Chapter 4: Forms of Ownership Flashcards
What is an Estate in Severalty (Tenancy in Severalty)
When an estate is held by one person or a single legal entity. This is sole ownership.
Co-owership (Concurrent ownership)
Ownership involving 2 or more owners
What are the 3 forms of Co-ownership)
- Tenancy in Common
- Joint Tenancy
- Tenancy by the Entirety
Tenancy in Common
- Can have equal or unequal interest
- Automatically occurs if not stated in deed
- Each owner owns all of it
- Each owner has an undivided interest in all of property
- Can dispose of interest at any time
- May file a partition suit
- May devise one’s interest (it’s inheritable)
- Two or more parties
- No right of survivorship
- Unity of possession (Ex: Can’t tell which 1/3 or 1/2 is owned by each owner)
- If not specifically stated, fractions are dispensed equally amongst owners.
- Upon death, an owner’s fractional interest can be passed to heirs
- Each owner has his own undivided interest in severalty.
- Each owner can do what they want with their interest w/o permission from the other owners
Joint Tenancy
- Two or more parties
- Corporations are prohibited from being joint tenants
- Has right of survivorship
- Has partition suit available
Right of Survivorship
When 1 of the owners in joint tenancy dies, the surviving owners receive that owner’s fractional interest
- Also called a “Poor Man’s Will”
- Overrides a will
- Probate or surrogate court aren’t needed
What are the 3 ways a joint tenancy or tenancy by the entirety can be created?
- Granting through a deed of conveyance
- Purchasing through a deed of conveyance
- By devise (giving the property by will)
It can’t be created by operation of law
What does devise mean?
To give a property to someone by will
What are the 4 unities required to create a joint tenancy?
- Unity of time: All JT acquire interest at the same time
- Unity of title: All JT acquire interest thru same instrument of conveyance
- Unity of interest: All JT hold equal ownership interests
- Unity of possession: All JT hold an undivided right to possess
Partition suit
A suit that is filed in court to terminate one’s co-ownership. They file suit to partition the land.
Tenancy by Entirety
- Married couple
- Adds a 5th unity (Unity of Person)
- Right of survivorship
- Exempt from claims of creditors unless both husband and wife are named on the debt
- Both spouses own the entire estate
- Both spouses have an equal and undivided interest
- Title can only be conveyed by deed signed by both parties
- Normally no right to partition
- Upon divorce JT becomes Tenancy in Common
- Can only be created by grant, purchase, or devise. It can’t be created by operation of law.
Trust
Any agreement where one party holds property for another party’s benefit (could be a person or legal entity)
Who is a trustor?
The person who gives the trustee the responsibility of managing the property for the benefit of the beneficiaries
Who is a trustee?
The person who holds/manages the property on behalf of the trustor. Trustor never gives up ownership, but trustor is legal owner.
What is a fiduciary?
a person, organization, or corporation that acts on behalf of another person or persons, putting their clients’ interest ahead of their own, with a duty to preserve good faith and trust.
Partnership
An association of 2 or more people to carry on a business as co-owners and share in the business’ profits and losses
General Partnership
All partners/owners participate in the operation of the business and may be held personally liable for business losses and obligations
Limited Partners
Includes general and limited (silent) partners. General partner runs the business but limited partners don’t participate. Each partner is held liable only to the extent of their investment.
- Is not usually a legal entity
- Can’t own property
- Titles must be conveyed as Tenancy in Common or JT
Uniform Partnership Act
- Establishes legality of the limited partnership form
2. Allows realty to be held in the partnership name
What happens if one of the partners in a Partnership dies, withdraws or goes bankrupt?
- Partnership must be dissolved
2. Must be reorganized
What is a corporation?
a company or group of people authorized to act as a single entity (artificial person) and recognized as such in law.
- Corporations own property in severalty
- Corporation is managed and operated by its board of directors
- A corporation’s charter sets forth the powers of the corporation
- Individuals participate/invest in a corporation by buying stock in it
- Profits are subject to double taxation
- As legal entity: File income taxes (pay tax on profits)
- Pay taxes on the profit dividends paid out to investors
- Prohibited from forming a joint tenancy
Syndicate
a group of people or firms who pool their capital to buy, build, and manage property (real estate investment).
- It is not a legal entity
- Ex: Joint Venture
Joint Venture
2 or more parties that combine resources for a specific development or investment.
The parties in a joint venture maintain their own business identity while working together to complete a deal.
There is a time limit for the parties to work together. It is not indefinite.
Cooperative (Co-Op)
Defn 1: is a type of housing owned by a corporation made up of the owners within the co-op.
Defn 2: a housing unit that is owned and controlled jointly by a group of individuals who have equal shares, membership, and/or occupancy rights to the housing community.
- cooperators (residents) receive a “proprietary lease”
- Title to land and building is owned by the corporation
The corporation owns the interior, exterior, and all common areas of the building.
Info 1:
Instead of buying property as you would in a traditional real estate transaction, you’re buying a share of the corporation that controls the co-op, which entitles you to living space.
Info 2:
Each resident is a shareholder in the corporation based in part on the relative size of the unit that they live in
Info 3:
Taxes, mortgage interest, principal, and operational/maintenance expenses are passed on to residents.
Info 4: Residents own stocks in the corporation not title or interest to real estate.
Condominium
- Occupants have fee-simple title to their units
- Occupants own the common elements as tenancy in commons
- No right of partition
Another name for condominium laws
Horizontal property acts or strata title
In a condominium, what are the indivisible parts of the building and land called?
Common elements
How is a condominium created?
Owners/Developers must execute and record an enabling declaration or master deed of its creation in the county where it is located
CC& R (Laws & covenants, conditions, and restrictions) are also filed at the same time as the master deed.
Each unit in a condominium is called an?
Air lot
Who administers a condominium?
Condo owner’s association (Meet at least once a year)
How much voting power does a condo occupant have?
Based on the percentage of their common interest
Contrast the process of changing by-laws, CC&R, and House Rules.
- Change in by-laws: Requires 3/4 (75% vote)
- Change in CC&R: Requires 2/3 (67% vote)
- Change in House Rules: a majority vote
Timesharing
- One can purchase interest in real estate property
- Each purchaser receives the right to use the facilities for a certain period of time.
- Developer owns the real estate
- Time share estate is fee simple “interest” (for the contractual period of time)
- Maintenance and other common expenses are prorated among the unit owners
- Time share management firm manages time share
Planned Unit Development (PUD)
a community of single-family homes, and sometimes condos or townhomes, where every homeowner belongs to a homeowners association (HOA)
- In areas for diversified land use
- Get a house and lot as separate property
- Get membership to a community association that owns the common areas
In a PUD, there are often commercial properties that will serve the needs of their residents including stores and restaurants.
