What is the difference between a grant deed and a gift deed?

Underwood-Blog-Images-1-300x300The deed to a property is the most important document a property owner has. It describes the title and its associated rights while operating as the conveyance of property itself. But not all deeds are the same.

While grant deeds and gift deeds are incredibly similar, their differences can inevitably lead to legal disputes. The added family dynamics that typically accompany gift deeds can make things even murkier. In these situations, having an experienced real estate attorney at your side can make all the difference. The Underwood Law Firm encounters both types of deeds with frequency and has the familiarity and skill to help title holders understand their rights.

What is a deed?

A deed is a written instrument (a document) that conveys or transfers the title to real property; it is an executed conveyance and operates as a present transfer of real property. (Estate of Stevens (2002) 28 Cal.4th 665, 672.) Deeds are also considered written contracts and are therefore subject to the rules applicable to and governing contracts. (Civ. Code § 1040; Johnston v. City of Los Angeles (1917) 176 Cal. 479, 485.)

Once executed, a deed becomes the grant itself. Because of this, a valid deed is subject to numerous requirements.

In order for the deed to function as a legally-binding transfer of real property, it must first be in writing. It must also name both the person conveying and receiving the title. It must be signed by the grantor under the Statute of Frauds, delivered to the individual receiving the deed, and finally, accepted by the grantee. (see generally Civ. Code § 1091.) If any of these “essential elements are missing, the deed is ineffective to transfer title.” (In re Marriage of Wozniak (2020) 273 Cal.App.5th 120, 134.)

What is a grant deed?

A grant deed is the most common method Californians use to transfer title to real property. (Miller & Starr 3 Cal. Real Estate § 8:5.) Authorized under Civil Code section 1092, the grant deed is called such because the person giving up the land is literally “granting” their property rights to another person.

With other types of deeds, this isn’t always the case. For example, quitclaim deeds are usually characterized by the words “release and remise.” There, the person transferring the title is not “granting” their property rights to someone else but instead “releasing” their interest in the property to another person.

This difference in language may seem trivial or inconsequential, yet the law stresses the importance of language. Thus, “the essential of such a [grant] deed has long been held to be the word ‘grant.’” (Klamath Land & Cattle Co. v. Roemer (1970) 12 Cal.App.3d 613, 618.)

What does a grant deed convey?

When a grant deed is used as the method of conveyance, it “conveys a fee simple title to the grantee for all purposes.” (Shuster v. BAC Home Loans Servicing, LP (2012) 211 Cal.App.4th 505, 511.)

A fee simple estate is a legal way of saying that one holds all the property rights possible associated with a certain piece of land. “Ownership of title in fee simple absolute includes the rights, subject to governmental restrictions, of full use and disposition of the property.” (Carlson v. Assessment Appeals Bd. I (1985) 167 Cal.App.3d 1004, 1013.) The title may endure forever, without limitation, and will pass to the grantee and their heirs.

The fee simple title is also alienable, devisable, and descendible. This means it can be sold at any time, transferred upon the owner’s death via will, or passed through the laws of intestate succession if no will is present.

In California, most title is held in fee simple, as it allows property owners to enjoy the maximum amount of property rights. But just because a grant deed is used does not mean the title is automatically conveyed in fee simple. Like all other types of contracts, intent matters. And any person transferring title, even through a grant deed, can intend to transfer a “lesser” estate. (Citizens for Covenant Compliance v. Anderson (1995) 12 Cal.4th 345, 378.)

What is a gift deed?

Generally, gift deeds (or deeds of gift) are just another form of grant deed. They usually convey the title in fee simple, and they typically include the word “grant” in their operative language. They are, however, unique in that they are “gifts.” They are transfers of title to property without anything given in return. For the most part, they are tools used between family members as a means of conveying property.

From afar, this seems problematic. As stated earlier in the post, deeds are considered written contracts, meaning the contours of contract law apply to them. The fundamentals of contracts are the same in virtually every state. To be valid, there must be an offer, an acceptance, and most importantly, consideration.

There is a wealth of law on consideration, but in essence, it is a benefit conferred or detriment suffered as a result of a promise. (Civ. Code § 1605.) For example, if A contracts with B to pay B $10,000 for a house, then the $10,000 is the real estate contract’s consideration. The money exchanged makes the contract valid.

Usually, promises to make gifts are unenforceable by the law. This is because they do not involve consideration. A gift is given in exchange for nothing. There is no “bargained for exchange.” (see Passante v. McWilliam (1997) 53 Cal.App.4th 1240, 1247.)

But gift deeds are one of the exceptions to this general rule. Because of the importance of real estate title, and the commonplace desire of families to transfer title between their members, the law allows for gift deeds to proceed even if they transfer property for nothing in exchange. “It is settled that a deed without fraud in its inception conveys title and is not void for any failure of consideration…” (Wooster v. Department of Fish & Game (2012) 211 Cal.App.4th 1020, 1030.)

Does my deed carry an implied covenant?

When title is conveyed through a grant deed, it comes with implied covenants. This means there are promises inherent to and within the deed itself unless otherwise denoted.

Under the California Civil Code section 1113, two covenants apply to any conveyance through a grant: (1) that prior to executing the present conveyance, the grantor did not themself convey the same estate, or any right, title, or interest, to anyone else other than the grantee, and (2) that such estate is, at the time of the present conveyance, free from all encumbrances suffered by the grantor.

Gift deeds, on the other hand, may not carry these covenants. While the authority for this position is quite old, it has yet to be explicitly disproved. Thus, under California law, love and affection are sufficient considerations to support a conveyance of property as a gift, but they are not sufficient considerations to hold the property as containing the implied covenants. (In re Estate of Porter (1903) 138 Cal. 618, 624.)

How can the Attorneys at Underwood Law Assist You?

Understanding how you hold title to your property is incredibly important. Based on the deed, you may have additional rights and obligations associated with your property. Additionally, the deed is the foremost document for many lawsuits involving property, be it a partition, adverse possession, foreclosure, breach of warranty, etc.  

As each case is unique, property owners would be well-served to seek experienced counsel familiar with estates and property interests of all types. At Underwood Law, our knowledgeable attorneys are here to help. If you are concerned about your deed being canceled, seeking to understand your property rights, or if you just have questions, please do not hesitate to contact our office.

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