Chapter 4 Flashcards
What are the main areas of real property regulation?
1) The bundle of rights (possession, usage, transfer, encumbering, and exclusion), 2) legal descriptions, 3) financing, 4) insurance, 5) inheritance, 6) taxation
Who does the bundle of rights belong to?
The owner listed on the title of the property
True or False: a property deed must include a written legal description of the property.
True
What do Financing regulations address?
Lending requirements and provides standards for lending, underwriting, and loan management practices.
What do insurance regulations provide?
Insurance requirements, policies, and the process of filing claims associated with real property.
What do inheritance laws address?
The logistics of transferring ownership of real property through an inheritance and the amount of tax due.
What do taxation regulations deal with?
All aspects of taxing real property. Real property taxation occurs at the local levels, so amounts differ throughout the same state, city, and county.
Which federal agency promotes and regulates home ownership?
Federal Housing Administration (FHA)
Which agency establishes protective usage restrictions and guidelines for dealing with hazardous materials and other environmental concerns?
The Environmental Protection Agency (EPA)
Which type of legislation requires certain homeowners to obtain flood insurance policies?
Federal flood insurance legislation
Which federal legislation prohibits discrimination in housing based on race, religion, color, or national origin?
The Federal Fair Housing Act of 1968
Which federal legislation created design and accessibility standards?
The Americans with Disabilities Act
True or false: The federal government does not levy real estate taxes.
True
True or false: State governments are the primary regulatory entities of the real estate business.
True
What are three characteristics of state government regulation?
1) They establish real estate license laws and qualifications and have established real estate commissions to administer license laws and oversee activities of licensees 2) They exert regional influence in the usage and environmental control of real estate within the state (flood zones, waste disposal, drainage control, shore preservation, and pollution standards) 3) They play a role in defining how real property may be owned, transferred, encumbered, and inherited 4) They have the power to level real estate taxes but generally pass this power to local government.
What do county and local government regulation focus on?
Land use control, control of improvements, and taxation
What do land use regulations and ordinances control?
How all property within the jurisdiction may be developed, improved, demolished, and managed.
What powers do county and local governments have?
The power to zone land, take over land for the public good, issue building permits, and establish the rules for all development projects.
Who has the power to levy real estate taxes?
County and local governments, along with school districts and other local jurisdictions.
Define case law.
Consists of decisions based on judicial precedent.
Define “common law”.
The collective body of law deriving from custom and generally accepted practice in society.
How does judicial regulation differ from federal, state, and local regulations?
Judicial regulations use case and common law rulings to influence regulations. Federal, state, and local regulations are created through statutory law.
What is the simple definition of real estate?
The air, water, land, and everything affixed to the land.
What does the legal concept of land encompass?
1) the surface area of the earth, 2) everything beneath the surface of the earth extending downward to it’s center, 3) all natural things permanently attached to the earth, 4) the air above the surface of the earth extending outward to infinity.
Define “parcel” or “tract”.
A portion of land delineated by boundaries.
What does the legal concept of real estate encompass?
1) land, 2) all man-made structures that are “permanently” attached to the land (fences, streets, buildings, wells, sewers, sidewalks, and piers called “improvements”
Define “property”.
The item that is owned and also a set of rights (bundle of rights) to the item enjoyed by the owner.
What does the “right to use” property mean?
The owner has the right to use the property in certain ways such as mining, cultivating, landscaping, razing, and building on the property. This right may not infringe on the rights of others to use and enjoy their property.
What does “the right to transfer” mean?
It includes the right to sell, bequeath, lease, donate, or assign ownership interests. An owner may transfer certain individual rights to the property without transferring total ownership. One may also transfer ownership while retaining individual interests. (Ex. A person may sell mineral rights without selling the right of possession. The owner may also convey all rights to the property except the mineral rights.)
True or false: The owner can only transfer what the owner possesses.
True (Ex. The owner cannot sell water rights if there are no water rights attached to the property).
What does “the right to encumber” mean?
The right to mortgage the property as collateral for debt.
What does “the right to exclude” do?
Gives the property owner the legal right to keep others off the property and prosecute trespassers.
What is a common example of the transfer of a portion of a bundle of rights?
An ordinary lease - the owner relinquishes the right to possess portions of the surface, perhaps a building, in return for the rent. The tenant enjoys the rights to posses and use the building over the term of the lease, after which these rights revert to the landlord. The tenant does not enjoy any of the other rights in the bundle of rights, just possession.
What are “surface rights”?
The real estate contained within the surface boundaries of the parcel (ground, all natural things affixed to the ground, and all improvements). May also include water rights but do not necessarily give the landowner right to the subsurface or air.
What do subsurface rights include?
The land beneath the surface of the real estate parcel extending from its surface boundaries downward to the center of the earth (rights to extract mineral and gas deposits, and subsurface water from the water table).
What do “air rights” include?
The space above the surface boundaries of the parcel, as delineated by imaginary vertical lines extended to infinity.
What do “water rights” include?
The rights to own and use water found in lakes, streams, rivers, and the ocean.
Concerning water rights, what does “surface water rights” include?
Ponds, rivers, streams, and bays. The state publicly owns and governs surface water.
Concerning water rights, what does “ground water rights” include?
Groundwater that filters down through the Earth’s surface and is the property of the landowner.
How are air rights delineated?
By imaginary vertical lines extended to infinity.
Land can be laterally divided into what classifications of rights?
Surface, subsurface, and air rights
What are the five important rights associated with owning a parcel of real estate?
1) right to possession, 2) right to use, 3) right to transfer, 4) right to encumber, 5) right to exclude
In what year did Texas Legislature want to freeze each landowner’s water use and rights with an overall annual usage cap?
1993
The ________________ defines state water as “the water of ordinary flow, underflow, and tides of every flowing river, natural stream, and lake…”
Water code
Described by the state as “the primary source of water for south central Texas and therefore vital to the residents, industry, and ecology of the region, the State’s economy, and the public welfare” is known as:
The Edwards Aquifer
The “________________” allows landowners to pump as much water from below their ground’s surface, regardless of whether or not it may deplete their neighbor’s own groundwater supply.
Rule of recapture
“_______________” is the ownership of real estate and the bundle of rights associated with owning real estate.
Real property
“___________” is ownership of anything that is not real estate, and the rights associated with owning the personal property item.
Personal property
A “_________________” is used to convert a mobile home from personal property to real property.
A statement of ownership and location
What is the difference between “tangible” and “intangible” property?
Tangible property is physical, visible, and material (boats, jewelry, coins, appliances, computers, artwork). Intangible property is abstract, having no physical existence in itself, other than as evidence of one’s ownership interest (stocks, copyrights, bonds, trademarks, patents, franchises, listing agreements)
What is the primary criterion for distinguishing real from personal property?
Whether the item is permanently attached to the land or to structures attached to the land.
“_____________” is the process to change the classification of personal property to real property.
Conversion
“______________” is the conversion of real property to personal property by detaching it from the real estate.
Severance (Ex. cutting down a tree, detaching a door from a shed, or removing an antenna from a roof).
“________________” is the act of converting personal property to real property by attaching it to the real estate.
Affixing (Ex. assembling a pile of bricks into a barbecue pit, or constructing a boat dock from wood planks).
A “______________” is a personal property item that has been converted to real property by attachment to real estate.
Fixture (Ex. chandeliers, toilets, water pumps, septic tanks, and window shutters).
What are the 5 criteria for determining whether an article of property is real or personal?
Intention Adaption Functionality Relationship of parties Sale or lease contract provisions
Define “intention” as it relates to differentiating whether an article of property is real or personal.
If someone attached an item to real property, yet intended to remove it after a period of time, the article may be deemed personal property. If a person intended an article to be a fixture, even though the item is easily removable, the article may be deemed a fixture. (Ex. Alarm system)
Explain “adaptation” as it relates to differentiating between real and personal property.
If an item is uniquely adapted to the property, or the property is custom-designed to accommodate the item, it may be deemed real property whether the item is easily removable or not. These items are often times not usable in other properties. (Ex. House keys, garbage compactor, removable door screen, custom-designed curtains)
Explain “functionality” as it relates to differentiating between real and personal property.
An item vital to the operation of the building may be deemed a fixture even though it is easily removable. (Window-unit AC, detachable solar panels)
Explain “relationship of parties” as it relates to differentiating between real and personal property.
If a tenant installs a fixture in order to conduct business, the fixture may be considered a trade fixture, which is the tenant’s personal property.
Explain “sale or lease contract provisions” as it relates to differentiating between real and personal property.
In a sale or lease transaction, the listing of an item in the contract as a personal property item, or a fixture, overrides all other considerations. Unless otherwise stated as exceptions, all fixtures are included in the sale.
“________________” are items of a tenant’s personal property that the tenant has temporarily affixed to a landlord’s real property in order to conduct business.
Chattel fixtures or trade fixtures (Ex. A grocer’s food freezers, a merchant’s clothes racks, a tavern owner’s bar, a dairy’s milking machines)
Plants and crops that grow naturally without requiring anyone’s labor or machinery, are considered real property. “_______________” are plants and crops requiring human intervention and labor and are considered personal property.
Emblements
What are 2 general types of characteristics of real property?
Physical and economic
“__________________” characteristics include immobility, indestructibility, and heterogeneity. These characteristics essentially discuss how land cannot be moved or destroyed, and that each real property is unique.
Physical characteristics
“___________________” characteristics are scarcity, improvements, permanence of investment, and area preference.
Economic characteristics
Describe “immobility” as a physical characteristic of real property.
Land is immobile, since a parcel of land cannot be moved from one site to another. In other words, the geographical location of a tract of land is fixed and cannot be changed.
Describe “indestructibility” as a physical characteristic of real property.
Land is indestructible in the sense that one would have to remove a segment of the planet all the way to the core in order to destroy it. Even then, the portion extending upward to infinity would remain. For the same reason, land is considered permanent.
Describe “heterogeneity” as a physical characteristic of real property.
Land is non-homogeneous, since no two parcels of land are the same. Admittedly, two adjacent parcels may be very similar and have similar economic value. However, they are inherently different because each parcel has a unique location. Additionally, every land area has a different makeup of soil, shape, and elevation.
Describe “scarcity” as an economic characteristic of real property.
The concept of scarcity refers to the idea that the total amount of land is fixed. In regards to how this affects value, consider population size and land area. In a small city with a large population, square foot pricing is likely much higher than in a large city with a small population. With less land area available, and many people wanting land, the price increases compared to other areas with more land available
Describe “improvements” as an economic characteristic of real property.
Any changes to a parcel of land can affect the value and use of the land. This includes improvements to the actual land and the land’s fixtures. These improvements can be either modifications or new builds and can affect the parcel and surrounding neighborhood favorably or unfavorably.
Describe “permanence of investment” as an economic characteristic of real property.
This means that the resources and capital used to build an improvement represent a large, fixed amount. These types of improvements often deal with infrastructure, such as sewage, drainage, water, and electricity. The return on these types of fixed investments is relatively stable, last for many years, and extend over the economic life of the improvement. It is important to consider this when deciding on major, long-term improvements.
Describe “area preference” as an economic characteristic of real property.
This characteristic does not refer to a specific location, but to people’s preference to certain locations and characteristics of a location. Consequently, different preferences and tastes result in different values for similar properties.
Which economic characteristic of real property is the most important?
Area preference is the most important economic characteristic. It’s the location, neighborhood offerings, and overall preference to one area over another.
