May I transfer title to a corporation via a warranty deed when there is a lien on the property?
Full Question:
Answer:
Generally speaking, a warranty deed must contain a phase specified by state law such as the phrase "conveys and warrants". These words, called operative words of conveyance, carry with them several warranties which the grantor is making to the grantee. Examples of the warranties are:
First, the grantor warrants that the grantor is the lawful owner of the property at the time the deed is made and delivered and that the grantor has the right to convey the property.
Second, the grantor warrants that the property is free from all encumbrances or liens.
Third, the grantor warrants that he or she will defend title to the estate so that the grantee and the grantee's heirs and assigns may enjoy quiet and peaceable possession of the premises with the power to convey the property.
Personal liability for the loan from the bank is handled separately from the transfer of title. Re-payment of the loan would still be required pursuant to the promissory note.
In contrast to a general warranty deed, a special warranty deed limits the liability of the grantor by warranting only what the deed explicitly states. A special warranty deed has practically the same effect as a quitclaim deed. Special warranty deeds are generally used by corporations or other entities that want to avoid assuming the liability of a general warranty deed. Like the general warranty deed, the special warranty deed should contain the appropriate language such as "conveys and specially warrants." Usually, the grantor warrants that he or she did nothing to impair title during the period the grantor held the title. While a special warranty deed may contain covenants of title, these covenants will usually cover only those claims arising by, through, or under the grantor.
Unfortunately, a warranty deed will have no effect if there is an encumbrance or lien on the title. The grantor would be liable to the grantee for that lien if he or she transfers the property via warranty deed.
