumbrances and all. Bargain and sale deeds are commonly used in foreclosure or tax sales where the grantor has title to the property but does not guarantee that the property is free of claims.
Title vs. Deed: What is the Difference?
It is important to understand that titles and deeds have different abilities and restrictions. The differences between a title and a deed, and each of the subcategories of title and deed, can drastically change how a real estate transaction is handled. If you are considering buying a house or otherwise possess real property, we highly suggest you speak with a knowledgeable real estate litigation attorney who can help further your understanding of titles and deeds.