Primer on Commercial Real Estate Conveyance Documents
When transferring properties, various legal instruments are used to facilitate the process. To ensure a smooth conveyance process, it is essential to comprehend the potential issues related to each of these documents. This article discusses the different legal instruments used in the conveyance process, including deeds, assignments, and bills of sale.
Deeds
Deeds are legal documents that transfer ownership of real property from the seller (grantor) to the buyer (grantee). There are several types of deeds, and it's crucial to specify the type of deed to be delivered at closing in the purchase and sale agreement as different deeds offer varying levels of protection to the buyer. The appropriate type of deed may also vary by jurisdiction, so it is important to understand the appropriate types of deeds used in your state. The most common types of deeds include:
General Warranty Deed:
This type of deed offers the most protection to the grantee. It not only transfers the grantor's title and interest in the real property to the grantee but also provides that the grantor will warrant against any title defects or claims against title going back to the inception of record ownership of the property. This means that the owner is even warranting against claims of title relating to events that happened prior to the current owner’s period of ownership. General warranty deeds are less common in commercial real estate transactions given that most transactions include title insurance to protect the buyer against claims beyond those covered in less protective forms of deeds.
Special Warranty Deed:
This type of deed, also referred to as a limited warranty deed, transfers the grantor's title to the grantee and promises to protect the grantee only against title defects or claims made by the grantor or anyone whose right to assert a claim against the title arose during the grantor's ownership of the property.
Fiduciary Deed:
This type of deed is used when the grantor is acting in an official capacity as a trustee, guardian, conservator, executor, etc. A fiduciary deed typically only warrants that the fiduciary is acting within their authority and does not guarantee clear title to the property.
Quitclaim Deed:
This type of deed releases any interest the grantor may have in the property and does not include any warranties from the grantor. It is commonly used when making related party transfers, such as from an owner into a trust, since the allocation of liability between the grantor and the grantee is not an important factor in these types of transfers.
Assignments
Assignments are legal instruments used to convey the seller's interests in leases, property-related contracts, licenses, permits, intellectual property, and other items to the buyer. The buyer must determine whether these specific items are assignable and if they want to assume them. The seller will transfer their interest in each item through assignments delivered at closing. These forms also typically include some form of indemnity related to the contracts being assumed, such that the seller is responsible for all claims related to periods before the closing date, and the buyer is responsible for all claims relating to time periods after the closing date.
Bills of Sale
A bill of sale is a legal instrument used to transfer ownership of personal property from the seller to the buyer. The bill of sale should identify the items being transferred as specifically as possible. It will also typically recite some form of "as-is" language reiterating that the seller is not responsible for repairs or warranties for the personal property except as may be expressly set forth in the purchase and sale agreement.
Conclusion
While the exact forms used may vary based on the state and transaction specifics, the list above is a summary of the basic conveyance documents typically used in a commercial real estate closing. Understanding these legal instruments can help ensure a smooth conveyance process.
