Lawyers have been trained to avoid using a general warranty deed when representing a client in a real estate transaction or when conveying property between related entities or individuals. In instances of dissolution, merger, a transfer from individuals to a majority owned entity or a transfer between other related parties, where there is not a concern of a claim to title, a Quit Claim Deed is erroneously believed to be the type of deed of choice. While not intending to cause an issue with the client’s title insurance, the use of a Quit Claim Deed, in these situations, may void any existing Owner’s Title Insurance Policy in Georgia by canceling the “continuation of insurance.” Even for this seemingly minor assistance to a client, it is critical to ask a knowledgeable real estate attorney and check the jacket of the client’s Owner’s Title Insurance Policy to determine how “continuation of insurance” is applied and how the “Insured” is defined. For example, “Continuation of Insurance” can only be maintained if the “Insured” shall have liability by reason of warranties in any transfer or conveyance of the Title.”
In this instance, in order to maintain “continuance of insurance,” the Insured would be required to transfer title of property by way of warranty or by way of a general warranty deed for their current coverage to extend. In short, the Owner’s Title Insurance Policy may only give coverage as long as there are “warranties of title.” A Quit Claim Deed makes no “warranty of title” and would kill coverage under the policy. Title agents also warn against conveying the property by limited warranty deed, in these types of situations, as that may also cut off title insurance as the warranties are limited and a new policy may need to be obtained. Therefore, again while these instances seem to be simple conveyances, transferring via a Quit Claim Deed could potentially terminate any protections under the existing Owner’s Title Insurance Policy. Be sure to consult knowledgeable real estate counsel and check the client’s Owner’s Title Insurance Policy before making a transfer or, in an abundance of caution, transfer using a general warranty deed when there is limited risk of a claim to title by the party or entity you are transferring title to.