Why YOU Should Use an Attorney for a Quitclaim Deed
By Cody McCaughan, Esq.
Quitclaim deeds are among the most common forms of property transfer in the state of Florida. Unlike other forms of deeds, quitclaim deeds do not require a formal review of title. They are simply a transfer of ownership from one party to another, where the owner does not guarantee the property is free and clear of encumbrances. In other words, quitclaim deed transfers can lead to hazards for which the person acquiring the property has little course of action.
1. Property Tax Assessment
Quitclaim deed transfer may lead the county to reassess property value. The reassessment could lead to a higher valuation of the property and ultimately a much higher property tax bill.
2. Homestead Tax Exemption
In Florida, Homestead law grants Florida property owners a reduction in assessed property tax for their primary residence. The exemption can reduce property value by up to $50,000, which could substantially decrease a tax bill. Conveying property through a quitclaim deed risks losing the exemption altogether, which will dramatically increase your property tax bill. It is important to understand how to protect yourself to ensure your property remains covered under the exemption.
3. No Property Interest
Since quitclaim deed transactions do not require formal title review, it is possible that the new owner is transferred a property from someone without proper title, or that the interest transferred is not the interest that the parties believe is being transferred. The new owner risks acquiring a property without ensuring they will own it free and clear after the transaction or have marketable title.
4. Unknown Liabilities
Quitclaim transactions can lead to unforeseen liabilities. For example, if the prior owner of the property filed for bankruptcy or has collateralized debts, the new owner could lose the property entirely as a result of the prior owner’s debts.
5. Possible Title Insurance Policy Cancellation
Title insurance is the main form of protection homeowners have against unresolved prior title issues. However, quitclaim deeds may mean that the Owner’s Title Insurance policy is oftentimes void or canceled. Meaning that in a lot of cases, the only line of protection the new homeowner had is no longer applicable.
6. Florida Transfer Taxes
Any transfer of property triggers the Florida Documentary Stamp Tax or the Florida Transfer Tax. The tax is based on either the amount of money that was paid for the property or the amount of money owed on the mortgage of the property. The laws and requirements of the tax are tricky and can even sometimes involve paying a tax in a transfer between spouses. It is vital to understand the intricacies of the tax law upon transfer, and an attorney can ensure that if there is an exception to the tax that applies to your situation, you will receive the benefit of it.
7. Association Violations
Associations oftentimes have complex and strict rules about property ownership including transfer. Oftentimes, new owners are required to apply and be approved. If the property acquired through a quitclaim deed was a part of an association, and the new owner did not receive approval from the association, the entire transaction may be void. In addition, there may be liabilities or fines incurred by the previous owner that the new owner will become responsible for.
8. Deed Execution and Legal Formalities
Quitclaim deeds must include a legal description, be acknowledged by two witnesses in front of a notary, and be recorded in the Public Records in order to be effective. In addition, there are other legal formalities that must be followed. Failure to properly satisfy these formalities may leave the parties to discover years later that the Quitclaim deed did not have the intended effect, or had no effect at all.
Contact Us
Quitclaim deeds are great for an easy and quick transfer, however the hazards of using them are many. Our firm is experienced in navigating the hazards that may arise, contact us at (305) 928-4190 for a no-charge consultation.
