What is Estoppel by Deed

Estoppel is a legal term to say that something is being stopped or blocked from taking place. In the concept of estoppel by deed, the grantor of a deed is stopped from denying the truth of the deed. It is a legal doctrine that is invoked when a lawsuit has been filed regarding a specific deed or if there is a question of deed rights that must be resolved.

Here Is a Typical Situation Where Estoppel By Deed Would Occur

Let's say that Joe has a property that is been sold to Jeremy. Joe doesn't own the property, but it is being conveyed over to Jeremy through the use of a warranty deed. A warranty deed essentially says that the title is free and clear. In the future, however, Joe is able to acquire the title to the property that was sold. He then passes this on immediately to Jeremy. Because a warranty deed is evidence of a free and clear title, Jeremy has two options. He can choose to accept the title and complete the sale or he can decide to sue Joe because the sale was really a breach of covenants and the right to convey for damages. Jeremy cannot be forced to accept the title after-the-fact. He can choose to accept the title OR he can choose to pursue damages. This does not apply to a quitclaim deed. If Joe were to sell property to Jeremy that he didn't own using a quitclaim deed instead of a warranty deed, then Jeremy would actually own nothing. Even if Joe was able to acquire the title later on, Jeremy still owns nothing. That's because a quitclaim deed passes on existing interests. At the time of the sale, Joe owned nothing, which means nothing is transferred to Jeremy.

Why Is Estoppel By Deed Important?

For the example above, this legal doctrine dictates what Joe must convey to Jeremy during the sales process. He cannot withhold the truth of the deed or misrepresent what is being conveyed. In other words, if he owns nothing, then he must admit that he owns nothing. The truth must be clearly represented or damages can be pursued. The quitclaim deed makes estoppel by deed a little stickier, but the same rule applies. Joe must be truthful about the fact that nothing is being transferred to Jeremy during the sale. If he is not truthful, then Jeremy may have some legal actions he could pursue. If Joe is truthful, however, then the sale may be deemed legal and Jeremy may not have any other options. Estoppel by deed is much like other estoppel doctrines. It mandates that truth be told during court proceedings so that neither party can obtain an advantage through fraud.

Posted on Jan 13, 2015


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