Do You Still Owe Debt When You Quitclaim a Property?

by Cindy Quarters, Demand Media
    A quitclaim deed transfers interest in a property.

    A quitclaim deed transfers interest in a property.

    Filing a quitclaim deed removes your name from the title to a piece of real estate and transfers your interest to a spouse, child, partner or other person whose name remains on the title. Quitclaiming is commonly used to transfer property during a divorce settlement, removing one spouse from the deed and putting the title solely in the name of the person who is retaining the family home. If you choose to quitclaim a property, you lose all rights to the property, but it does not release you from any related financial obligations.

    Quitclaim Basics

    A quitclaim deed is a legal document that releases a person’s interest in a particular piece of property, and it becomes effective as soon as you sign it. Certain obligations transfer with the property, including any easements, liens, covenants, restrictions, assessments, rights of way, conditions, taxes and other encumbrances are associated with the property at the time of transfer. This means that the property continues to serve as collateral for existing debt, regardless of whose name is now on the title.

    Mortgages and Liens

    Signing a quitclaim deed does not remove your financial obligation to pay an existing mortgage or any other liens, such as those for construction, that may already be on the property. All encumbrances, including bank liens, stay with the property in the sense that the property continues as collateral for these debts, but your original contract for the debt also remains in force. The bank retains all of the lender’s original rights, including the right to pursue you for the debt and the right to foreclose on the property if you don’t make the payments, whether or not your name is on the deed.

    Taxes

    You have a responsibility to pay any taxes on the property that are due at the time you sign the quitclaim deed. Failure to do so can result in legal action against you, even though you no longer own the property. The tax collector can foreclose on the property, but you can also be sued for payment of the debt that accrued while you owned the property. Be sure to file the quitclaim deed as soon as you’ve signed it so that the tax collector gets notice that you are not liable for any new taxes.

    Considerations

    Since you are still obligated for any debt that was incurred prior to the date of the quitclaim deed, it is in the best interest of both parties to make sure that the financial aspects of the property transfer are handled at the same time that the quitclaim deed is executed. If you release your interest in the property but the remaining owner doesn’t refinance the property or settle taxes and liens at the time of the transfer, you continue to be liable for those debts. If the other owner doesn’t pay, you can be sued for the outstanding debt. If you are the party who is receiving the property and the other person stops paying on the debt, you can end up losing the property even though you have paid your share. It is best to refinance the mortgage completely in the new owner’s name and to pay off any other outstanding debt, such as taxes, at the time the quitclaim deed is signed. This clarifies the financial situation and shifts all debt to the remaining owner.

    About the Author

    Cindy Quarters has been writing professionally since 1984. She writes travel, pet, gardening and technical articles, with work published in "Radiance Magazine" and the "AKC Gazette," as well as online. Quarters earned a Bachelor of Arts in English from Washington State University and a master's degree in management information systems from West Coast University.

    Photo Credits

    • BananaStock/BananaStock/Getty Images