Deeds in Texas

What is a deed?

A deed is a written instrument that conveys legal and equitable title to real property—in most cases this means a fee simple estate which is the highest level of ownership. “An absolute or ‘fee simple’ estate is one entitling the owner to the benefits of that estate during his life and descending to his heirs, devisees, and legal representatives on his death. One can own a fee simple estate in both legal and equitable property interests.” Jackson v. Wildflower Prod. Co., 505 S.W.3d 80, 88 (Tex.App.—Amarillo 2016, pet. denied).

A deed (a conveyance) should be distinguished from a contract (a mere promise to convey). “A purchaser takes title to real property solely through a deed. An instrument that does not operate as a present conveyance of title to real property is a contract to convey rather than a deed.” Smith v. Davis, No. 12-12-00169-CV, 2013 WL 2424266 (Tex.App.—Tyler 2013, no pet.).

This article describes basic requirements for Texas deeds along with various types of deeds commonly used in residential transactions. It is deliberately organized in pragmatic fashion for practitioners and is not intended as a comprehensive academic review of the topic.

DEEDS AND THE EARNEST MONEY CONTRACT

Deed Considerations Begin with the Contract

Parties to a transaction should carefully consider the content of the deed before the earnest money contract is signed. If a party knows in advance that certain deed wording will be required then the contract (or its addenda) must say so. Otherwise, the other party will be under no obligation to agree to custom language. The resulting title company deed will be a minimalist document that includes no custom provisions and no special clauses favorable to either side.

Too often, the content of a deed is either assumed or left for later discussion. But what (for example) if the transaction is “as is?” If so, then a prudent seller should want to make sure that the deed at closing includes an express “as is” clause. Real estate lawyers consistently advise sellers that a thorough “as is” clause should be included in the warranty deed. Why? Because:

(1) the contract “as is” clause (paragraph 7.D.1) may not survive closing due to the doctrine of merger (see below);

(2) the wording of the “as is” clause in the deed can shape and determine continuing seller liability after closing; and

(3) since “as is” clauses vary widely in quality and quantity, they can be the subject of much debate; it is therefore better to agree in advance on the exact wording.

Since neither the TREC nor TAR contracts offer a box to check for the purpose of including an “as is” clause in the deed, a special provision must be added to the contract.

The seller’s best approach is to attach a separate special provisions addendum to the TREC Contract that expressly sets forth the “as is” language that will be included (word-for-word) in the deed—so there is no dispute about the clause or its wording later.

Survival of Contract Terms

Some contract terms might survive closing and some might not. This can significantly affect the post-closing liability of the parties and the potential for future litigation.

The doctrine of merger states that the terms of the contract merge into the deed in the absence of an express survival clause. “The merger doctrine provides that when a deed is delivered and accepted as performance of a contract to convey, the contract is merged into the deed. Thus where terms of the deed vary from those contained in the contract, courts must look to the deed alone to determine the rights of the parties.” In other words, in most cases and unless otherwise provided, the contract disappears and is replaced by the deed and other closing documents. Chicago Title Insurance Company v. Cochran Investments, Inc. 602 S.W.3d 895 (Tex. 2020).

Using a Special Provisions Addendum

A special provisions addendum can benefit both buyer and seller by (1) clarifying merger and survival issues and (2) adding custom contract clauses and provisions that are not found in the TREC Contract.

Inclusion of a deed “as is” clause for the seller is only one example of a custom clause; another might be an assignment of warranties clause for the benefit of the buyer. There are many others to consider. Deciding at the contract stage which deed clauses will be included and which will not is an excellent way to avoid disputes at the closing table. In business and real estate contracts, clarity is your friend.

By now it should be obvious that the wording of the deed is critical to the rights and remedies of the parties after closing. Such wording should be addressed at the contract stage and not left for later. It is not prudent to assume that deed-drafting issues will somehow take care of themselves.

THE BASICS OF TEXAS DEEDS

Technical Wording Not Required

Technical wording is not required in a Texas deed. “Words previously necessary at common law to transfer a fee simple estate are not necessary” (Prop. Code Sec. 5.001). “For a deed or instrument to effect conveyance of real property, it is not necessary to have all the formal parts of a deed formerly recognized at common law or to contain technical words. If, from the whole instrument, a grantor and grantee can be ascertained, and if there are operative words of grant showing an intention of the grantor to convey title to a real property interest to the grantee, and if the instrument is signed and acknowledged by the grantor, it is a deed which is legally effective as a conveyance.” Harlan v. Vetter, 732 S.W.2d 390 (Tex.App.—Eastland 1987, writ ref’d n.r.e.).

If there is a signed written document that identifies a grantor and grantee, provides a reasonably accurate description of the property, and clearly contains the intention to convey, then that document is a deed under Texas law. Green v. Cannon, 33 S.W.3d 855,858 (Tex.App.—Houston [14th Dist.] 2000, pet. denied).

Even so, most Texas deeds include traditional wording such as “bargain, grant, sell, and convey” in order to make it clear that the parties intend to convey title. Texas law then honors that intention.

Minimum Deed Requirements

Although technical wording is not required, there are certain minimum rules that apply if a deed is to be valid. For instance, the parties should be named, the intent to convey property must be clear from the wording, the property must be sufficiently described, and the deed must be signed by the grantor and delivered to the grantee. Gordon v. W. Hous. Trees, Ltd., 352 S.W.3d 32 (Tex. App.—Houston [1st Dist.] 2011, no pet.).

There is no standard form for a Texas deed although Property Code Section 5.022(a) offers a simple form that may be used. For legal purposes, only a minimalist bare-bones document is required to convey title; however, if the grantor and grantee have specific agreements or objectives then the inclusion of additional deed clauses can be critically important.

What interests can a deed convey?

Deeds can convey a wide range of property interests. It is presumed, however, that a deed is intended to convey fee simple title “unless the estate is limited by express words or unless a lesser estate is conveyed or devised by construction or operation of law” (Prop. Code Sec. 5.001).

A deed can only convey what the grantor owns and no more. This is true even if the deed “purports to transfer a greater right or estate in the property” (Prop. Code Sec. 5.003).

Must deeds show the actual purchase price?

No. In fact, it is customary in Texas to recite that the consideration paid is “ten dollars and other valuable consideration.” Confidentiality is the reason. While recording gives the public notice that a transaction has occurred and therefore preserves the chain of title, it is Texas tradition that the actual purchase price is not the public’s business. Of course, the parties can always choose to reveal the actual price in the deed if they wish.

PROPERTY DESCRIPTION

Property Description in the Deed

The Texas rule is that the property description in a deed is sufficient if it identifies the property with reasonable accuracy. Morrow v. Shotwell, 477 S.W.2d 538 (Tex. 1972). A title company “examiner should ascertain that the description in the instruments involved in a chain of title sufficiently describes the land so that it can be identified and located on the ground with reasonable certainty” (Comments to Standard 5.10, Texas Title Examination Standards).

Still, no prudent buyer should be satisfied unless the legal description is precisely correct and corresponds to previous descriptions in the chain of title. Assuring that this is the case should be part of the buyer’s due diligence process during the option period.

Lot and Block Descriptions Versus Metes and Bounds

In some cases lengthy metes and bounds are used to describe property rather than the usual lot and block descriptions commonly found in residential subdivisions. These need to be evaluated carefully by a prospective buyer. If a legal description is outdated or if there is any doubt as to its present accuracy (e.g., it refers to an “old oak tree for corner” or a “stream for boundary”) then a new survey would be a good investment by the buyer.

If the deed for some reason refers to more than one description of the property, and there is a conflict, the more specific metes-and-bounds description controls. Stribling v. Millican DPC Partners, LP, 458 S.W.3d 17 (Tex. 2015).

It is not required that the street address of the property be included in the deed, and there is a rather obtuse resistance on the part of some real estate lawyers to doing this. In our view, it is certainly the better practice to include the full street address. As a practical matter, this makes it easier for investors with multiple properties to determine which deed goes with which property.

Absent an express reservation to the contrary, legal descriptions in Texas deeds are presumed to also include and convey omitted narrow strips of land that should logically be included in the conveyance, given the nature of the property, and which would otherwise have little utility to the grantor. This is the strips-and-gores doctrine. Strait v. Savannah Court Partnership, 576 S.W. 3d 802 (Tex.App.—Fort Worth 2019, pet. denied).

Another presumption is the centerline presumption, which states that a landowner is presumed to have ownership of the soil all the way to the centerline of an adjoining street (subject to the public’s right of passage), even if the legal description in the landowner’s deed does not specifically extend that far. As with the strips-and-gores doctrine, this presumption is rebuttable by evidence that the parties clearly intended a different outcome.

Legal descriptions can evolve over time. “While any title is only as good as the weakest link the chain of descriptions, practical considerations justify reliance upon corrections or improved land descriptions appearing in later conveyances and upon the passage of time if no apparent difficulties have arisen from a less than perfect land description.” Pickett v. Bishop, 223 S.W.2d 222 (Tex. 1949).

Appraisal District Legal Descriptions

Appraisal district legal descriptions are typically abbreviated and condensed and may not coincide with the official legal description of the property as shown in the county clerk’s real property records. Two different computer systems are involved. The legal description in a new deed should track the description (lot and block or metes and bounds) in the prior deed on file with the county clerk—corrected if necessary—in order to preserve proper chain of title.

Appraisal district property descriptions are best viewed as guidelines and should not be relied upon in drafting deeds.

RESERVATIONS AND EXCEPTIONS

Limiting the Full Fee-Simple Estate

Property Code Section 5.001 provides that a deed conveys a fee simple interest in property (i.e., all of the rights to the property, without exceptions or reservations) “unless the estate is limited by express words or unless a lesser estate is conveyed or devised by construction or operation of law.” Modern deed formats usually refer to whether or not there are reservations and exceptions to the conveyance. These should be mentioned in the deed if they exist.

Reservations and exceptions in deeds must be clear and specific. Courts will not find reservations or exceptions by implication. Rahlek, Ltd. v. Wells, 587 S.W.3d 57 (Tex.App.—Eastland 2019, pet. denied).

A note on terminology: “The primary distinction between a reservation and exception is that a reservation must always be in favor and [held back] for the benefit of the grantor; whereas an exception is a mere exclusion from the grant. . . .” Pich v. Lankford, 302 S.W.2D 645 (Tex. 1957).

In other words, a reservation retains a certain interest in the grantor (e.g., the grantor keeps the minerals, an easement, or a life estate); by contrast, an exception stipulates that a certain interest is simply not conveyed at all, regardless of who may be the owner of it. Such language must be clear; an implied exception or reservation is not good enough. Griswold v. EOG Resources, Inc., 459 S.W.3d 713 (Tex.App.—Fort Worth 2015, no pet.).

Reservations and exceptions affect the total package of rights and interests a buyer is getting, so buyers should consult an attorney and pay close attention to the wording of the deed.

EXECUTION, DELIVERY,
AND RECORDING OF DEEDS

Signing, Dating, and Delivering the Deed

“A conveyance of an interest in real property must: (1) be in writing, (2) be signed by the grantor, and (3) be delivered to the grantee” (Prop. Code Sec. 5.021). A deed need not be dated in order to be effective, although it is clearly a better practice to do so. If the deed lacks a date or recites an impossible date then it will take effect as of the date of delivery. Webb v. Huff, 61 Tex. 677 (1884).

The last requirement—delivery—cannot be ignored. A deed must be delivered, actually or constructively, in order to be effective. “Manual delivery of the deed is not, however, required. The test is not physical possession, but whether the grantor gave grantee control of the deed.” This may be accomplished by means of delivery through a third person. Wheatley v. Farley, 610 S.W.3d 511 (Tex.App.—El Paso 2020, no pet.).

A 2010 Texarkana case holds:

Conveyance by deed requires delivery of the deed. Delivery of a deed has two elements:
(1) the grantor must place the deed within the control of the grantee (2) with the intention that the instrument become operative as a conveyance. The question of delivery of the deed is controlled by the intent of the grantor, and it is determined by examining all the facts and circumstances preceding, attending, and following the execution of the instrument.

See Chambers v. Equity Bank, 319 S.W.3d 892 (Tex.App.—Texarkana 2010, no pet.).

Intention is a critical component of the delivery requirement. A showing that a deed was executed and delivered with an intent to convey the property is sufficient to establish that the deed vested title in the grantee. Stephens County Museum, Inc. v. Swenson, 17 S.W.2d 257, 261-62 (Tex. 1975).

Proof that a deed was recorded creates a presumption of and establishes a prima facie case of delivery and intent by the grantor to convey the land. Troxel v. Bishop, 201 S.W.3d 290, 297 (Tex.App.—Dallas 2006, no pet.). Both cases are cited with approval in Watson v. Tipton, 274 S.W.3d 791 (Tex.App.—Fort Worth 2008, pet. denied).

Presumption of Acceptance

When a grantor transfers property, title to the property vests in the grantee upon execution and delivery of the deed. The grantee’s acceptance is not usually indicated anywhere on the document. Acceptance (express or implied) is generally presumed. However: “The acceptance of a deed is never presumed where the deed imposes burdens and obligations on the grantee to be performed by him. In such case his acceptance must be shown, not by resort to mere presumption, but by actual evidence just as in the case of any other contract.” Taylor v. Sanford, 108 Tex. 340, 193 S.W. 661 (1917).

“[A] deed which is not accepted by the grantee does not convey any interest in the land.” Martin v. Uvalde Sav. and Loan Ass’n, 773 S.W.2d 808 (Tex.App.—San Antonio 1989, no writ).

If the grantor wishes to confirm that a deed has been delivered and accepted, it is always possible to require that the grantee sign and acknowledge it. This practice is particularly useful when the deed includes custom clauses that go beyond a bare-bones transfer with title warranties (an “as is” clause is a common example).

If the deed is signed and acknowledged by the grantee, then ambiguity about whether or not there is grantee acceptance is eliminated.

Must deeds be recorded to be valid?

No. There is no requirement that a deed be recorded in order to be valid—only that it be executed and delivered to the grantee, at which time the transfer is fully effective between grantor and the grantee. Even though unrecorded, it is also “binding on the parties’ heirs and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument” (Prop. Code Sec. 13.001(a) and (b)).

An original deed may be recorded in the real property records if it is signed and acknowledged by the grantor. “An instrument that is properly recorded in the proper county is (1) notice to all persons of the existence of the instrument’ and (2) subject to inspection by the public” (Prop. Code Sec. 13.002).

Recording a deed makes it easier for title companies to research and insure the chain of title. Title companies insist on recording for this reason. Recording also informs the taxing authorities where ad valorem tax bills should be sent.

Thompson v. Six Shooter Enterprises provides an excellent summary of the law relating to deed delivery and recording:

In Texas, it is settled that title to real property will vest upon execution and delivery of the deed. . . . The recording of the deed is not necessary to pass title. . . . The recording, however, establishes a prima facie case of delivery and the accompanying presumption that the grantor intended to convey the land according to the terms of the deed. . . . Although equitable title to real property passes at the time a deed is delivered, a delay in recording of the deed leaves open the possibility that the prior owner could illegally purport to convey the same property to a different purchaser. . . . This possibility arises because the prior owner still appears to be the current, legal owner when the subsequent purchaser searches the public record. . . . In such a case, of course, both purchasers would claim title to the property. . . .

Texas law settles such a dispute over competing deeds in favor of the first to record, even where the first to record is a subsequent purchaser, as long as such deed holder qualifies as a subsequent purchaser for value pursuant to Section 13.001(a) of the Property Code. See Prop. Code Sec. 13.001(a) stating that an unrecorded conveyance in real property is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice.

See Thompson v. Six Shooter Enterprises, LLC, 633 S.W.3d 107 (Tex.App.—El Paso 2021, no pet.).

Notarization

A deed must be properly acknowledged and notarized if it is to be recorded in the county clerk’s real property records (statutory recording requirements are found primarily in Property Code Chapters 12 and 13). However, as between a grantor and grantee, deeds are valid even if the signature of the grantor is not acknowledged before a notary. Haile v. Holtzclaw, 414 S.W.2d 916, 928 (Tex. 1967).

In other words, notarization may be necessary for recording in the county clerk’s office but an unnotarized deed is still valid as a conveyance of title if core legal requirements have been met.

Digital signatures on all manner of legal documents (including entirely electronic real estate closings) are becoming common. Online notaries are permitted by Chapter 406 of the Government Code. Property owners may appear at appraisal board hearings and offer evidence electronically (Tax Code Sec. 41.45). This is all as it should be. A legal agreement or closing document is nothing more than a verified exchange of information that should not require the presence of one’s biological organism.

The Texas Recording Statute

Texas is considered a notice state for recording purposes, meaning that recording an instrument with the county clerk (1) gives notice to the world of the transfer and (2) establishes priority in the event an unscrupulous seller attempts to convey the property twice. “Recorded instruments in a grantee’s chain of title generally establish an irrebuttable presumption of notice.” Noble Mortg. & Invs. v. D&M Vision Invs., 340 S.W.3d 65, 76 (Tex.App—Houston [1st Dist.] 2011, no pet.).

Being a notice state is contrasted with the old common-law rule of first-in-time first-in-right. The latter rule prevailed in historical times primarily because there was no central registry of real property transactions.

Property Code Chapters 12 and 13 govern the requirements and effects of recording. Property Code Section 13.001 states:

Prop. Code Sec. 13.001. Validity of Unrecorded Instrument

(a) A conveyance of real property or an interest in real property or a mortgage or deed of trust is void as to a creditor or to a subsequent purchaser for a valuable consideration without notice unless the instrument has been acknowledged, sworn to, or proved and filed for record as required by law. (b) The unrecorded instrument is binding on a party to the instrument, on the party’s heirs, and on a subsequent purchaser who does not pay a valuable consideration or who has notice of the instrument. (c) This section does not apply to a financing statement, a security agreement filed as a financing statement, or a continuation statement filed for record under the Business & Commerce Code.

Prop. Code Sec. 13.002. Effect of Recorded Instrument

An instrument that is properly recorded in the proper county is: (1) notice to all persons of the existence of the instrument; and (2) subject to inspection by the public.

Thus while recording may not be required, in a notice state like Texas it is a good idea.

In counties where it is allowed, Texas authorizes electronic filing pursuant to the Uniform Electronic Transactions Act (Bus. & Com. Code Sec. 322.001-21).

The Doctrine of After-Acquired Title

The doctrine of after-acquired title relates to the timing of the effectiveness of a conveyance. If I give you a deed today to property that I do not own (the Astrodome, for instance) it has no effect; but if next week I happen to acquire the Astrodome then the deed I previously gave you comes to life and the property is yours. This doctrine is also broadly known as estoppel by deed, which means that “all parties to a deed are bound by the recitals therein, which operate as an estoppel, working on the interest in the land if it be a deed of conveyance, and binding both parties. . . . Estoppel by deed or contract precludes parties to a valid instrument from denying its force and effect.” Sauceda v. Kerlin, 164 S.W.3d 892 (Tex.App.—Corpus Christi 2005), rev’d on other grounds, 263 S.W.3d 920 (Tex. 2008).

Using a Power of Attorney to Execute a Deed

Generally, according to the Estates Code, property transactions involving the use of a power of attorney require that the POA be recorded in the county clerk’s real property records within 30 days of the date the deed is recorded:

Est. Code Sec. 751.151. Recording for Real Property Transactions Requiring Execution and Delivery of instruments

A durable power of attorney for a real property transaction requiring the execution and delivery of an instrument that is to be recorded, including a release, assignment, satisfaction, mortgage, including a reverse mortgage, security agreement, deed of trust, encumbrance, deed of conveyance, oil, gas, or other mineral lease, memorandum of a lease, lien, including a home equity lien, or other claim or right to real property, must be recorded in the office of the county clerk of the county in which the property is located not later than the 30th day after the date the instrument is filed for recording.

It therefore makes sense to draft powers of attorney in recordable form which should include the statutory notice of confidentiality rights at the top:

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER’S LICENSE NUMBER.

See Property Code Section 11.008.

COMMUNITY PROPERTY CONSIDERATIONS

Texas is a community property state. Under the inception of title doctrine, the marital character of property (whether it is separate or community property) is fixed at the time of acquisition (Henry S. Miller Co. v. Evans, 452 S.W.2d 426 (Tex. 1970)). Such character may be later altered by means of divorce or a partition agreement pursuant to Family Code Section 4.102.

Although not strictly required, it is good practice to indicate the marital status of the parties in the deed. Not doing so will likely raise questions later. For instance, a title company involved in a subsequent transaction may want to resolve potential community property questions by requiring a marital status affidavit or other document to assure that all community property interests are properly accounted for.

It is common in Texas deeds for a party’s name to be followed by one of the following phrases:

an unmarried person;

a married person not joined herein by Grantor’s spouse as the property conveyed forms no part of the residence or business homestead;

a married person not joined herein by Grantor’s spouse as the property conveyed is his or her sole and separate property and forms no part of the residence or business homestead; or

a married person, joined herein pro forma by Grantor’s spouse even though the property herein conveyed forms no part of the residence or business homestead.

Sample choices for the grantee would include “an unmarried person” and “as grantee’s sole and separate property.”

Best practices in this area require that neither the marital status of grantor nor grantee be in doubt when real property is conveyed. Ambiguity only results in the need for later clean-up.

IMPLIED COVENANTS IN A DEED

Six Common Law Implied Covenants

Implied covenants in a Texas deed may arise by common law or by statute (the Property Code). At common law, a deed is accompanied by six implied covenants:

(1) the covenant of seisin (the grantor is the owner of the
property being sold);

(2) the covenant against encumbrances (the land is owned
free and clear of liens);

(3) the covenant that the grantor has the right to convey the property without joinder of others;

(4) the covenant of quiet enjoyment, which represents an assurance by the grantor that the grantee’s title will not be disturbed by third-party claims;

(5) the covenant of warranty, obliging the grantor to defend title against challenges by others; and

(6) the covenant of further assurances, meaning a promise by the grantor that will take such other and further actions in the future as may be necessary to vest title in the grantee.

The covenant of seisen is the probably the most important. The common-law covenant of seisin is a representation on the part of the grantor that the grantor is, in fact, the owner of the property. “The covenant of seisin is breached by the grantor at the time the instrument is made if [the grantor] does not own the estate in the land [the grantor] undertakes to convey.” Childress v. Siler, 272 S.W.2d 417, 420 (Tex. App.—Waco 1954, writ ref’d n.r.e.). The measure of damages for breach of an implied covenant “where there is a total failure of title” is the consideration paid, with interest. Childress at 420.

The law of implied covenants has been established in Texas law for quite some time. “[In] the absence of any qualifying expressions, [such implied covenants] are read into every conveyance of land or an interest of land except in quitclaim deeds.” Childress v. Siler, 272 S.W.2d 417, 420 (Tex.Civ.App.—Waco 1954, writ ref’d n.r.e).

Two Statutory Implied Covenants

The Property Code (without excluding the existence of other implied common-law covenants) recites only two statutory covenants: (1) an attenuated version of the covenant of seisin and (2) the covenant against encumbrances:

Prop. Code Sec. 5.023. Implied [Statutory] Covenants [In Texas Deeds]

(a) Unless the conveyance expressly provides otherwise, the use of “grant” or “convey” in a conveyance of an estate of inheritance or fee simple implies only that the grantor and the grantors heirs covenant to the grantee and the grantees heirs or assigns:

(1) [Covenant of seisin means] that prior to the execution of the conveyance the grantor has not conveyed the estate or any interest in the estate to a person other than the grantee; and

(2) [Covenant against encumbrances means] that at the time of the execution of the conveyance the estate is free from encumbrances [i.e., debts and liens].

(b) An implied covenant under this section may be the basis for a lawsuit as if it had been expressed in the conveyance.

Note that Section 5.023 changes the common-law covenant of seisin to mean that the grantor has not previously conveyed the property to someone else, which is not quite the same thing as saying that the grantor is the owner of the property being sold It is unclear what advantage this more limited covenant may possess, except perhaps to make it slightly easier for a swindler to flim-flam a gullible grantee.

Even though deeds may legitimately vary in form in Texas, the use of the traditional phrase “grant, sell, and convey” will always include the two statutory covenants contained in Section 5.023 plus the implied common-law covenants—unless these are excluded by express language in the deed.

One occasionally hears about the implied covenant of habitability and the implied covenant of good and workmanlike construction. Both of these covenants exist in Texas, but apply only in the case of newly-built residences. Centex Homes v. Buecher, 95 S.W.3d 266, 273 (Tex. 2002).

Practice note: a careful drafter of a deed without warranties (discussed below) will take pains to expressly disclaim the two statutory covenants in order to assure that the conveyance is entirely devoid of warranties.

How do covenants in a deed differ from warranties of title?

Implied covenants in a deed are conceptually and legally separate from warranties of title (i.e., whether a deed offers a general warranty, a special warranty, or no warranties at all). “A warranty clause in a conveyance is not part of the conveyance proper; it neither strengthens, enlarges, nor limits the title conveyed, but is a separate contract on the part of the grantor to pay damages in the event of failure of title. A warranty of title does not warrant the title of grantor but instead warrants the title of the grantee.” Chicago Title Insurance Company v. Cochran Investments, Inc. 602 S.W.3d 895 (Tex. 2020). A title “examiner generally does not need to address the issue of title warranties, because warranties are not a part of the conveyance and do not enlarge the title.” Standard 4.130, Texas Title Examination Standards.

Sale of Property Subject to Existing Indebtedness

The parties may agree that the property will be transferred even if money is owed to a lender. Title and debt are different and divisible concepts, both practically and legally. A “subject to” deed refers to acquiring title to property while expressly providing that the buyer assumes no liability for existing debts and liens. It is a common device used by investors in order to buy property, fix it, and then flip it for a profit, all without promising to pay the existing debt or taking any liability for it.

DEEDS EVIDENCING AGREEMENTS
BETWEEN THE PARTIES

Estoppel by Deed

Generally speaking, all parties to a Texas deed are bound by the terms, provisions, and statements contained in the deed. Green v. White, 153 S.W.2d 575 (Tex. 1941). This is true even though the deed is usually executed by one party—the grantor. The parties to a deed (grantor and grantee) are bound by statements and recitals that are contained within it, even though a deed is traditionally signed only by the grantor. Trial v. Dragon, No. 18.0203 (Tex. 2019).

The deed is a critical document because it more often than not entirely replaces contracts and agreements that have gone before it (pursuant to the doctrine of merger), making the deed the final word on the subject of transfer of title. Given this fact, spelling out any additional agreements between the parties within the four corners of the deed itself can eliminate any doubt or ambiguity as to the content of those agreements. As to confirming specific acceptance by grantee, it does no harm (and may do considerable good) to have the grantee sign and acknowledge the deed.

Custom Agreements between the Parties

Some lawyers take the view that a deed should be a pure and spare conveyance, uncluttered by clauses and agreements that do not bear directly upon the transfer of title any warranties of title. This minimalist approach often necessitates preparation of companion documents designed to contain additional conveyance-related deal-points that have been agreed to between the parties. As a result, several documents are required rather than one. This may have value when the parties’ side agreements are confidential (and not intended to be reflected in the public deed records), but otherwise it may be simpler and more direct to include such agreements in the deed itself.

It is presumed that the grantee in a deed accepts the deed according to its stated terms, including any “as is” clause. However, to avoid a situation where the deed terms are later disputed, it is a useful drafting technique to require that the grantee sign and acknowledge the deed in order to establish the grantee’s unconditional agreement with any custom clauses and covenants. When both grantor and grantee sign and acknowledge the deed, it becomes a contract as well as a conveyance. A well-drafted deed should make any custom agreements both clear and binding—so express acceptance by the grantee is always the better option.

An important example of an agreement between grantor and grantee is conveyance of the property in “as is” condition, without obligation on the part of the grantor to repair or remediate the property and without post-closing liability for conditions that may be found upon it. The grantee may be willing to accept these terms. How then can the parties be certain that the “as is” provision is unconditionally accepted by the grantee? The grantee should be required to sign and acknowledge the deed.

COMMON DEED TYPES

General Warranty Deed

The term warranty deed refers to a deed that contains both express and implied title warranties. (There is also a deed without warranties, discussed below.) The title warranties in a deed may be general or special.

A general warranty deed is the preferred form of deed for a buyer because it contains the most expansive warranty of title; it expressly warrants the entire chain of title all the way back to the sovereign, and it binds the grantor to defend against title defects even if those defects were created prior to the grantor’s period of ownership.

Here is a sample general warranty clause:

Grantor binds Grantor and Grantor’s heirs, executors, administrators, successors and assigns to warrant and forever defend all and singular the Property to Grantee and Grantee’s heirs, executors, administrators, successors, and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof, except as to the reservations from conveyance and the exceptions to conveyance and warranty.

As a matter of custom, general warranty deeds predominate in sales of residential property.

Special Warranty Deed

In a special warranty deed, title is warranted only from the grantor and no further back than that. The grantor’s liability for title defects is therefore limited to his period of ownership up to and including conveyance to the grantee. Example: “Grantor binds Grantor and Grantor’s heirs, executors, administrators, successors and assigns to warrant and forever defend all and singular the Property to Grantee and Grantee’s heirs, executors, administrators, successors, and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof, when the claim is by, through, or under Grantor, but not otherwise, except as to the reservations from conveyance and the exceptions to conveyance and warranty.”

“[A] special warranty clause speaks to [a limitation on] the grantor’s liability [to grantee], not its conveyance of [title to the] property. And unlike a quitclaim deed [which contains no warranties], a special warranty clause still protects the grantee with respect to a failure or defect of title created by the grantor [during Grantor’s period of ownership]. . . .” Chicago Title Insurance Company v. Cochran Investments, Inc., 602 S.W.3d 895 (Tex. 2020).

Acceptance of a special warranty should realistically temper the grantee’s expectations. “When a vendee accepts … a deed with special warranty, the presumption of law is that he acts upon his own judgment and knowledge of the title, and he will not be heard to complain that he has not acquired a perfect title.” McIntyre v. De Long, 8 S.W. 622 (Tex. 1888).

There is usually no reason not to use a general warranty deed if the property is residential—although executors and trustees commonly use special warranty deeds in the case of residential properties. Commercial properties are typically conveyed by special warranty deed as a matter of custom. Deeds into an investor’s LLC may be either with general or special warranty, depending on the circumstances, but a general warranty is usually preferred.

Deed Without Warranties

A deed without warranties is a conveyance of real property without warranties of title, express or implied. Note that we are talking about title in this context (and the warranties that may or may not be associated with it), not property condition. This is a sample no-warranties conveyance clause:

Grantor, for the consideration and subject to the Reservations from Conveyance and Exceptions to Conveyance and Warranty, grants, sells, and conveys to Grantee the Property, together with all and singular the rights and appurtenances thereto in any way belonging, to have and to hold it to Grantee and Grantee’s heirs, executors, administrators, successors, and assigns forever, without express or implied warranty. All warranties and covenants, express or implied, are entirely excluded and disclaimed. Excluded covenants include but are not limited to the covenant of seisin; the covenant against encumbrances; the covenant of right to convey; the covenant of quiet enjoyment; the covenant of warranty; the covenant of further assurances; and the statutory implied covenants contained in section 5.023 of the Texas Property Code.

Why would anyone make or accept a conveyance without warranties? The usual case is when the parties are unsure as to the extent of the grantor’s interest, or if the grantor is willing to enter into the conveyance only on the condition that there is no liability for doing so. A deed without warranties may transfer the entire interest in a certain property, or it may not. The parties assume the risk of this uncertainty, which is presumably reflected in the (lower) price paid. A deed without warranties is therefore considered an inferior form of deed, but it nevertheless is effective in transferring whatever title the grantor possesses. Another way to put it: a deed without warranties may transfer record title but it does not necessarily transfer insurable title or marketable title. Even so, as a means of transfer, it is certainly superior to a quitclaim, discussed next.

Quitclaims

Clients often call a lawyer’s office and say they need a quitclaim deed. The lawyer’s response should almost always be No, you don’t. Why? For one reason, a quitclaim is not a true deed at all since it is technically not a conveyance. It merely quits any claim by Grantor to any right, title, and interest that the grantor may have in a certain property if any such interest exists. (In this context, the term quit is akin to the release of any such claim to the recipient of the quitclaim.) Since there is no grant, sell, and convey language as there is in a deed, nothing is conveyed. Rogers v. Ricane Enterprises, 884 S.W.2d 763, 769 (Tex. 1994).

Secondly, from a practical standpoint, title companies disdain quitclaims and will frequently require that a proper deed be obtained instead. One does no favor to the chain of title by inserting a quitclaim into it. If the seller is unwilling to provide a conveyance with warranties (a general or special warranty deed), then a knowledgeable buyer should insist on a deed without warranties instead of a quitclaim.

A quitclaim contains no covenant of seisen or warranty of title. Jackson v. Wildflower Prod. Co., Inc., 505 S.W.3d 80, 90 (Tex.App.—Amarillo 2016, pet. denied). Because of this, the recipient of a quitclaim is considered to be on notice that something about either seisen or title may be awry. Accordingly, the grantee of a quitclaim deed cannot attain the status of bona fide purchaser for value against unrecorded instruments and equities that may exist when the quitclaim was made. Threadgill v. Bickerstaff, 29 S.W. 757 (Tex. 1895). For all of these reasons, a quitclaim is, for the grantee, the least desirable of all conveyances.

Notwithstanding the foregoing, if a quitclaim has been recorded for four or more years, Property Code Section 13.006 allows a subsequent purchaser to attain bona fide purchaser status free of any constructive notice of title defects such as unrecorded conveyances or encumbrances.

Assumption Deed

Assumption deeds are general or special warranty deeds of the usual type. The difference is that assumption deeds expressly provide, as part of the consideration, that the grantee will assume liability for existing indebtedness and promise to discharge one or more existing liens against the property.

Title is separate from debt. They are related concepts but different. One can take title to property without becoming liable to pay the underlying debt. This is what happens in the case of a “subject to” deed. Debts secured by liens against the property remain in place even if title is transferred.

Under an assumption deed the grantee declares his assumption obligation to the grantor—but, it should be pointed out, not to the lender, since the grantee has not signed the lender’s note. Similarly, the grantor has not been released from the existing note unless the lender has approved the assumption and expressly released the grantor in writing, which is so rare as to be nearly nonexistent. As a practical matter, expect a release only in response to full payment.

An assumption deed may be accompanied by a deed of trust to secure assumption which enables the grantor to step in and make payments if the buyer fails to do so. The seller may then recover these “advancements” from the buyer. This enables the seller to proactively mitigate loss and preserve good credit. If reimbursement for advancements is not made, foreclosure may follow.

Can assumptions occur without the lender’s consent? Yes, and they often do, in spite of the due-on-sale clause contained in the widely-used FNMA deed of trust, which gives the lender the option (but not the obligation) to accelerate the note in such cases.

Deed in a Wraparound Transaction

A wraparound transaction is a form of creative seller financing that leaves the original loan and lien on the property in place when the property is sold. The buyer usually makes a down payment and signs a new note to the seller (the wraparound note) for the balance of the sales price. This wrap note, secured by a new deed of trust (the wraparound deed of trust), becomes a junior (subordinate) lien on the property. The buyer makes monthly payments to the seller on the wrap note and the seller in turn makes payments to the original lender. The original lender’s note is referred to as the wrapped note and it remains in place and continues to be secured by the existing wrapped deed of trust. The buyer receives a warranty deed (general or special) which transfers title to the property into the buyer’s name. The buyer does not assume the wrapped note.

The deed in a wrap transaction should refer to the parties’ points of agreement as to the new wraparound note and the existing wrapped note. However, lots of ancillary details need to be addressed (casualty insurance, for instance) so a separate wrap-around agreement often accompanies the warranty deed. Unlike the deed, the wraparound agreement is not recorded, so items that are confidential can be addressed there.

Trustee’s Deed or Foreclosure Deed

A trustee’s deed is delivered by a lender’s trustee to the successful bidder at a foreclosure sale. The lender often bids the amount of the debt (plus accrued fees and costs) and acquires the property in this way. If the sale generates proceeds in excess of the debt, the trustee must distribute the excess funds to other lienholders in order of seniority and the remaining balance, if any, to the borrower.

Property Code Section 51.009 states that a buyer at a foreclosure sale “acquires the foreclosed property ‘as is’ without any expressed or implied warranties, except as to warranties of title, and at the purchaser’s own risk; and is not a consumer.” It is also certain that the trustee’s deed itself will contain its own extensive disclaimers. Even with these limitations, a foreclosure deed is probably the cleanest title obtainable, though it does not eliminate taxes owed.

Deed Incident to Divorce

The parties to a divorce should not rely on the final decree to transfer title to real property. A divorce decree is a court order resolving litigation, not a conveyance of affected real estate.

A special warranty deed (often accompanied by a deed of trust to secure assumption if there is debt against the property) should be executed and recorded. The deed may also include an “owelty partition” that creates a lien in favor of the grantor to secure payment of a certain sum from the other spouse. This is used to equalize the overall division of property.

Deed in Lieu of Foreclosure (DIL)

A deed in lieu of foreclosure is a specialized instrument designed to transfer property to a lender in satisfaction of a debt and in exchange for a full and complete release. DILs often contain a clause similar to the following:

This Deed is executed and delivered by Grantor and accepted by Grantee in lieu of Grantee demanding and collecting the Indebtedness and in lieu of the necessity for Grantee to give notice of default, notice of intent to accelerate, notice of acceleration, notice of posting for foreclosure, and conduct of a foreclosure sale of the Property.

The customary DIL occurs when both parties expressly consent to the mutual benefits of this arrangement. Morission v. Christie, 266 S.W.3d 89 Tex.App.—Ft. Worth 2008, no pet.).

It goes without saying that a DIL should contain specific statements and recitals if it is to have the desired effect. A simple warranty deed to the lender will not do the job. Ideally for the borrower, the transaction should convey the property “as is” and include:

(1) agreement by the lender not to post the property for foreclosure or conduct a foreclosure sale;

(2) agreement that the indebtedness is fully paid, without forgiveness of debt and without deficiency, and the borrower is fully released;

(3) the liens (i.e., the vendor’s lien and the deed of trust lien) are canceled;

(4) the lender waives any claims and causes of action against borrower going forward;

(5) the lender agrees not to take any action that will damage the borrower’s credit; and

(6) the lender agrees not to report to the IRS that the borrower has received income as a consequence of the DIL agreement. Finally (again, in the optimal circumstance) a separate release of lien(s) should also be recorded.

A DIL is usually accomplished by means of a special warranty deed, but a deed without warranties may also be used.

Unfortunately, few institutional lenders today accept a DIL as a means of avoiding foreclosure. The reason is that the foreclosure process itself is usually advantageous to the lender since it cleans up title by eliminating junior liens. It also clearly establishes a deficiency amount (the difference between the price at foreclosure and the balance on the note) for which the lender may then sue the borrower.

A lender may record an affidavit rejecting and voiding a DIL within four years if the grantor-debtor did not disclose liens of which the lender hand no personal knowledge (Prop. Code Sec. 51.006).

A deed in lieu of foreclosure is a situation where it is desirable to obtain the lienholder’s express acceptance (acknowledged signature) of the terms stated in the deed.

Deeds With Life Estate Reserved

A life estate is a severable estate in land that may be conveyed or reserved (retained) in a deed.

It is possible that a real estate investor may encounter a situation where an older person is willing to sell but wishes to retain the right to reside in the property until his or her death. This may be an excellent investment if the property is likely to appreciate. A deed with life estate reserved to the seller should contain wording similar to the following:

Grantor reserves, for Grantor and Grantor’s assigns, a legal life estate in and to the Property for the remainder of Grantor’s life, including rights to full possession, benefit, use, rents, revenues, and profits of and from the Property, until the death of Grantor (the “Life Estate”) at which time full legal and equitable title to the Property shall automatically vest in Grantee, free of any interest of Grantor, Grantor’s successor, heirs, and/or assigns. Grantor shall have the right to reside in the Property without rent or charge during the Life Estate.

Mineral and Water Deeds

Minerals are a severable estate in land. A mineral deed does not convey to the surface of the property but only (for example) “ownership of all sub-surface minerals including but not limited to all of the oil, gas, and other minerals in and under the property including: (1) the right to develop (the right of ingress and egress), (2) the right to lease (the executive right), (3) the right to receive bonus payments, (4) the right to receive delay rentals, and (5) the right to receive royalty payments.”

The mineral estate may also be partitioned by mineral partition deed.

Water (surface water or groundwater) is not considered a mineral but water rights may be transferred in a manner similar to a mineral deed. Water Code Section 11.040 states that “a permanent water right is an easement and passes with the title to land. . . A written instrument conveying a permanent water right may be recorded in the same manner as any other instrument relating to a conveyance of land.”

DEEDS INTENDED TO AVOID PROBATE

Deeds Involving Joint Ownership and Survivorship

Joint tenancy with rights of survivorship (JTWROS) provides that a co-owner will inherit the other co-owner’s interest upon death—a horizontal and automatic transfer. This can be a useful technique for married buyers who want to take title as JTWROS as part of a basic estate plan. Note that the word tenancy here is a carry-over from the traditional verbiage of English common law. In this context, tenant means owner, not lessee.

JTWROS contrasts with the ordinary, presumed case in Texas in which co-grantees are presumed to be tenants-in-common (Est. Code Sec. 101.002) meaning that the heirs of each co-owner will inherit that co-owner’s interest upon death. The decedent’s interest (in most cases) thus passes vertically downward to the heirs rather than horizontally to the other co-owner.

JTWROS is established by statute in Texas and requires an express written agreement signed by the parties. Estates Code Section 112.051 et seq. governs in the case of spouses and Section 111.001(a) applies in the case of non-spouses. These statutory requirements supersede the old common-law rule that joint tenancy needed to be established at the inception of title.

As to unmarried persons, the statutes states: “Notwithstanding Section 101.002 [regarding descent of a non-spousal property interest to the heirs], two or more persons who hold an interest in property jointly may agree in writing that the interest of a joint owner who dies survives to the surviving joint or owner or owners” (Est. Code Sec. 111.001(a)).

As to married persons, spouses may at “any time agree between themselves that all or a part of their community property, then existing or to be acquired, becomes the property of the surviving spouse on the death of a spouse . . . by means of a written agreement signed by both spouses. . . .” (Est. Code Sec. 112.051 and 112.052). This is now “the exclusive means to establish rights of survivorship in community property.” Holmes v. Beatty, 290 S.W.3d 852 (Tex. 2009).

What the law does not expressly say is that a signed written agreement must be a stand-alone instrument separate and apart from the deed itself. This is not a requirement. It is quite feasible to create a deed that contains the necessary JTWROS language (tracking the statute) which, when signed by both grantor and grantee, fulfills the statutory requirement of a signed written agreement as an all-in-one instrument.

The Deed in the Drawer

Executing and delivering a deed without immediately recording it can be a useful, inexpensive estate planning device—sometimes called the deed in the drawer. If, for example, a parent wants to insure that property is transferred to a child without probate or other difficulty then he or she can sign and deliver a deed with the intention that it be held (unrecorded) until death. This is an entirely legal method that has been used for ages.

A deed in the drawer is a variation of a gift deed. A gift deed is nothing more than a general or special warranty deed that dispenses with any mention of consideration. “The essential elements of a gift made during a grantor’s life are donative intent, delivery, and acceptance” Gannon v. Baker, 830 S.W.2d 706 (Tex. App.—Houston [1st Dist.] 1992, writ denied). It is thus the preferred practice to label a gift deed as such and include such language as “love and affection” in the section of the instrument where consideration would normally be stated.

There is another and probably better option in this area—the transfer on death deed, a presently-recordable instrument discussed next.

Transfer on Death Deed (TODD)

A transfer on death deed (TODD) is an uncomplicated, non-probate method of transferring title to real estate when the owner dies. The Texas Real Property Transfer on Death Act is found in Estates Code Chapter 114. Section 114.051 states that “An individual may transfer the individual’s interest in real property to one or more beneficiaries effective at the transferor’s death by a transfer on death deed. . . .”

A transfer on death deed must be recorded. It is effective without consideration and without notice or delivery to or acceptance by the designated beneficiary during the life of the grantor (Est. Code Sec. 114.056). However, vestment is not immediate. A TODD transfer does not actually vest title in the grantee until the grantor’s death.

All in all, a TODD is a good basic estate planning method, particularly if the grantee does not require warranties of title (which are not permitted under Estates Code Section 114.103(d)).

The statutory form that was once available for a TODD has been repealed, so lawyers are left to their own devices in the crafting of these conveyances. Clearly, at the very least, the instrument must comply with the usual legal formalities of a deed and it must be recorded.

A TODD cannot be revoked by a last will and testament but can be revoked by a recorded revocation (Est. Code Sec. 114.052). In fact, a TODD is revocable even if the instrument states otherwise. Also, if the grantor sells the property by means of a recorded transfer subsequent to executing a TODD, then the TODD is automatically revoked: “If a transferor during the transferor’s lifetime conveys to any person all of the transferor’s interest in real property that is the subject of a transfer on death deed, the transfer on death deed is void as to that interest in real property” (Est. Code Sec. 114.102).

Can a living trust be a person for purposes of being a beneficiary of a TODD? Yes, since in this context the term person has the meaning assigned by Government Code Section 31.005. In most situations, however, it would make more sense just to convey the property into the living trust contemporaneously, without waiting for the death of the grantor (see below).

For those attempting to do some basic estate planning, it is possible to combine joint ownership (JTWROS) with a TODD, so that (for example) parents now have an inexpensive alternative method to pass real property to a child upon the death of the last parent.

A TODD may not be executed by means of a power of attorney. It must be executed by the named grantor.

Lady Bird Deed

Transfer on death deeds have partially replaced the former widespread use of Lady Bird Deeds, which are revocable deeds retaining a life estate. They are based not on statute but on common law. Lady Bird Deeds are sometimes called enhanced life estate deeds since the life estate retained by the grantor is entirely revocable. In other words, a Lady Bird Deed immediately vests a remainder interest in the grantee that is subject to divestment—the grantor’s optional ability to revoke the whole conveyance at will. Any other, subsequent conveyance of the property will have the effect of revoking a Lady Bird Deed.

Lady Bird Deeds have been traditionally used to avoid both probate and recovery against the grantor’s probate estate by the Texas Medicaid Recovery Program. When a Lady Bird Deed is used, Medicaid does not require that a deceased’s home be sold in order to pay reimbursement. Note, however, a transfer on death deed accomplishes this same objective since Property Code Section 114.106(b) expressly provides that real property transferred by means of a TODD is not considered to be a part of the grantor’s estate.

In contrast to a TODD, a Lady Bird Deed may be executed on the grantor’s behalf by means of a power of attorney (at least so long as the POA provides that the attorney-in-fact is empowered to execute gift deeds of real property). Note, however, that title companies look askance on situations where the attorney-in-fact and the grantee are the same person. Avoid this practice since it can raise real problems.

A Lady Bird Deed may be “activated” on behalf of the heirs by means of a simple affidavit of death stating that the grantor has died. No affidavit of heirship is necessary.

Deed into a Living Trust

The advantages of a living trust can be significant. In establishing a trust that includes the homestead, it is a necessary part of the process to execute a deed of the property into the living trust (or, more properly stated, into the trustee acting on behalf of the trust). The deed should be recorded but recordation of the trust agreement is not required. It remains a private document.

Since record title is held by the living trust, and the trust does not die, the surviving beneficiaries automatically “inherit” the trust property upon death of the trustor (or for married persons, upon death of the last spouse-trustor). There is no need for probate, although the beneficiaries would be wise at that point to engage an attorney to overhaul and update the trust agreement.

In order to preserve the homestead tax exemption, both the trust agreement and the deed into trust must be drafted so as to meet the “qualifying trust” requirements of Property Code Section 41.0021 and Tax Code Section 11.13(j). The requirements are complex. This is absolutely not a project that should be attempted on a DIY basis.

CORRECTIONS TO A DEED

When should a deed be corrected?

The deed correction statute reads:

Prop. Code Sec. 5.027. Correction Instruments: Generally

(a) A correction instrument that complies with Section 5.028 or 5.029 may correct an ambiguity or error in a recorded original instrument of conveyance to transfer real property or an interest in real property, including an ambiguity or error that relates to the description of or extent of the interest conveyed.

In determining whether or not to utilize a correction instrument, the first step is to make sure one is looking at an instrument of conveyance (a warranty deed) not an affidavit or something else. Correction instruments executed pursuant to Section 5.027 are intended to address errors in conveyances only.

If the parties intend to alter fundamental terms of the original conveyance then a new deed—not a correction instrument—may be better advised.

It is important to understand that a correction instrument is not a conveyance. It is merely an affidavit reciting a correction. “The execution of a correction [instrument] itself, without more, does not constitute a sale or conveyance of real property. In fact, a correction [instrument] conveys nothing; it simply replaces and is a substitute for the original instrument.” Endeavor Energy Resources, LP v. Trudy Jane Anderson Testamentary Trust, 644 S.W.3d 212 (Tex. App.—Eastland 2022, no pet.) citing Prop. Code Sec. 5.030(a)(1).

A correction instrument is a supplementary filing that relates back in time to an original deed that contained some error or mutual mistake. It corrects the mistake but leaves other terms of the conveyance intact. No new consideration is required. Broadway Nat’l Bank v. Yates Energy Corp., 631 S.W.3d 16 (Tex. 2021).

Non-Material Corrections to a Deed

As to non-material corrections, the statute reads:

Prop. Code Sec. 5.028. Correction Instruments: Nonmaterial Corrections

(a) A person who has personal knowledge of facts relevant to the correction of a recorded original instrument of conveyance may prepare or execute a correction instrument to make a nonmaterial change that results from a clerical error. . . .

Section 5.028 deals with correction instruments that make a non-material correction to instruments of conveyance—the classic scrivener’s error, in other words. Perhaps a distance or an angle in the legal description was misstated, or the name of a party is misspelled. A person with personal knowledge of the facts may execute this type of correction instrument without joinder of others, but a copy of the correction instrument must be sent to each party to the original instrument.

Material Corrections to a Deed

As to material corrections, the statute reads:

Prop. Code Sec. 5.029. Correction Instruments: Material Corrections

(a) In addition to nonmaterial corrections, including the corrections described by Section 5.028, the parties to the original transaction or the parties’ heirs, successors, or assigns, as applicable may execute a correction instrument to make a material correction to the recorded original instrument of conveyance. . . . [so long as the] correction instrument [is]: (1) executed by each party to the recorded original instrument of conveyance the correction instrument is executed to correct or, if applicable, a party’s heirs, successors, or assigns; and (2) recorded in each county in which the original instrument of conveyance that is being corrected is recorded.

Material corrections are a more serious issue and are addressed by Section 5.029. Examples include conveyance of the wrong property (lot 5 instead of lot 6 for example) or conveyance to the wrong entity.

A correction instrument effecting this sort of material correction must be executed by each party to the original recorded instrument. “If a material correction is required, Section 5.029 requires that either the original parties to the transaction or the heirs, successors, or assigns of an original party, if applicable, must execute it.” See Endeavor, cited above.

Can the parties use a correction instrument to correct a material error after a third party acquires an interest in the property? Must the third party sign off on the change? No, says the Supreme Court: “In [Broadway National Bank v. Yates] the Supreme Court held that Section 5.029 permits the original parties to a conveyance to execute a valid correction deed even when the original grantees no longer own the property at issue. In so holding, the court rejected the argument (which is advanced by the Trust) that all current interest owners in the property must execute the correction deed. Thus, an ‘heir, successor, or assign’ is required to execute a correction deed only if an original party to the transaction is unavailable.” See Endeavor, cited above.

Notwithstanding this case law, one can expect that title companies, in order to protect their interests, will continue to insist that all affected parties sign a material correction instrument before issuing a title policy (Standard 2.20, Texas Title Examination Standards).

Experienced practitioners will tell you that it is the better practice to have any correction instrument executed by all affected parties if it is feasible to do so.

Statute of Limitations for Corrections

The usual four-year statute of limitations for written documents (Civil Prac. & Rem. Code Chap. 16) applies to deed correction and reformation cases. The statute begins to run on the date the deed is signed and delivered (the date of the legal injury which is the legal injury rule) or when a claimant discovers, or through the exercise of ordinary diligence, should have discovered the alleged error or defect (the discovery rule).

Which rule to apply—the legal injury rule or the discovery rule—is the subject of much litigation. The Marcus case explains:

The discovery rule is a narrow exception to the legal injury rule that defers accrual of a cause of action until the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving rise to the cause of action. It applies when the injury is by its nature inherently undiscoverable. An injury is inherently undiscoverable if it is by nature unlikely to be discovered with the prescribed limitations [based on the legal injury rule] despite due diligence. The determination of whether an injury is inherently undiscoverable is made on a categorial basis rather on the facts of the individual case.

See Marcus & Millichap Real Estate Investment Services of Nevada, Inc. v. Triex Texas Holdings, LLC, No. 21-0913 (Tex. 2023).

There is a rebuttable presumption that the respective parties know the contents of a deed at the time of closing, particularly if clearly stated, since it is the basic due diligence obligation of nearly everyone to read a document before signing or receiving it at a real estate closing. Trahan v. Mettlen, 428 S.W.3d 905 (Tex.App.—Texarkana 2014, no pet.).

In cases of mistake, waiting to take action does not generally work to the benefit of the plaintiff. In Jarzombek v. Ramsey (534 S.W.3d 534 (Tex.App.—San Antonio [4th Dist.] 2017, pet. denied), the court declined to reform a deed seven years after closing, stating that the discovery rule is not intended to extend the statute of limitations for the purpose of correcting conspicuous and plainly-evident mistakes.

AMBIGUOUS AND LOST DEEDS

Ambiguous Deeds

In the event of ambiguity or controversy, the goal of a court in interpreting a deed is “ascertaining and effectuating the parties’ intent . . . by conducting a careful and detailed examination of the deed in its entirety.” Wenske v. Ealy. 521 S.W.3d 791 (Tex. 2017). Courts in this position look at the expressed intent of the parties as reflected by actual wording, not what the parties subjectively believe they were trying to say.

“In Texas, deeds are construed to confer upon the grantee the greatest estate that the terms of the instrument will allow. A deed will pass whatever interest the grantor has in the land, unless it contains language showing the intention to grant a lesser estate.” Parker v. Jordan, 632 S.W.3d 108 (Tex.App.—El Paso 2021, affirmed by the Texas Supreme Court Dec. 20, 2022).

With regard to ambiguity in deeds, the same question presents itself in all legal document drafting: why allow ambiguity to arise at all? Why not clearly and expressly state the entire agreement of the parties within the four corners of the instrument?

Lost Deeds

A good reason for recording a deed is to preserve evidence of the transfer in the event the original document cannot be located. What happens when an unrecorded deed is lost or destroyed? “A deed or other document is not made ineffective by its destruction or loss…. Production of the original document is excused when it is established that the document has been lost or destroyed. . . . Other evidence of the contents of a writing is admissible if the original has been lost or destroyed. . . . Loss or destruction of the document is established by proof of search for this document and inability to find it.” Gause v. Gause, 496 S.W.3d 913 (Tex.App.—Austin, 2016, no pet.).

A fraudulent deed is a void deed, but affirmative action must be taken in order to establish that the deed is fraudulent. A finding of fraud does not happen automatically, merely upon allegation or notice to the offending party.

FRAUDULENT DEEDS

Government Code Remedies for a Fraudulent Deed

The Government Code offers two statutory remedies for a fraudulent deed:

(1) County Clerk Action. Government Code Section 51.901, entitled “Fraudulent Document or Instrument,” requires a county clerk to act if there is “a reasonable basis to believe in good faith that document or instrument previously filed or recorded or offered or submitted for filing or for recording is fraudulent.” One way to trigger such action is for an aggrieved party to file an affidavit and then raise the matter with the county clerk. A copy of the affidavit should be sent to the perpetrating party along with a demand that the fraudulent instrument be canceled.

(2) District Court Action. Government Code Section 51.903, entitled “Action on Fraudulent Lien on Property,” contemplates action by a district court in response to a motion supported by an affidavit (see statute for suggested form). Although this section is primarily known as a remedy against fraudulent liens, it also addresses an instrument that assert a fraudulent interest in real property—which would certainly include a fraudulent deed claiming a fee-simple interest. Considered an expedited remedy, Section 51.903 should not require the filing of underlying lawsuit or scheduling a hearing.

Lawsuit Remedies for a Fraudulent Deed

If statutory remedies are unsuccessful, a suit alleging fraud (both common-law fraud and statutory fraud under Business & Commerce Code Section 27.01) and requesting rescission and a declaratory judgment should be filed in district court where the property is located.

As to penalties, Section 12.002 of the Civil Practice & Remedies Code provides that a person who knowingly and intentionally files a fraudulent lien or claim against real property may be held liable in civil district court for the greater of $10,000 or actual damages, exemplary damages, and recovery of attorney’s fees and costs.

There is no rule at this stage requiring one to choose a specific remedy to the exclusion of the others. It may well be the better option to pursue all available remedies simultaneously.

CONCLUSION

It is difficult to imagine a more important instrument than a deed, and yet its preparation is often left to a title company attorney who represents neither buyer nor seller and has no incentive to produce anything other than a basic boilerplate form. This is true even though Property Code Section 5.022(b) expressly states that “the parties to a conveyance may insert any clause . . . not in contravention of law.” This represents a measure of flexibility in format that is (unfortunately) seldom utilized in residential transactions. Using a minimalist deed can be a missed opportunity to expressly recite and confirm custom agreements of the parties.

Title company deeds lack custom clauses because it is not the job of the title company or its attorney to protect or advance the interests of either party. Furthering those interests is the job of the parties and their respective brokers and attorneys.

Buyers and sellers who are unrepresented by counsel may forego the opportunity to include advantageous deed clauses that are perfectly legitimate and acceptable—if only one requested them. Obvious examples would be an “as is” clause in the deed to protect the seller from post-closing lawsuits and an assignments clause to make sure that the buyer acquires property-related warranties and maintenance contracts. When executed by both parties (not only by the grantor) a deed can become a contract as well as a conveyance.

Given that Texas courts have a distinct preference for construing the meaning of a deed according to its express language—within the four corners of the document—appropriate customization within the four corners of the deed can go a long way toward accomplishing the goals of the parties.

What does the attorney need from the client?

When a client needs a deed prepared, the existing warranty deed to the property should be provided to the attorney along with a copy of the sales contract and title commitment. Since Texas is a community property state, the client should supply the marital status of the parties and the names of spouses, if any. The client should also explain if there will be any exceptions or reservations from the conveyance (a mineral interest, for example).

If the deed conveys property into an LLC, the attorney will want to see the formation documents of the LLC. If the company is a series LLC, then the destination series will need to be determined since the specific series must be stated in the grantee clause.

Finally, the attorney will need to know if the proposed deed should include custom clauses, disclosures, disclaimers, or conditions. It may be advisable to secure the signatures of both grantor and grantee on the deed in order to assure the mutual acceptance and enforceability of any such clauses.