One key element of all commercial real estate transactions is a property deed. A property deed is a legal document that moves ownership of a property from one party to another. Deeds play a pivotal role in ensuring a smooth transfer of real estate assets, and different types of deeds serve distinct purposes. Let’s delve into the most common property deeds in commercial real estate.
General warranty deed
A general warranty deed is one of the most comprehensive and secure deeds used in commercial real estate. With this deed, the seller guarantees that they have clear title to the property and if any debts emerge after the property sells, the seller is the one responsible for the debt, not the buyer. This type of deed provides the highest level of protection for the buyer, making it the preferred choice in many transactions.
Special warranty deed
Unlike the general warranty deed, the special warranty deed limits the seller’s guarantee specifically to the time they owned the property. This deed guarantees the property was free of encumbrances during the seller’s ownership. While offering more limited protection compared to a general warranty deed, a special warranty deed is still very secure and a common choice in commercial real estate transactions.
A quitclaim deed is often used when the buyer and seller have an existing relationship, such as family members or business partners. This type of deed makes no guarantees about the quality of the title or that the seller owns the property. It simply transfers the seller’s interest in the property. It’s essential to carefully consider the implications of using a quitclaim deed in commercial transactions since they normally don’t provide any protection to the buyer.
Bargain and sale deed
A bargain and sale deed is similar to a quitclaim deed, except it guarantees that the seller holds title to the property and has the right to sell it. A bargain and sale deed provides a minimal level of protection and is commonly used in commercial transactions where the buyer accepts the property “as is,” without any comprehensive warranties or protections.
Master deeds are typically utilized when a condominium developer divides the complex into single units and common areas. They may include covenants and are filed before any units are sold. The developer must prepare the deed to portray the division of the units and how the common areas are laid out.
Deed of trust
A deed of trust works like a mortgage. This type of deed involves three parties: a trustor, a beneficiary and a trustee. The trustee is a designated third party who holds the legal title to the property until the loan is paid off by the trustor. The trustee in these transactions is typically a title company, which is in charge of dissolving the trust and transferring the title to the trustor once the loan is paid off to the beneficiary.
It’s important for both buyers and sellers to understand the nuances of each type of deed since they significantly impact the level of protection and obligations associated with the transfer of property. The team at Landmark Title works closely with clients to ensure that the appropriate deed is selected to meet the specific needs of each commercial real estate transaction. If you’re looking for assistance with a commercial real estate transaction, contact Landmark Title today and we can help you navigate the complexities and ensure a successful, timely closing.