Question 40

Special Warranty Deed

Sellers may use a Special Warranty Deed to limit their risk by not providing covenants or guarantees against title defects that occurred prior to their ownership of the property. This type of deed only warrants the title against defects occurring during the seller's ownership.

A) General Warranty Deed

A General Warranty Deed provides the highest level of protection to the buyer, as it includes covenants that guarantee the title is free from defects not only during the seller's ownership but also before that time. Thus, it does not limit the seller's risk, making it an incorrect choice for this scenario.

B) Special Warranty Deed

A Special Warranty Deed is specifically designed to limit the seller's liability by only covering defects that arose during their ownership. This deed does not guarantee against issues that predate their title, making it the correct answer for sellers looking to minimize risk.

C) Bargain and Sale Deed

A Bargain and Sale Deed implies that the seller holds title and has the right to convey it, but it does not provide warranties against defects. While it offers some protection, it does not explicitly limit risk concerning prior title defects like a Special Warranty Deed does.

D) Trust Deed

A Trust Deed is primarily used to secure a loan with real property as collateral and does not convey title in a manner that addresses warranties or covenants. Therefore, it does not pertain to the question about limiting risk regarding title defects.

Conclusion

The Special Warranty Deed is the appropriate choice for sellers aiming to limit their risk related to title defects that occurred before their ownership. Unlike the other options, it specifically protects sellers by only addressing issues arising during their tenure, thereby clearly distinguishing it from the General Warranty Deed, Bargain and Sale Deed, and Trust Deed.