Definition of ‘Warranty of Title’
A guarantee by a seller to a buyer that the seller has the right to transfer ownership and that no one else has rights to the property. In addition, a warranty of title may be used to guarantee that no other party has copyright, patent or trademark rights in the property being transferred.
Investopedia explains ‘Warranty of Title’
A formal warranty of title is included in a warranty deed, which is used to legally transfer property in a sale. This document guarantees that the seller has the legal right to transfer the property and that no other entity, such as the Internal Revenue Service or an ex-spouse, has a lien against or claim to the property. A warranty deed’s warranty of title protects the buyer’s interests and gives the buyer legal recourse if any entity later tries to make a claim to the property.
A warranty of title is automatic in most sales, but if the seller is acting as a representative, no warranty of title may exist. This situation might arise in an auction, a sheriff’s sale or an estate sale. In these cases, the person selling the property is not its owner and therefore may not be aware of any other entity’s rights in that property.