Explaining the use of a quitclaim.
I was in a conversation the other day regarding the subject of quitclaim. It became apparent that the other individual did not fully understand what a quitclaim is and what it isn’t. If one individual is confused then I suppose it is fair to assume others are as well. Here is my take to the question when is the use of a quitclaim appropriate?
Grantor releases interest.
In The Language of Real Estate Quitclaim Deed is defined as “A deed of conveyance that operates, in effect, as a release of whatever interest the grantor has in the property.” The grantor does not warrant title or possession. “In effect, a grantor forever quits whatever claim he or she had if, in fact, any existed.”
Understand that the grantor only relinquishes interest in the property at the time of execution and has no effect on any future interest the grantor may acquire.
Quitclaim deeds are commonly used to remove a cloud on the title. The cloud may not be an actual defect, but more of a precaution to circumvent any future problems. This is particularly important for a title company that issues title insurance. They will be called upon to defend any title claims associated with the previous owner that can arise in the future.
Proper and improper use of a quitclaim.
Let’s say John Doe owned property before marrying Jane Doe. John decides to sell the property after the marriage. The property is titled in his name only. Upon selling the property, the title company will ask Jane to sign a quitclaim to remove any possible cloud on the title. Jane, would not be able to claim an improper sale in the future. This is a proper use of a quitclaim.
Let’s say John decides he wants Jane to have ownership in his property. Even though a quitclaim can transfer interest, consider an interspousal deed as it may have advantages over a quitclaim.
After some years John and Jane decide they no longer want to stay married. They made decisions on splitting their property with John keeping the home and Jane receiving cash consideration.
The home has a loan. Jane signs a quitclaim removing her name from the title. Ah, but wait. There is a note signed by John and Jane promising to pay the note holder. Jane is still on the hook.
Jane, should not sign away her ownership rights until such time Jane is relieved of her loan obligation. Of course like all things legal Jane would seek the advice of legal counsel before doing anything. An interspousal deed might be more appropriate in a divorce situation
A better choice to consider.
A quitclaim deed can be used if you intend to transfer ownership to another; but to do so with a warranty, use a Grant Deed. A warranty is a guarantee of ownership. If you want to gift real estate consider using a grant deed.
Quitclaim deeds may raise red flags when title companies perform a title search; a grant deed not so much. Quitclaim deeds may require further explanation before issuing title insurance.
To learn more about quitclaim and other deeds the Sacramento County Law Library has an excellent graphical website that you can reference.
Any good title company and/or lawyer can explain what type of deed to use, depending on your transfer need.
Quitclaim deeds are quick and inexpensive needing only a notary to verify signatures. Please make sure you understand the consequences of signing away your ownership.
If you have questions, you can write me at email@example.com.