Special Warranty Deed
A deed in which the grantor warrants title only against defects that arose during their own period of ownership — not the property's entire history.
A special warranty deed (called a limited warranty deed in some states, and a covenant deed or grant deed in others) transfers real estate with warranties limited to the grantor's own period of ownership. The grantor promises that they did not create or allow any title defects or encumbrances while they owned the property — but makes no promises about anything that happened before they took title. This places it between the protective general warranty deed (which covers the entire title history) and the no-warranty quitclaim deed.
What is — and isn't — covered
- Covered: Liens, claims, or defects the grantor created or permitted during their ownership.
- Not covered: Defects that predate the grantor's ownership — an old lien from two owners ago, a boundary dispute from decades earlier, or a missing heir's interest.
Because the protection is time-limited, buyers taking title by special warranty deed rely heavily on a title search and title insurance to cover older risks.
Where special warranty deeds appear
Special warranty deeds are common where the seller wants to limit liability and reasonably cannot vouch for the full history of the property:
- Bank-owned (REO) sales after foreclosure, where the lender never occupied the property.
- Commercial real estate transactions, which frequently use special warranty deeds as a matter of custom.
- Estate, trustee, and corporate sales, where the seller can only speak to its own period of ownership.
- New construction in some markets.
Why a special warranty deed matters in note transactions
When a note is secured by a property the borrower acquired via special warranty deed — common for notes created on REO or commercial properties — the note buyer knows the deed itself does not warrant the older chain. That makes the title search, chain of title review, and a title policy especially important during due diligence. The deed type is not a deal-killer; it simply tells the buyer where the title protection comes from (insurance and search rather than the grantor's broad promises). A clean search plus title insurance can fully support the collateral even when only a special warranty deed was used. A note on a property with a special warranty deed and unresolved older title issues, however, would be priced more cautiously.
Example
A bank sells a foreclosed home by special warranty deed and the buyer obtains title insurance. The buyer finances part of the price with a seller- or third-party note secured by a deed of trust. When that note is later sold, the note buyer confirms the title policy covers pre-ownership risks the special warranty deed does not — and, satisfied that the collateral's title is sound, makes a competitive offer.
This entry is general information, not legal advice. The warranties implied by a special (limited) warranty deed vary by state and by the deed's wording; consult a qualified attorney or title professional.