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National Exam > Chapter 2 > Flashcards

Chapter 2 Flashcards

1
Q

TYPES OF OWNERSHIP

A
  • Estate in Severalty
    -Tenancy in Common
    -Joint Tenancy
    -Tenancy by the entirety
  • If a property is held by one party for the benefit of another then that property is held in trust
  • When two or more parties join together to create and operate a real estate investment we
    call this a syndicate.
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2
Q

estate in severalty

A

Ownership by one. tenancy in severalty or sole ownership.
This can be ownership by one individual, or one business entity such as a corporation or a
partnership. Corporations or Partnerships often hold title this way. If only one signature is
required to sell a piece of property, then there is only one owner.

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3
Q

tenancy in common

A

Ownership by two or more without rights of survivorship. This is the most common type of joint ownership. It is an estate of inheritance. A condominium
is multi-unit housing with individual ownership of apartments and tenancy in
common ownership of the common areas. Upon your death, your share goes to your heirs,
at probate. Unequal shares are permitted. You may sell your share without the permission
of the other owners. In the absence of any other instructions, the title company will always
assume tenancy in common with equal shares.

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4
Q

joint tenancy

A

Ownership by two or more with rights of survivorship. Upon your
death, your share goes to surviving co-owners, immediately. This is sometimes called a “poor
man’s will” as it eliminates the need for a will. Joint tenancy overrides a will. This is not an
estate of inheritance. To prevent any accidental cases of joint tenancy, there are four unities
required for this type of ownership – time, title, interest and possession. All owners acquire
their interest at the same time, from the same legal document. Their shares are equal and
undivided - each owns a percentage of the whole, rather than a piece of the whole.

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5
Q

Partition

A

is a procedure to divide the co-tenant’s interests in real property. It can be a court
action - involuntary alienation, or by agreement of the parties - voluntary alienation.
Partition would divide the property into pieces and end the joint tenancy. If the land
cannot be physically divided, the court will order the property sold and the proceeds will
be divided among the joint tenants.

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6
Q

Tenancy by the entirety

A

is a specific type of joint tenancy where the co-owners are married
to one another: husband/wife, spouse/spouse. One advantage of this type of ownership is
that it avoids probate. (This is also true of joint tenancy.)

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7
Q

TENANCY IN COMMON

A
  • most common
  • willabel
  • estate of inheritance
  • unequal interest allowed
  • title passes at probate
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8
Q

JOINT TENANCY

A
  • poor mans will
  • right of survivorship
  • last man standing
  • unity of time, title, interest, possession
  • avoids probate-title passes at death
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9
Q

Some special types of ownership include

A
  • time shares
  • condominiums
  • cooperatives
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10
Q

Time Shares

A

give an individual part ownership of a property coupled with the right to exclusive use
of it for a specified number of days per year, without the responsibility of full ownership. This can be
called “interval ownership.” It is tenancy in common ownership. This is most often used for resort
or vacation properties.

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11
Q

Cooperative or “Co-ops”

A

are an investment for residents. The land and buildings are owned by a
corporation. Residents must buy shares in the corporation in exchange for a “proprietary lease” on
their unit. The corporation pays for the mortgage, property taxes and maintenance of the building.
The residents have a personal property interest in their units and the common areas

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12
Q

Condominiums

A

are established under laws referred to as horizontal property acts. Each unit is a
separate legal ownership and each owner arranges his or her own financing. Along with unit ownership
comes a tenancy in common interest in all the common areas. Property taxes are assessed on
each unit separately and are based on the assessed value of the unit plus the share of the common
areas. It is not necessary for the taxing authority to assess and tax the common areas separately.
Monthly condominium fees are not for taxes. They pay for the maintenance of the complex and the
salary of the manager. Condominium managers work for resident owners and their main responsibility
is to preserve property values

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13
Q

ESTATE

A

is an interest in real property

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14
Q

Freehold estate

A

is ownership.

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15
Q

Bundle of Rights

A

All the legal rights that attach to the ownership of real property.

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16
Q

Bundle of Rights include but are not limited to:

A
  1. the right to sell, will to heirs, encumber or lease (disposition)
  2. the right to exclude others (exclusion)
  3. the right to use, enjoy, occupy (possession)
  4. the right to use uninterrupted by former owners (quiet enjoyment).
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17
Q

Fee Simple or

Fee Simple Absolute

A

Ownership with the greatest bundle of rights - the best type of ownership. The owner has all the available rights to the property and can always pass it
to his or her heirs.

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18
Q

Fee simple defeasible

A

is ownership with conditions or terms, which if violated, could cause the
ownership interest to be defeated or terminated. When the ownership is defeated, it reverts, or goes
back, to the original grantor or the grantor’s heirs

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19
Q

Fee simple defeasible can be determinable or condition subsequent

A

If it is determinable, violation
of the condition, or termination of the conditional use results in reversion to the grantor, automatically.
In condition subsequent, the grantor must take steps to reclaim the property within a
reasonable period of time if the condition is violated or the conditional use is terminated

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20
Q

life estate

A

is ownership for the duration of someone’s life. The owner is called the life tenant.

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21
Q

life tenant.

A 
The life tenant has all the rights and duties of an owner, except the right to choose who will get the
Copyright © 2020 Champions School of Real Estate®
18
Chapter 2
Forms of
Ownership,
Transfer,
and
Recording of
Title
property upon his or her death
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22
Q

remainderman.

A

The person who gets the property after the life estate is ended. The remainderman gets fee simple

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23
Q

life estate with reversion.

A

If the life estate is set up so that at the end of the life estate the property goes back to the original
owner. The original owner has a reversionary interest in
the property. The original owner is the remainderman.

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24
Q

life estate

pur autre vie

A

If the life estate is based on the life of someone other than the life tenant,

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25
Q

Lease agreements create the

A

leasehold estate

The lease is personal property, but the right to possession
that the lease gives is real property.

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26
Q

There are four leasehold estates and each gives possession

without ownership

A
  1. Estate for years
  2. Periodic tenancy
  3. Estate at will
  4. Tenancy at sufferance
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27
Q

Estate for years

A

is a lease with a specific starting and ending date. This lease survives
death and/or the sale of the property. No notice is required to terminate

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28
Q

Periodic Tenancy

A

is a lease with a fixed period that is automatically renewed unless the
tenant or landlord acts to terminate it. A month-to-month lease is this type. Notice to
terminate is usually required, typically 30 days’ notice.

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29
Q

Estate at Will

A

or tenancy at will is a lease that can be terminated by either party at will
without notice.

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30
Q

Tenancy at Sufferance

A

occurs when a lease expires and the tenant refuses to move out.
The landlord is not receiving rent. This holdover tenant has no right to be there. If the
holdover tenant pays rent and the landlord accepts that rent, a holdover tenancy is created.

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31
Q

holdover tenancy

A

f the

holdover tenant pays rent and the landlord accepts that rent

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32
Q

Types of leases

A
  • Gross lease
  • Net lease
  • Percentage lease
  • Graduated lease
  • Lease with an option to buy
  • Lease purchase agreement
  • Ground lease
  • Oil and gas lease
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33
Q

Gross lease

A

the landlord pays all the expenses of the property. The tenant pays only rent.

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34
Q

Net lease

A

the tenant pays rent plus some of the expenses of the property.

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35
Q

Percentage Lease

A

lease in which all or part of the rent amount is based on the receipts of the
tenant’s business (Typical shopping center lease). This lease allows the landlord to participate in the
tenant’s success

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36
Q

Graduated Lease

A

a lease with scheduled rent increases often based on expected business growth.

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37
Q

Lease with an option to buy

A

gives a tenant the right to purchase at a future date. The price is set
when the agreement is negotiated. It is advantageous to the tenant-buyer

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38
Q

Lease purchase agreement

A

an agreement in which part of the rent payment is applicable toward a
set purchase price. Title is transferred from lessor to lessee when the lessor receives the prearranged
total price.

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39
Q

Ground Lease

A

the tenant is usually making a long-term commitment, up to 99 years. This lease
is more often for industrial or commercial land use. The tenant will build on the leased property

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40
Q

Oil and Gas Lease

A

this lease gives the tenant the right to extract oil and gas from a specific
property. NOTE: In Texas, the Texas Railroad Commission regulates oil and gas leases, but on a
Federal level, for the National portion of the exam, the EPA will be the best answer for any questions
regarding what department of the government regulates these leases.

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41
Q

Covenant of quiet enjoyment

A

a landlord is usually prohibited from entering leased property unless
there is a need for maintenance, inspections or emergency response

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42
Q

Right of First Refusal

A

the tenant has the right to match or better any offer before the property will
be sold to someone else.

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43
Q

Subletting

A

is the transfer of some or all of the rights and/or leased space under a lease to another,
with liability remaining with the original tenant.

44
Q

Assignment

A

is the transfer of all rights and liabilities to a new tenant under an existing lease

45
Q

Forcible entry and detainer, or an action of forcible detainer

A

is the legal term for eviction

46
Q

Expiration

A

When the lease comes to the end of the negotiated term or lease period.

47
Q

Termination

A

When the time period on a lease ends or is cut short.

48
Q

Mutual rescission

A

When a lease is terminated by agreement of the parties.

49
Q

Constructive eviction

A

Occurs when a landlord is aware of a property condition and allows deterioration
to the point that the building is uninhabitable and the tenants are forced to leave.

50
Q

Sale and leaseback

A

A property owner sells property to an investor or lender and then leases it back.
Therefore, the seller occupies the property after closing.

51
Q

lien

A

is a charge against property as security for a debt. The lien is an encumbrance – a limit on your
rights. It is also, usually, a cloud on the title. This means title cannot be conveyed or transferred to
another until the lien is removed. The legal method of removing an encumbrance is to release it or
get a release.

52
Q

voluntary lien

A

is created by the lienee’s or borrower’s actions, like taking out a mortgage or home
improvement loan. Filing or recording the mortgage creates a lien. A mortgage is not effective or
enforceable until it is recorded. When the mortgage is recorded, if it is the first recorded claim, it
will be the first priority lien.

53
Q

involuntary lien

A

is created by law and can be statutory or equitable (common law). (NOTE:
Statutory law always takes precedence over common law.) Examples of statutory liens include federal
tax liens, ad valorem (according to value) tax liens, judgment liens, and mechanics and materialmens’
(m&m) liens.
(Note: An m&m lien can be placed on a property when materials have been delivered or work has
begun.)

54
Q

Equitable liens

A

come from common law and include seller (vendor) or buyer (vendee) liens. An
example of a vendor’s lien would be seller financing. A vendee’s lien would be used when a buyer has
paid, but not yet received a deed. (i.e. at a foreclosure sale, or in contract for deed)

55
Q

Liens can be specific or general

A

A specific lien attaches to one or more specific or named properties
(Example: a mortgage). A general lien attaches to all the property of the debtor, not exempt from
forced sale (Example: a judgment or IRS lien). Recording is required for a judgment to become a
lien

56
Q

writ of execution

A

If a party wins a judgment and is unable to collect, that party can secure a writ of execution from
the courts to enforce payment of the lien.

57
Q

Reminder:

A

At foreclosure, lien priority is determined by date of recording with the first recorded lien
having first priority. Recorded liens are only paid after the property tax lien is paid.

58
Q

Mineral, air and water rights

A

are all considered part of real property. Mineral rights consist of rights
to subsurface land and profits. These may or may not be included in the sale of real property.

59
Q

Air rights

A

consist of the right to use open space above your land. Air rights can be sold or leased.
They can also be transferred by easement as in elevated highways. Air rights can be taxed separately
from the land.

60
Q

Water rights

A

are called riparian rights or littoral rights

61
Q

riparian rights

A

The right to use water from a river or stream

that borders your property

62
Q

littoral rights

A

The right to use water from a lake or ocean

63
Q

Water can be used for domestic reasons

A

The flow cannot be interrupted and
the water cannot be contaminated.

The state has the right to refuse to grant water rights. One reason for this would be a scarcity or
shortage of water

64
Q

Prior Appropriation

A

is a theory of water law based on the idea that “first in time is first in right.” The
first landowner to claim water rights has the exclusive right to take all the water for specific beneficial
uses. Subsequent owners of nearby properties cannot claim water rights.

65
Q

For navigable waterfront property,

A

landowners own to the vegetation line. Building piers will not
extend your property line. The state owns all navigable water. Generally, all water in rivers, creeks
or streams belongs to the state.

66
Q

For non-navigable waterfront property

A

landowners may own to the middle of a body of water.

67
Q

alienation

A

A change of ownership of real property

68
Q

Voluntary alienation

A

occurs when an owner transfers title to another. Voluntary alienation usually
involves a written document called a conveyance. A conveyance is any instrument or document that
transfers an interest in real property. Ownership is most often transferred by deed, patent, power of
attorney, or wil

69
Q

voluntary alienation usually

involves a written document called a

A

conveyance

70
Q

Involuntary alienation

A

usually happens in court as in foreclosure, bankruptcy, condemnation,
escheat, adverse possession, reversion of defeasible fee, partition, or inheritance without a will.

Involuntary alienation can also occur from natural causes including accretion and reliction which
result in an increase in property size, and erosion and avulsion which result in a loss of land.

71
Q

REQUIREMENTS OF A VALID DEED

A

• Grantor and Grantee - the Grantor must be competent
• Consideration - legal consideration can be “good” or “valuable. “Love and affection” is an
example of good consideration. Money is valuable consideration.
• Words of conveyance – the granting clause - a written statement that indicates transfer of
some interest in real property from one person to another.
• Execution - the grantor must sign the deed.
• Delivery - title does not pass until the deed is delivered and accepted. Delivery can be into
escrow. Delivery must be made during the life of the grantor.
• Legal description of the property.
Deeds do not have to be dated, signed by the grantee, or recorded.

72
Q

Types of deeds include

A
  • General warranty deed
  • Special warranty deed
  • Bargain and sale deed
  • Quitclaim deed
73
Q

General Warranty Deed

A

guarantees and protects against defects. It offers the buyer the best
protection. It warrants title to the sovereignty of the soil. It is the most common deed and
the one mentioned in the Texas sales contract. A buyer who wishes to ensure that the seller is
conveying good title should request a General Warranty Deed

74
Q

Special Warranty Deed

A

guarantees title only against defects arising under the grantor’s
period of ownership. Defects existing before that time are not covered.

75
Q

Bargain and Sale Deed

A

a deed with only one covenant. (Trustees, executors, sheriffs, and
officers of the court use this.) This deed does not provide any warranties about the condition
of the title, but only promises the grantor has the right to convey the title

76
Q

Quitclaim Deed

A

a deed that gives NO warranties or guarantees and offers the least protection.
It is used to clear a cloud on the title or to cure a defect in title.

77
Q

Deeds often contain covenants and warranties to the buyer.

A
  1. The covenant of seizin
  2. The covenant of quiet enjoyment
  3. The covenant of further assurance
  4. The covenant against encumbrances
  5. The covenant of warranty forever
78
Q

The covenant of seizin

A

the grantor claims to be the owner with the right to sell the property

79
Q

The covenant of quiet enjoyment

A

the grantor promises the new owner will not be disturbed

with claims against the property

80
Q

The covenant of further assurance

A

the grantor is responsible for any documentation

needed to ensure title is transferred to the grantee

81
Q

The covenant against encumbrances

A

the grantor promises that all encumbrances have

been disclosed.

82
Q

The covenant of warranty forever

A

the grantor’s promises have no expiration date

83
Q

patent

A

When the government transfers title to an individual it uses a patent

84
Q

dedication.

A

When a developer turns over
the streets in a subdivision to the local government. This is accomplished
by recording the plat plan.

85
Q

testate

A

One who has a valid will

86
Q

executor

A

The person named in the will to settle the estate

87
Q

Inheritance by will gives Title by Devise.

A

The property is the devise and the heir is the

devisee.

88
Q

intestate.

A

One without a will

89
Q

administrator

A

to settle the estate of an

intestate person.

90
Q

Title by Descent

A

The heirs will inherit real property according to the Laws of Descent and will have
Title by Descent. Spouse and children have priority under the Laws of Descent.

91
Q

Will

A
  • Testate
  • Executor
  • Title By Devise
  • Beneficiary
92
Q

No Will

A
  • Intestate
  • Administrator
  • Laws of descent and distribution
  • Title by descent
93
Q

probate

A

The judicial process to prove or confirm a will, or to settle the estate of a party who dies intestate.
Title to real property passes at probate and that title transfer is final in 30 days.

94
Q

Foreclosure

A

is the legal process instituted by a trustee, lien holder or creditor, after a debtor’s default
on his or her payments. In other words, the lender begins the foreclosure.

Any excess money left over from the forced sale is given to the debtor. In the event of a shortage, the
lender may sue the borrower for a Deficiency Judgment.

Foreclosure under the Deed of Trust ends when the trustee delivers the Trustee’s Deed to the buyer.

At foreclosure all junior liens against the property are wiped out.

95
Q

Deed in lieu of foreclosure

A

An alternative to foreclosure. This is sometimes called “friendly foreclosure”
or “voluntary deed.” The lender accepts a deed from the borrower. The lender must also
accept any junior liens on the property. This would be the fastest way for the lender to get title to
the property

96
Q

Redemption

A

At any time up to the moment of the foreclosure, the borrower has the right to step
in and pay what is owed and reclaim property forfeited due to mortgage default. This is his or her
equity of redemption, or equitable redemption. A lender would almost always prefer equity of
redemption to deed in lieu of foreclosure.

97
Q

There are legal guidelines for notices to be provided in the event of a foreclosure.

A

The lender must
send the notice of foreclosure by certified mail 21 days before the foreclosure sale. There is no
requirement that the borrower receive the notice, only that the lender sends it. The notice of foreclosure
must be posted at the door of the county courthouse and filed in the County Clerk’s office.
With a traditional mortgage (not a Deed of Trust) the foreclosure will be recorded as a lis pendens.
Foreclosure sales are held on the first Tuesday of the month in Texas.
Copyright © 2020 Champions School of Real Estate®
24
Chapter 2
Forms of
Ownership,
Transfer,
and
Recording of
Title
NOTE: With a traditional mortgage foreclosure is judicial, but with a Deed of Trust it is non-judicial,
due to the power of sale clause.

98
Q

Short Sale

A

A sale of secured real property that produces less money than is owed the lender – the
lender releases its lien so property can be sold to the new purchaser. The lender often requires that
brokers adjust their commissions on these transactions. The lender saves the delay and expense of
foreclosure. The short sale requires additional time to get approval from the seller’s lender. The
lender may require an appraisal before proceeding. The lender may also require a survey as part of
the approval process. These steps may add to the time required for a short sale to close. A short sale
will result in a negative note on the credit report of the defaulting borrower, but is better than a
foreclosure.

99
Q

Real-estate owned or REO

A

is a class of property owned by a lender—typically a bank, government
agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction. A foreclosing
beneficiary will typically set the opening bid at a foreclosure auction for at least the outstanding
loan amount. If there are no bidders that are interested, then the beneficiary will legally repossess
the property. This is commonly the case when the amount owed on the home is higher than the current
market value of this foreclosure property, such as with a high loan-to-value mortgage following
a real estate bubble. As soon as the beneficiary repossesses the property, it is listed on their books
as REO.

100
Q

RECORDING TITLE

A

• Recording is not necessary for a deed to be valid.
• Recording gives constructive notice of ownership. This is notice to the world and protects
against fraudulent sale. Taking possession of property also gives constructive notice of
ownership.
• Recording is always done in the county where the property is located.
• A document must be acknowledged before it can be recorded. It must also be in English.
• An acknowledgment is a declaration to a notary authorized to take oaths that the signature is
a free and voluntary act. An acknowledgment verifies the signature.

101
Q

Title

A

is both the ownership of something and the legal evidence of that ownership– a deed. Types
of real estate title include clear or good title, marketable title, and equitable title.

102
Q

Equitable Title

A

Is an interest created by a legal document, such as that held by a buyer with a signed sales contract, who has not yet gone to closing. The buyer has equitable estate, or equitable title.

103
Q

Title insurance

A

A title insurance policy agrees to compensate or reimburse the insured against any losses sustained as a result of defects in the title, other than those exceptions listed in the policy.

104
Q

Subrogation clause

A

Allows the title company to assume the rights of a buyer with respect to any claim against a seller, if the title company has made payments to that buyer to satisfy that claim.

105
Q

Abstract of title

A

Is a complete history of title

106
Q

Chain of title

A

A list of all owners from the first until today

107
Q

Quiet title suit

A

If no one is available to sign a quitclaim, then a court procedure to cure or quiet the cloud can be used. This is called an action to quiet title or quiet title suit.

National Exam (8 decks)

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