We have previously written on the different types of deeds (Real Estate 101: Different Types of Deeds in Ohio, Kentucky, and Indiana), as well as how costly it can be to breach your covenants under a general warranty deed (Real Estate 101: Breach of General Warranty Covenants Can Be Costly Mistake). Perhaps the most common breach occurs when you transfer property that is encumbered in some way, such as by an easement or lien, and that easement or lien is not excepted from the deed. However, one of the less discussed components of a general warranty deed is the covenant to defend. Whether you are the grantor or grantee with respect to a general warranty deed, you should be aware of when this duty arises, and what it means, in order to protect yourself, your rights, and your checkbook.
Statutory duty to defend in “short form” general warranty deeds
R.C. 5302.06 states:
In a conveyance of real estate, or any interest therein, the words “general warranty covenants” have the full force, meaning, and effect of the following words: “The grantor covenants with the grantee, his heirs, assigns, and successors, that he is lawfully seized in fee simple of the granted premises; that they are free from all encumbrances; that he has good right to sell and convey the same, and that he does warrant and will defend the same to the grantee and his heirs, assigns, and successors, forever, against the lawful claims and demands of all persons.“
(Emphasis added). This means that a grantor who conveys property under a general warranty deed promises to defend the grantee and the granteeâs title against all âlawful claims and demandsâ of others.
What are âlawful claims and demandsâ?
Unfortunately, Ohio law does not provide much guidance as to what âlawful claims and demandsâ encompasses â this is not a defined term under the statute, nor have the courts ventured to define it in this context. A lawsuit is generally defined to be âthe lawful demand of oneâs right.â Ludlow’s Heirs v. Culbertson Park, 4 OHIO 5 (1829).
Additionally, in various contexts, Ohio courts have provided the following guidance as to each of the terms separately:
- State ex rel. Grant v. Brown, 39 Ohio St. 2d 112, 116 (1974) (âTo say of an act that it is âlawfulâ implies that it is authorized, sanctioned, or at any rate not forbidden, by law.â);
- La Fon v. City Nat’l Bank & Trust Co., 3 Ohio App. 3d 221, 223 (10th Dist. 1981) (adopting the definition of âclaimâ as âto assert . . . to state; to urge; to insist . . . a right or title.â);
- Crozier, v. First National Bank of Akron, 9th Dist. Summit No. 10140, 1981 Ohio App. LEXIS 13717, *6-7 (defining âclaimâ as âa âbroad comprehensive wordâ that includes âan assertionâ and âa cause of suit or cause of action.ââ); and
- Eighth Floor Promotions v. Cincinnati Ins. Cos., 3d Dist. Mercer No. 10-15-19, 2016-Ohio-7259, ¶ 26 (ââDemandâ is defined as âthe assertion of a legal right or procedural right.â).
Thus, read collectively, a âlawful claim or demandâ can be defined as âan authorized or unforbidden assertion of a right.â
Do we first have to ascertain is a “claim or demand” is lawful before duty to defend arises?
However, courts have found that the term âlawfulâ does not require the âclaim or demandâ to be meritorious before the duty to defend is triggered since this would essentially render the covenant meaningless. See Sediqe v. I Make the Weather Prods., 6th Dist. Lucas No. L-15-1250, 2016-Ohio-4902, ¶ 29 (holding that the claim or demand as it relates to the underlying duty, e.g., that the property is not free from encumbrances as warranted, need not be proven or successful before the duty arises, as âsuch a rule would render the duty to defend ineffective and eliminate the grantorâs right to control the defense against the claim.â). Thus, for example, a party claiming to have a lien on conveyed property need not prove the validity of their lien before the grantorâs duty to defend the grantee against such claim arises. The idea is that the grantor will step in before it gets to that point in order to defend the granteeâs title against such claims.
Does a suit have to be filed to trigger a duty to defend?
Indeed, the party asserting the claim likely isnât even required to file suit to trigger the grantor and granteeâs respective rights and obligations under the general warranty deed. As discussed (Here), the Court in Hollon v. Abner, 1st Dist. Hamilton No. C960182, 1997 Ohio App. LEXIS 3814 (Aug. 29, 1997) did not require that the party asserting the adverse, âlawful claim or demandâ bring suit before the grantorâs duties under the general warranty deed arose. In fact, the Court awarded the grantee attorneyâs fees as damages in a suit initiated by the grantee because the grantee would not have incurred those fees had the grantor lived up to his obligations under the general warranty deed.
Conclusion
If you are a grantee under a general warranty deed and someone asserts a claim against your property (even if they havenât yet filed suit), the first step to getting your grantor to defend your title as warranted is by informing the grantor that someone is asserting such a claim. As a grantor, if you receive notice that someone is asserting a claim against property that you conveyed by general warranty deed, proven or not, you will want to step up sooner rather than later. A delay in honoring your covenant to defend likely only exacerbates your granteeâs attorneyâs fees (especially if your grantee has to file suit to defend his or her own title), for which you will ultimately be responsible.
