Chapter 10 - Interest in Real Estate Flashcards
Chapter 10 Objectives
1) Summarize the four government powers in real estate, and provide at least one example of each.
2) Describe at least three types of freehold estates in detail.
3) Define a homestead.
4) Define an easement and provide at least three examples of an easement.
5) Define a lien and provide at least four examples of a lien.
6) Explain the difference between riparian and littoral rights.
Police Power
The right of any political body to enact laws and enforce them, for the order, safety, health, morals and general welfare of the public.
There is no federal police power and only exists at the state level
Eminent Domain
A right of the government to acquire property for necessary public use by condemnation; the owner must be fairly compensated.
Land cannot be condemned for private use (only public) The power to the land by the government, the action of this is condemnation. The result, is eminent domain
Ex: Roadway being widened, airports, parks, utility services. The landowner must be informed of the landowner bill of rights
Condemnation
Taking private property for public use, with fair compensation to the owner; exercising the right of eminent domain. (The action to create eminent domain)
Usually includes disputes of appraisal of land being taken (payment usually includes the appraised value of land and damages to the property)
Escheat
The reversion of the State of property in event the owner thereof abandons it or dies, without leaving a will and has no distributes to whom the property may pass by lawful descent (by default the state becomes owner)
Feudal Ownership System
where the king owned all of the land
Allodial Ownership System
US land is held under this system - owned by individual citizens. Subject to the powers and rights held by the government
The 4 Government Powers of Ownership (PETE)
Police Power
Eminent Domain
Taxation
Escheat
Taxation
property taxes - to raise revenues to meet the public needs of the government
Freehold Estate
An estate of indeterminable duration, e.g., fee simple or life estate.
Fee Simple Estate (complete and total ownership)
Absolute ownership of real property; a person has this type of estate where the person is entitled to the entire property with unconditional power of disposition during the person’s life and descending to the person’s heirs or distributees. (The highest type of interest that is recognized by law)
Fee Simple Absolute
An inheritable estate in land providing the greatest interest of any form of title.
Fee Simple Determinable
An estate that will end automatically when the stated event or condition occurs. The interest will revert to the grantor or the heirs of the grantor.
Ex: owner wants to donate land to church and that it must be used for religious purposes - the ownership would then be contingent on this purpose
Remainderman
A person who inherits or is entitled to inherit property upon the termination of the estate of the former owner.
Life Estate
A freehold estate created for the duration of the life or lives of certain named persons; a non-inheritable estate.
Life Tenant
The owner of a life estate. Full enjoyment of ownership for duration of life - when they die, it ends.
Estate in Reversion
Property or estate ownership that reverts back to the grantor after a temporary ownership period.
Estate in Remainder
An estate which vests after the termination of the prior estate.
Reversionary Interest
The interest which a person has in lands or other property, upon the termination of the preceding estate. A future interest.
Devisor
One who disposes of real property by will.
Devisee
One who receives a gift of real property by will.
Two Categories of Estates and Land
1) Freehold Estates
2) Leasehold Estates
Defeasible Fee Estate
fee simple interest that may be defeated in a specified event
1) Determinable Fee
2) Fee Simple subject to a condition subsequent - the grantor must go to court to assert the right of entry
Fee Simple Subject to a Condition Subsequent
similar to determinable, but it does not automatically end and revert back to previous owner when a condition occurs (it instead has to go to court)
Per Ultra V Life Estate (For the life of another)
created when the grantor conveys the prop to a life tenant based on the life of another. Ends when the death of that other occurs (often created for a physically or mentally impaired person)
Homestead
A legal life estate in land that is owned and occupied as a family home.
Texas Homestead Law
to protect a family against eviction by creditors and to protect spouses by requiring that both husband and wife both convey the deed and sign
- Must intend to occupy the homestead as their home
- must own or lease the property
family obtains 6 months after the event of sale in order to acquired another homestead (before creditors)
can be terminated by:
- death
- selling the property
- abandoned (the discontinuance of use or property with the intention not use it)
Limitations to a Homestead
- 10 acres in urban areas
- 200 acres in rural areas (100 for single)
Homestead Protection Exemptions
- taxes owed on the property
- mortgages on the property
- liens
- homeowner association liens
owelty loan - one spouse maintains possession and the divorced can retain their portion through this loan
Encumbrance
A claim, charge, or liability that attaches to, and is binding on real estate. A right or interest held by someone that does not own the property
1) Liens
2) Easements
Restriction
A limitation on the use of real property.
Lien
A claim against a property that provides security for the repayment of a debt or an obligation of the property owner (mortgage, property as collateral)
Easement
A right acquired by one party to use the land of another party for a special purpose. (can also be in the air)
Easement Appurtenance
A right of use in the adjoining land of another that moves with the title to the property benefiting from the easement. (Two parties: Servient and Dominant)
Easement by Necessity
Exists when a landowner has no access to roads and is landlocked.
Easement in Gross
A right of use in the land of another without the requirement that the holder of the right own adjoining land.
Easement in Prescription
Obtained by use of the land of another for the legally prescribed length of time.
Easement by Voluntary Grant
A grantor conveys the right to use the grantor’s land to a grantee for the purpose of ingress and egress.
Servient Tenement
Land encumbered by an easement.
Dominant Tenement
Land benefiting from an easement appurtenant.
Deed Restrictions/Restrictive Covenants
generally imposed by developer or subdivision to maintain the standards in which originally designed
Landlocked
term used for a property that does not have access to public roads (may have easements attached to it in order to cross into it)
Voluntary Lien
Any lien placed on property with consent of, or as a result of, the voluntary act of the owner. (Mortgage)
Involuntary Lien
A lien imposed against property without consent of an owner (ex: taxes, special assessments, federal income tax liens, etc.). (either statutory or equitable)
General Lien
A lien on all the property of a debtor. (Real and Personal property)
Specific Lien
A lien that attaches to one specific property only. (Mortgage, Property Tax, Mechanics Liens)
Priority of Lien
The order in which liens are given legal precedence or preference.
Subordination Agreement
An agreement by the holder of an encumbrance against real property to permit that claim to take an inferior position to other encumbrances against the property.
Lien
a charge against property that provides security for some type of debt (all liens are encumbrances)
the holder has the right to sell the property to make themselves whole again
created by a deed of trust and has a power of sale provision. Liens run with the land (transferable)
Non-Judicial Power of Sale
public sale for the benefit of lien holder (not conducted by courts)
Four ways to Creating a Lien (VISE)
V - Voluntary
I - Involuntary
S - Statutory - created by statute (mechanics/work done on property)
E - Equitable - common law (vendors/vendees lien)
Priority Liens
the order in which liens get paid on point of sale:
1) Tax Lien
2) Mortgage Lien
3) All others
can be changed through subordination (a written agreement between lien holders to swap positions)
IRS Tax Liens
don’t have a specific priority - they are considered general liens (personal and real property). Attach only to the equity interest of the owner of the property
On Sales -> tax lien -> Mortgage lien -> IRS Tax -> left over for owner
Real Estate Taxes
1) Ad Valorem Taxes (according to value) - school districts, city, utility taxes, hospital..etc.. for general support of the government agency
2) Special Assessment Taxes (improvement taxes)
Under Texas Law, public or nonprofit ownership is not subject to taxation (schools, parks, playgrounds, religious corps, hospitals, etc)
The Ad Valorem Tax Process
1) Property Valuation
2) Protest
3) Adoption of tax rate
4) collection
generally between Jan 1st - April 30th
Appraised Value deadlines:
April 1st - Homesteads
May 1st - all other
Exemptions in Taxes (discounts)
applied to the base assessed value amount (not the tax amount)
- Homestead Tax Exemption - 15K off a home taxable value for school district taxes (1) has to own as principle residence of Jan 1. (2) submit application between Jan 1- April 30th (3) submit copy of DL/Vehicle registration
- Age 65 exemption (Jan 1 of the year they turn 65) $25K reduction in value for tax purposes. Also qualify for (1) Tax Ceiling Freeze - taxes can’t increase YoY unless improvements are made (2) Installment Payments - made in 4 equal installments w/o any interest (3) Tax deferral (4) surviving spouse benefit
- Disability Exemption - mandatory for school districts. $10K (can’t also be the 65 year exemption, one or the other).
Assessed Valuation
A valuation placed upon a piece of property by a public authority as a basis for levying taxes on the property.
Protest Period
begins after district has sent out appraisal notice of valuation. If not satisified with the original resolution, may submit written protest by the later of either 1) On or before May 31st 2) after 30 day when the appraisal was submitted
ARB
Appraisal Review Board
Tax Levy
A form of action taken to impose a tax. Formed by a vote of the tax districts
Tax Rate
The amount of money needed by a municipality to meet budgetary requirements divided by the taxable assessed and nonexempt value of all real property within that jurisdiction.
Computed separately for each.
Typically expressed as a $ amount for each $100 of assessed value
Ex: property assessed for 100K and 1.50 per 100 dollars = tax due of 1,500
taxes are paid in arrears (at the end of the period)
Tax Lien
An encumbrance against a property filed by the taxing jurisdiction for delinquency in paying real property taxes. Remember, these are given priority over all other liens against a property
Tax Appropriation
the action taken by each taxing entity that authorizes the expenditure of funds and provides the sources of the funds.
Equitable Right of Redemption
an owner’s right to redeem the property prior to the tax sale
Statutory Right of Redemption
right to redeem after the date of the sale. If prop is a homestead, mineral, agricultural, the owner has up to 2 years after purchasers deed is recorded to redeem the property.
25% penalty over first year
50% penalty of second year
Mechanics Lien
A specific lien that gives security to persons or companies who perform labor or furnish material to improve real property.
- Affidavit Mechanics Lien - involuntary lien. (property owner hires a general contractor for remodel - this contractor may hire other subcontractors and can file this when hasn’t been paid by owner of property)
Judgment Lien
A legal claim on all of the property of a judgment debtor which enables the judgment creditor to have the property sold for payment of the amount of the judgment. General but involuntary lien on both real and personal property
Attachment
The process by which real or personal property of a party to a lawsuit is seized and retained for payment of an existing note secured by a mortgage or deed of trust against the property, becoming a co-guarantor for the payment of a mortgage or deed of trust note.
Mortgage Liens/Deed of Trust/Purchase Money
voluntary lien given to a lender by a borrower as a pledge of security
Preferred Lien - used as this. no other major liens against the property (besides real estate taxes)
Lis Pendens
not a lien, but notice of a possible future lien. gives notice to all interested parties (purchasers, lenders)
State and Inheritance Tax Liens
encumber a deceased persons real and personal property
Vendors Liens
seller has this when has not received in cash the full purchase price of the home - specific, equitable and involuntary lien
Vindee Lien
a buyers claim against a sellers property when title has been failed to be delivered - specific, equitable and involuntary lien
Surety Bail Bond Lien
for bail bond - voluntary lien
Texas Workforce Commission Wage Lien
employers who owe back wages to an employee (takes priority of all other liens)
IRS Tax Liens
results from failure to pay federal taxes. general, statutory, involuntary lien
Federal Judgement Liens
student loans, etc
Riparian Rights
The rights of a landowner or land occupier to use flowing water (such as a river) that is adjacent to the land.
Littoral RIghts
The right of a property owner whose land borders on a body of water, such as a lake, ocean or sea, to reasonable use and enjoyment of the shore and water the property borders on.
Accession
An addition to property through the efforts of man or by natural forces.
Accretion
The increasing in land area resulting from the deposit of soil by the natural action of the water.
Alluvium
The gradual increase of earth on a shore of an ocean or bank of a stream resulting from the action of the water.
Alluvion
Increased soil, gravel, or sand on a stream bank resulting from flow or current of the water.
Avulsion
A sudden and perceptible loss of land by the action of water as by a sudden change in the course of a river.
Erosion
The eating away of a coastline or land by the action of water, ice, and/or wind, or wearing away of a surface by corrosion or traffic.
Ground Water
Water under the earth’s surface, below the saturation point.
Air Rights
The rights in real property to the reasonable use of the air space above the surface of the land.
