What Happens When a Covenant of Warranty is Violated? Understanding Breach and Remedies
A covenant of warranty, a crucial element in real estate transactions, promises that the grantor (seller) has good title to the property and the right to convey it. When this covenant is violated—meaning the grantor's promises are breached—significant consequences can arise for both the grantor and the grantee (buyer). Let's delve into the specifics of what happens when this important covenant is broken.
What Constitutes a Breach of the Covenant of Warranty?
A breach of the covenant of warranty occurs when the grantee's title or possession is disturbed due to a defect in the grantor's title that existed at the time the deed was conveyed. This disturbance can take various forms, including:
- Ejectment: A third party successfully claims ownership of the property or a portion of it, forcing the grantee to vacate.
- Quiet Enjoyment Disturbance: While not necessarily involving complete loss of possession, the grantee faces interference with their peaceful use and enjoyment of the property due to a title defect. This could include ongoing legal battles or challenges to ownership.
- Encumbrances: The presence of undisclosed liens, easements, or other encumbrances that significantly impact the property's value or usability constitutes a breach.
- Adverse Possession Claims: A third party claims ownership through adverse possession, effectively challenging the grantee's title.
What are the Remedies for a Breach of Covenant of Warranty?
When a breach occurs, the grantee has legal recourse to seek remedies. The specific remedies available can vary depending on the jurisdiction and the specifics of the breach. Common remedies include:
- Legal Action: The grantee can sue the grantor for damages, which may include:
- Direct monetary compensation: This covers the financial losses suffered by the grantee due to the breach, such as legal fees, costs of defending the title, and any reduction in the property's value.
- Compensation for loss of use: If the grantee was prevented from using the property, they may recover compensation for this loss.
- Specific Performance: In some situations, a court may order the grantor to take specific actions to rectify the title defect, such as purchasing the outstanding claim or clearing the encumbrance. This is less common than monetary damages.
- Warranty Deed Recourse: The strength of the remedies available depends on the type of deed used. A general warranty deed offers the strongest protection, while a quitclaim deed provides minimal protection to the buyer.
What if the Grantor is No Longer Alive?
H2: What happens if the grantor is deceased?
If the grantor is deceased, the grantee's recourse shifts to the grantor's estate. The claim would be made against the executor or administrator of the estate, who would be responsible for defending the claim and potentially paying damages from the estate's assets. The success of the claim depends on the availability of assets within the estate to cover the damages.
Can a Covenant of Warranty be Waived?
H2: Can I waive the covenant of warranty?
While a covenant of warranty is typically a standard part of a real estate transaction, it's theoretically possible for the grantee to waive their right to enforce it. However, this is generally not advisable unless the grantee has conducted thorough independent title searches and is fully aware of any potential risks. Waiving the covenant essentially shifts the risk of title defects entirely to the buyer.
How Can I Protect Myself From a Breach of Covenant of Warranty?
H2: How can I protect myself from a breach of covenant of warranty?
Protecting yourself from a breach requires proactive measures:
- Title Insurance: Obtaining title insurance is highly recommended. This insurance policy protects the buyer against financial losses resulting from title defects.
- Thorough Title Search: Conduct a comprehensive title search to identify any potential problems before closing the transaction.
- Review the Deed Carefully: Before signing the deed, carefully review all terms and conditions, including the specifics of the covenant of warranty.
- Seek Legal Counsel: Consult with a real estate attorney before closing the deal to ensure your interests are protected.
By understanding the implications of a covenant of warranty violation and taking the necessary preventative steps, buyers can significantly reduce their risk in real estate transactions. Remember that the specific laws and procedures regarding breach of covenant vary by location; seeking legal advice specific to your jurisdiction is always crucial.
