Chapter 2: Estates in Land & Methods of Holding Title

Question 1

Define: Freehold Estates

Answer 1

Freehold estates include fee simple estates and life estates.

In contrast to someone with a leasehold estate, someone with a freehold estate has title to the property.

The two main categories of freehold estates are fee simple estates and life estates.

Question 2

Define: Fee Simple

Answer 2

A fee simple estate is the highest and most complete form of real property ownership.

It is perpetual, transferable, and inheritable.

A fee simple is classified either as a fee simple absolute or as a defeasible fee estate.

Question 3

Define: Fee Simple Absolute

Answer 3

Fee simple absolute is fee title without conditions or qualifications of any kind.

Question 4

Define: Defeasible Fee

Answer 4

A defeasible fee estate includes all of the same rights of ownership as a fee simple absolute, but it may terminate if a condition or event specified in the deed occurs.

At that point, title reverts to the original grantor or his heirs.

A defeasible fee is either a fee simple determinable or a fee simple subject to condition subsequent.

Question 5

Name one of the two types of defeasible fee estates and define

Answer 5

A fee simple determinable is one of the two types of defeasible fee estates.

With a fee simple determinable, title may be forfeited automatically.

Question 6

Name and define the second type of defeasible fee estates

Answer 6

A fee simple subject to a condition subsequent is one of the two types of defeasible fee estates.

If the condition stated in the deed is not met, title is not forfeited automatically, but the grantor or his heirs may take legal action to regain title.

Question 7

Life Estates

Answer 7

A life estate is an ownership interest that lasts only as long as a specified person, the measuring life, lives.

When that person dies, the property reverts to the reversioners or passes to the remainderman.

Question 8

Measuring Life

Answer 8

The measuring life is the person upon whose death the life estate will terminate.

It’s usually the person who owns the life estate, but not always.

Question 9

Estate in Reversion

Answer 9

An estate in reversion is held by the grantor’s heirs, who receive the estate after the end of the measuring life.

The heirs are known as reversioners.

Question 10

Estate in Remainder

Answer 10

An estate in remainder is held by a designated third party who receives the estate after the end of the measuring life.

The third party is known as a remainderman

Question 11

Define: Leasehold Estate

Answer 11

Leasehold estate: A leasehold estate gives a tenant exclusive possession and use of the property for a limited period. The tenant does not have title.

Question 12

Estate for Years

Answer 12

Estate for years: An estate for years is a lease for a fixed term, which ends automatically when the term is over. The parties may mutually agree to end the tenancy sooner by surrender. An estate for years is assignable to a third party.

Question 13

Periodic Estate

Answer 13

Periodic estate: A periodic estate is not limited to a specific term, but automatically continues from period to period until one party gives the other proper notice of termination.

Question 14

Estate at Will

Answer 14

Estate at will: An estate at will has no specific term or rental interval. Rent is not paid on a regular basis, or else it takes some form other than money. A landlord has to give notice to terminate an estate at will

Question 15

Estate at Sufferance

Answer 15

Estate at sufferance: An estate at sufferance arises when a tenant who lawfully took possession of the property stays on after the lease ends, without the permission of the landlord

Question 16

Severalty

Answer 16

Ownership in severalty is ownership by one individual (either one natural person or one artificial person).

Question 17

Concurrent Ownership

Answer 17

Property is owned concurrently (co-owned) when two or more persons have undivided interests in it.

The forms of concurrent ownership recognized in Washington are tenancy in common, joint tenancy, and community property.

Question 18

Tenancy in Common

Answer 18

In a tenancy in common, the co-tenants’ undivided interests may be equal or unequal.

There is no right of survivorship, so a tenant in common’s interest may be willed.

Question 19

Joint Tenancy

Answer 19

joint tenants have equal undivided interests in the property.

The key characteristic of a joint tenancy is the right of survivorship.

When a joint tenant dies, her interest automatically passes to the surviving joint tenants.

Question 20

name and define the four entities required for joint tenancy

Answer 20

To establish or maintain a joint tenancy, there must be unity of interest, time, title, and possession.

Question 21

Unity of Possession

Answer 21

Both joint tenancy and tenancy in common involve unity of possession.

This means that all of the co-tenants have a right to possess the entire property.

Question 22

Community Possession

Answer 22

Community property is a form of co-ownership that exists only between two married people.

Everything that a married person owns in Washington is either community property or his or her separate property.

Each spouse has a 50% undivided interest in the community property.

Question 23

Separate Property

Answer 23

To be classified as a spouse’s separate property, property acquired during marriage must be one of the following: (1) acquired by gift or inheritance, (2) purchased with separate funds, or (3) profits or proceeds from separate property.

Question 24

Joinder

Answer 24

The signatures of both spouses are necessary to list, sell, encumber, or purchase community real property

Question 25

General Partnership

Answer 25

In a general partnership, all of the partners have a say in managing the company, and they are personally liable for the partnership’s debts.

Question 26

Partnership Property

Answer 26

If property is acquired in a partnership’s name, or if the deed refers to the partnership, then the property is partnership property.

Partners may possess the property for partnership purposes.

But an individual partner isn’t a co-owner of the partnership property, and has no transferable interest in it.

Question 27

Limited Partnership

Answer 27

A limited partnership has one or more general partners who manage the business and have unlimited liability.

It also has limited partners, who may participate in management but usually are passive investors, and who have limited liability.

Question 28

Limited Liability

Answer 28

investors who have limited liability are not legally responsible for the debts, the obligations, or the actions of the entity in which they have invested.

Question 29

Corporation

Answer 29

A corporation is an artificial person that is separate from its stockholders.

The stockholders have limited liability and elect a board of directors to oversee the business.

The board appoints the officers, who manage the business.

Question 30

LLC

Answer 30

n a limited liability company, all of the members have limited liability.

Unlike general partners, the managing members of an LLC are not personally liable for the company’s debts and obligations.

And in contrast to most corporations, LLCs are not subject to double taxation.

Question 31

Joint Venture

Answer 31

In a joint venture, two or more legal entities join together to accomplish a particular project.

A joint venture is not an ongoing business.

Question 32

REIT

Answer 32

In a real estate investment trust, there are at least one hundred investors, and they have limited liability.

To avoid double taxation, the REIT must distribute most of its income to its investors.

Question 33

Securities

Answer 33

Securities are investment instruments that represent a financial interest in an enterprise without direct managerial control over it, such as shares in a corporation.

Securities are subject to regulation by the Securities and Exchange Commission at the federal level and to blue sky laws at the state level.

Question 34

Condo

Answer 34

n a condominium, an owner has title to his dwelling unit.

But he shares ownership of the condominium’s common elements with the other unit owners as tenants in common.

For most purposes, including financing and taxation, each unit is treated as a separate property.

Question 35

Common Elements

Answer 35

The common elements are parts of the condominium property that may be used by all of the residents.

Ownership of a specific undivided interest in the common elements is assigned to each unit in the condominium.

Question 36

Limited Common Elements

Answer 36

Certain features in a condominium, such as assigned parking spaces or balconies, may be designated as limited common elements.

Ownership of a limited common element is shared by all of the unit owners.

However, the use of a limited common element is reserved for the owner of one unit.

Question 37

Cooperative

Answer 37

In a cooperative, the units are not separately owned; instead, a corporation has title to the whole property.

A tenant owns shares in the corporation and has a proprietary lease for a particular unit.

The entire cooperative is taxed and financed as a single property.

Question 38

Timeshare

Answer 38

A timeshare involves purchase of the right to use a property during a particular time slot on a recurring basis.

Real estate licensees may handle resales of timeshares, but not first-time sales, which can be sold only by persons registered as timeshare salespersons.