In Colorado, as in most other states, legal ownership of real estate is transferred through use of a legal document known as a “deed.”
There are several types of deeds commonly used in Colorado. However, the main ones, discussed below, include General Warranty Deeds, Quitclaim Deeds, Special Warranty Deeds, and Bargain and Sale Deeds:
1. Warranty Deed: A Warranty Deed is arguably the most common type of deed used in Colorado real estate transactions, and generally provides the greatest level of protection for a buyer, as the seller “warrants the title to the [property]” without exception. C.R.S. 38-30-113(1)(a). This means that the seller represents to the buyer that they have clear title to transfer the property, and warrants the property against any defects existing both before the seller acquired the property, and at all times during the seller’s ownership of the property.
2. Special Warranty Deed: A Special Warranty Deed is similar to a Warranty Deed in that the seller warrants the property against any defects that arose during the seller’s ownership of the property, but differs from a Warranty Deed in that the seller does not warrant against any defects that existed prior to the seller taking ownership of the property. This is accomplished by using language stating the seller, or “grantor,” “warrant(s) the title [to the property] against all persons claiming under” the seller. C.R.S. 38-30-113(1)(b). Accordingly, a Special Warranty Deed generally provides a buyer with less protection than a Warranty Deed, but more than with a Bargain and Sale Deed or Quitclaim Deed.
3. Bargain and Sale Deed: In a Bargain and Sale Deed, a seller “sells and conveys” property to a buyer without making any warranties as to title. Accordingly, a buyer receives little assurance that the property is not encumbered. However, the use of “sell and conveys” in the conveyance language may imply that the seller has at least some sort of interest in the property being sold, and the Deed conveys any after-acquired title of the grantor to the buyer. C.R.S. 38-30-113(1)(c).
4. Quitclaim Deed: As noted above, a Quitclaim Deed is similar to a Bargain and Sale Deed in that, with a Quitclaim Deed, the seller makes no representations or warranties as to the title of the property being transferred. Instead, the seller merely “quitclaims” whatever interest the seller has in the property to the buyer, if any interest at all. If the seller has no interest to convey, the buyer receives nothing. Additionally, unlike a Bargain and Sale Deed, the buyer, or “grantee,” of a quitclaim deed does not receive any after-acquired title that the granter may later obtain. Because Quitclaim Deeds offer little to no assurances for a buyer, Quitclaim Deeds are primarily used to transfer property as gifts, or where an owner wishes to transfer property to themselves in trust, or to an LLC or other entity already owned or controlled by the seller. C.R.S. 38-30-113(1)(d).
Although the above are the most common types of deeds used in Colorado real estate transactions, other types of “deeds” may be used in various situations. For example, a legal agreement known as a “Deed of Trust” may be used where property subject to a mortgage is purchased. Likewise, individuals in Colorado may choose to use “Beneficiary Deeds” as a form of estate planning, to control how ownership of their real estate should pass upon their death.
Regardless of the type of deed used in a transaction, every deed should be carefully drafted to ensure that the deed (1) complies with applicable statutes, and (2) acts as the buyer and seller intend. In addition to ensuring that names, addresses, and property legal descriptions included in a deed are complete and correct, careful consideration should be given to the conveyance language used in the deed. Various Colorado statutes set forth requirements for language that must be used in various types of deeds for the deed to be effective. Failure to use mandated language may result in a deed being deemed void or otherwise ineffective.
Additionally, the language used in a deed may also affect how buyers take ownership of purchased property. For example, many buyers, especially couples, desire to take ownership of purchased property as joint tenants with rights of survivorship. However, in order to do so, specific language must be included in a deed to the same effect. Otherwise, default laws will result in the buyers taking ownership to the purchased property as tenants in common without rights of survivorship.
In addition to language and content requirements for deeds, various Colorado statutes contain requirements governing how deeds must be executed and recorded. Failure to comply with the statutory requirements can result in a deed being considered unenforceable, or being left unrecorded.
Given the important legal ramifications of the various types of deeds available to parties in real estate transactions, when buying, selling, or transferring an interest in real estate, it is important to understand the different types of deeds available, and ensure that the type of deed chosen complies with both statutory drafting, executing, and filing requirements, and meets the needs and intentions of the parties to the transaction.
