Monthly Archives: October 2014

Avoiding Unnecessary Liability In Probates

One of the biggest mistakes I often see in probate matters is when a Personal Representative of an estate sells real estate and conveys it by Statutory Warranty Deed.

There are four deeds used to transfer real estate in the state of Washington: The Statutory Warranty Deed, the Bargain and Sale Deed, the Quit Claim Deed, and the Transfer on Death Deed.  The first two require the Grantor, who is the person authorized to convey title to the real property, to make warranties to the person or persons receiving title.  The Statutory Warranty Deed is the gold standard, and warrants the following:

1.  The Grantor owns in fee simple (owns all the rights of ownership) and has the right to convey;
2.  The Property is free of all encumbrances (including encroachments);
3.  That the Grantee will have quiet and peaceful possession (meaning no one will have a claim against their ownership and use of the property;
4.  The Grantor will defend the title against all lawful claims;
5.  The Grantor conveys any after-acquired title.

A Bargain and Sale Deed is one in which the Grantor makes the first 3 of the above warranties.   Conversely, no warranties are made with a quit claim deed, in which a Grantor conveys any right or title they may have.  (Transfer on Death Deeds are specialized devices used to designate beneficiaries and avoid probate in certain circumstances, and therefore would not be used by a Personal Representative in the context of probating an estate.)

In many probates, a Personal Representative is acting with non-intervention powers, which means that they do not have to get the Court’s permission to sell real property that is owned by the estate.  However, in most cases, the Personal Representative also has no idea of the real property has been encroached upon my a neighbor, or if there is a cloud on title, either due to lien or and old claim which has never been removed.  Because the Personal Representative often has no knowledge of such things, I often counsel them to convey the real property by means of a type of Quit Claim Deed called a Personal Representative’s Deed.  This will spare the estate the expense of having a piece of property surveyed and having to order a title report from a title company, which is often a step taken by a Buyer, who wants title insurance on their purchase anyway.

I have encountered some Buyers who want deeds with guarantees, and some practitioners will often counsel their clients to use a Bargain and Sale Deed in the context of a probate, but in a tight real estate market in which the seller has an advantage, it is easier for a Personal Representative to avoid unnecessary and potentially costly risks, and use a Quit Claim Deed, especially since such sales rarely get the absolute top dollar that a living and breathing property owner might hold out for.

Depending upon the estate, it is usually a good idea to have an attorney review the purchase and sale agreement as well, especially if the Personal Representative does not have non-intervention powers, because then the sale will be conditioned up on Court approval, and a number of other statutory requirements and factors will also govern the sale of the property.

Leave a comment

Filed under Contracts and Agreements, Pieces of the puzzle, Probates and Estates, Real Estate, Transfer on Death Deeds