Chapter 4 - Nat'l Ownership - Units 1-7 Flashcards
Real Estate
air, water, land, and everything affixed to the land. Real estate in the United States may be owned privately by individuals and private entities, or publicly by government entities.
Land
Surface area of the earth.
Everything beneath the surface of the earth extending downward to its center.
All natural things permanently attached to the earth.
Air above the surface of the earth extending outward to infinity.
Parcel/Tract
portion of land delineated by boundaries.
Physical Characteristics of Land (3)
Immobility.
Indestructibility.
Heterogeneity.
Immobility - Phys. Land
Land is immobile since a parcel of land cannot be moved from one site to another.
Geographical location of a tract of land is fixed and cannot be changed.
One can transport portions of the land such as mined coal, dirt, or cut plants. However, as soon as such elements are detached from the land they are no longer considered land.
Indestructibility - Phys. Land
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 to be permanent.
Heterogeneity - Phys. Land
Land is non-homogeneous since no two parcels of land are exactly the same.
Two adjacent parcels may be very similar and have the same economic value. However, they are inherently different because each parcel has a unique location.
Economic Characteristics of Land (5)
Demand. Utility or Usefulness. Scarcity. Transferability. Situs (Site).
Lack of any will decrease market value (price buyer is willing to pay).
Demand - Eco. Land
The more demand there is for a particular property, the more valuable it is to consumers looking for real estate.
Utility or Usefulness - Eco. Land
A three bedroom house is more useful to more consumers than a one or two bedroom house.
Scarcity - Eco. Land
A property will sell quickly if only a few properties in a particular area are on the market.
Transferability - Eco. Land
When loans are available, and rates are low, real estate is readily transferable from seller to buyer.
Situs (Site) - Eco. Land
The unique attractiveness of a property’s location is a major determinant of the other economic characteristics.
Legal Concept of Real Estate
All man-made structures that are “permanently” attached to the land (i.e. “improvements” - fences, streets, sidewalks, buildings, etc.)
Permanently = not literally permanent, but intension of creating permanent dwelling.
Property
something owned by someone.
Real Property
ownership of real estate and the bundle of rights associated with owning the real estate.
Personal Property
Ownership of anything that is not real estate, and the rights associated with owning the personal property item. Items of personal property are also called chattels or personalty.
Chatels/Personalty
Transferred by means of a bill of sale.
The Uniform Commercial Code regulates the transfer of chattels and the use of chattels as security for debts.
Tangible Property
physical, visible, and material (i.e. boats, cars, jewelry, appliances, computers, art work).
Intangible Property
abstract, having no physical existence in itself, other than as evidence of one’s ownership interest (i.e. stock certificates, contracts, patents, copyrights, bonds, trademarks, franchises, listing agreements).
Types and Uses of Real Estate Property (5)
Residential. Industrial. Commercial. Agricultural. Special Purpose Real Estate.
Residential Property
land or improved property with buildings designed for humans to live in, such as single-family homes, multi-family homes, apartments, vacation homes or condominiums.
Industrial Property
land used for industrial purposes, such as warehouses, factories, distribution centers and power plants.
Commercial Property
income-producing property, such as office buildings, restaurants, shopping centers, hotels and motels, parking lots and stores.
Some industrial properties may also fall into this category.
Agricultural Property
land used primarily for growing crops or raising livestock, such as farms, pastureland, orchards, and timberland. Zoning ordinances are usually favorable for agriculture use.
Special Purpose Real Estate (SPRE)
property that does not fall into one of the above categories.
It has a unique use to the persons who own and use it, such as churches, hospitals, schools and government buildings.
Other types of property that fall into the special use category include: Public Open Space and Recreational Areas
Public Open Spaces - SPRE
usually owned by private persons or the government and includes undeveloped shorelines, public parks and lakes.
Recreational Areas - SPRE
parks, water access areas, trails and shorelines.
These are usually preserved for ecological or educational reasons.
Right to Use a Property
right to use it in a certain way (i.e. mining, cultivating, landscaping, razing, and building on the property).
The right is subject to the limitations of local zoning and the legality of the use.
One’s right to use may not infringe on the rights of others to use and enjoy their property.
Ex. owner may be restricted from constructing a large pond on her property if in fact the pond would pose flooding and drainage hazards to the next door neighbor.
Right to Transfer Interests in the Property
right to sell, bequeath, lease, donate, or assign ownership interests.
Can only sell what they possess.
An owner may transfer certain individual rights in the property without transferring total ownership.
Also, one may transfer ownership while retaining individual interests.
Ex. a person may sell mineral rights without selling the right of possession. On the other hand, the owner may convey all rights to the property except the mineral rights.
Right to Encumber the Property
right to mortgage the property as collateral for debt. There may be restrictions to this right, such as a spouse’s right to limit the degree to which a homestead may be mortgaged.
Right to Exclude
gives the property owner the legal right to keep others off the property and to prosecute trespassers.
Severable Land Rights
Land can be laterally severed into:
Surface rights.
Air rights.
Subsurface rights.
Surface Rights
Apply to the real estate contained within the surface boundaries of the parcel.
This includes the ground, all natural things affixed to the ground, and all improvements.
Surface rights also include surface water rights.
Air Rights
Space above the surface boundaries of the parcel, as delineated by imaginary vertical lines extended to infinity. Since the advent of aviation, air rights have been curtailed to allow aircraft to fly over one’s property, provided the overflights do not interfere with the owner’s use and enjoyment of the property.
The issue of violation of air rights for the benefit of air transportation is an ongoing battle between airlines, airports, and nearby property owners.
Subsurface Rights
Apply to land beneath the surface of the real estate parcel extending from its surface boundaries downward to the center of the earth.
Notable subsurface rights are the rights to extract mineral and gas deposits and subsurface water from the water table.
Water Rights
Concern the rights to own and use water found in lakes, streams, rivers, and the ocean.
In addition, they determine where parcel boundaries can be fixed with respect to adjoining bodies of water.
Variables that determine what water rights and owner enjoys (3)
Whether the state controls the water.
Whether the water is moving.
Whether the water is navigable.
Doctrine of Prior Appropriation
requires that property owners obtain permits for the use of water.
Littoral Rights
Concern properties abutting bodies of water that are not moving, such as lakes and seas.
Owners of properties abutting a navigable, non-moving body of water enjoy the littoral right of use but do not own the water or the land beneath the water.
Ownership extends to the high-water mark of the body of water.
Littoral rights attach to the property. When the property is sold, the littoral rights transfer with the property to the new owner.
Riparian Rights
Concern properties abutting flowing water, such as streams and rivers.
If a property abuts a stream or river, the owner’s riparian rights are determined by whether the water is navigable or not navigable.
Riparian Right - Navigable
If the waterway in question is navigable, it is considered to be a public easement.
In such a case, the owner’s property extends to the water’s edge, as opposed to the midpoint of the waterway.
The state owns the land beneath the water.
However, the landowner has the right to all accretions, which is the land resulting from the soil build-up caused by the natural action of the river or stream.
Riparian Right - Non-Navigable
If the property abuts a non-navigable stream, the owner enjoys unrestricted use of the water and owns the land beneath the stream to the stream’s midpoint.
One’s riparian rights to use flowing water are subject to the conditions that:
Usage is reasonable and does not infringe on the riparian rights of other owners downstream.
Usage does not pollute the water.
Usage does not impede or alter the course of the water flow.
Groundwater Rights
Groundwater is water located below the earth’s surface, below the saturation point, in underground geological formations called aquifers.
The rule of capture allows a property owner to pump a regulated amount of water.
Landowners who negligently remove excessive water may be liable for sinkage in neighboring properties.
Land loss or gain due to action of water (5)
Accretion. Erosion. Avulsion. Reliction. Alluvion.
Accreation
increase of land created by deposits of soil by the natural flow of water.
Erosion
gradual loss of land caused by flowing water or the wind; the opposite of accretion.
Avulsion
loss of land by a sudden and large-scale change in water flow (e.g. the ocean washes away the water front during a typhoon, or heavy rains change the flow of a stream).
In either event the owner still owns the land underlying the water’s previous location.
Reliction
increase in land due to the receding of water from the shore.
Alluvion
actual soil, rock and other matter moved by flowing water which results in accretion.
Fixtures
Personal property item that has been converted to real property by attachment to real estate is called a fixture. Typical examples are chandeliers, toilets, water pumps, septic tanks, and window shutters.
The owner of real property inherently owns all fixtures belonging to the real property.
When the owner sells the real property, the buyer acquires rights to all fixtures.
Fixtures not included in the sale must be itemized and excluded in the sale contract.
Intention
One’s original intention can override the test of movability in determining whether an item is a fixture or not.
If someone attached an item to real property, yet intended to remove it after a period of time, the article might be deemed personal property.
If a person intended an article to be a fixture, even though the item is easily removable, the article might be deemed a fixture.
Ex. apartment renter installs an alarm system, fully intending to remove the system upon lease expiration. Here, the alarm system would be considered personal property.
Adaptation
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.
Ex. house keys, a garbage compactor, and a removable door screen, etc.
Functionality
If an item is vital to the operation of the building, it may be deemed a fixture, even though perhaps easily removable.
Ex. Window-unit air conditioners and detachable solar panels are possible.
Relationship of parties
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.
Sale or lease contract provisions
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.
Ex. if a sale contract stipulates that the carpeting is not included in the sale, it becomes a personal property item. If the carpeting is not mentioned, it goes with the property, since it is attached to the floor of the building.
Trade fixtures (chattel fixtures)
Items of a tenant’s personal property that the tenant has temporarily affixed to a landlord’s real property in order to conduct business.
Trade fixtures may be detached and removed before, or upon surrender, of the leased premises.
Should the tenant fail to remove a trade fixture, it may become the property of the landlord through accession. Thereafter, the fixture is considered real property.
Ex. grocer’s food freezers, a merchant’s clothes racks, a tavern owner’s bar, a dairy’s milking machines, and a printer’s printing press.
Emblements
Growing plants, including agricultural crops, may be either real property or personal property (require human interaction).
Plants and crops that grow naturally, without requiring anyone’s labor or machinery, are considered real property.
Conversion (2)
Severance.
Affixing/Attachment.
Severance
converting real property to personal property.
Ex. cutting down a tree, detaching a door, removing antenna.
Affixing/Attachment
converting personal property to real property.
Ex. assembling bricks into a bbq pit or building a dock from wood boards.
Allodial System of Ownership
Individuals are entitled to own property without proprietary control by the king/government.
The allodial system and the right of individuals to own property is one of the foundations upon which our country was built.
All property in the United States is under the allodial system.
Areas of Government Regulation (6)
Bundle of rights: possession, usage, transfer, encumbering and exclusion Legal descriptions Financing Insurance Inheritance Taxation
Federal Regulation of Real Property Interests
primarily concerned with broad standards of real property usage, natural disaster, land description, and discrimination.
Does not levy real estate taxes.
State Regulation of Real Property Interests
Primary regulatory entities of the real estate business.
Establish real estate license laws and qualifications.
Relevant state laws might include laws relating to flood zones, waste disposal, drainage control, shore preservation, and pollution standards.
Play a role in defining how real property may be owned, transferred, encumbered, and inherited.
Have power to levy real estate taxes.
Local Regulation of Real Property Interests
Controls how all property within the jurisdiction may be developed, improved, demolished, and managed.
Power to zone land, take over land for the public good, issue building permits, and establish the rules for all development projects.
Power to levy real estate taxes.
County and Local gov’t zoning laws (7)
Use of land.
Lot size.
Types of structures permitted.
Building heights.
Setbacks (how far back from the street an improvement can be built).
Density (ratio of land area:improved area).
Types of animals that can or cannot be kept on the property.
Violation of zoning laws renders a title unmarketable.
Judicial Regulation
Exerts an influence on real estate ownership and use through decisions based on case law and common law, as distinguished from statutory law.
Case law consists of decisions based on judicial precedent.
Common law is the collective body of law deriving from custom and generally accepted practice in society.
Uses of Legal Descriptions (4)
Public recording.
Creating a valid deed of conveyance or lease.
Completing mortgage documents.
Executing and recording other legal documents.
provides a basis for court rulings on encroachments and easements.
Accepted methods of legally describing parcels of real estate (3)
Metes and Bounds.
Rectangular Survey system, or Government Survey method.
Recorded Plat method, or Lot and Block method.
Metes and Bounds
Begins with City, County, and State where property is located.
Identifies the boundaries of a parcel of real estate using reference points, distances, and angles.
Always identifies an enclosed area by starting at an origination point, called point of beginning, or POB, and returning to the POB at the end of the description.
Must return to the POB in order to be valid.
Metes = distance/direction.
Bounds = fixed references points (monuments and landmarks).
Rectangular Survey System
Created to replace Metes and Bounds. Use latitude (east-west) and longitude (north-south) lines to create grids called townships.
Meridians (Principal and Guide)
north-south lines on survey grid.
Principal: single designated meridian for identifying townships in the principal meridian’s geographical “jurisdiction.”
Guide: Every 24 miles east and west that’s used as a correction for the curvature of the earth.
Common meridians are 6 miles apart.
Parallel (Base/Base Line and Correction/Standard)
east-west, latitudinal lines that are 6 miles apart.
Base: designated line for identifying townships. There is a base parallel for each principal meridian.
Correction/Standard: every 24 miles north and south of a base parallel used, with the guide meridians, as a correction for the curvature of the earth.
Common parallels are six miles apart, measuring from a standard parallel.
Check/Quadrangle
24-by-24-mile square created by the intersection of guide meridians and standard parallels
Range
north-south area between consecutive meridians.
Identified by its relationship to the principal meridian.
All ranges are six miles wide.
Tier/Township Strip
east-west area between two parallels.
Identified by its relationship to the base parallel.
All tiers are six miles wide.
Township
area enclosed by the intersection of two consecutive meridians and two consecutive parallels.
Since the parallels and meridians are six miles apart, a township is a square with six miles on each side.
Its area is therefore 36 square miles.
Identifying a Township
identified by their tier and range identification taken together, with the tier designation named first.
Sections of a Township
rectangular survey system divides a township into thirty-six squares called sections.
Each side of a section is one mile in length.
Area of a section is one square mile or 640 acres.
Can be divided into fractions (i.e. 1/2 section = 320 acres = 5280ft x 2640ft).
Method of describing a fraction of a section (3)
Proceed from the smallest unit to the largest, ending with the section.
Name the location of the unit within the next larger unit, then its fraction of the next larger unit.
Repeat step (2) until you reach the section itself. Give the section number.
Converting Section Fractions to Acres
Multiply the denominators of the fractional descriptions together.
Divide 640 by the resulting number.
Ex. SE 1/4 of a Section = 640/4 = 160 acres
W 1/2 of the NW 1/4 of a Section = 640/ (2 x 4) = 80 acres
E 1/2 of the NE 1/4 of the NE 1/4 of a Section = 640/(2 x 4 x 4) = 20 acres
Recorded Plat/Lot and Block System
used to describe properties in residential, commercial, and industrial subdivisions.
Subdivision Plat Map
Under this system, tracts of land are subdivided into lots. The entire group of lots comprises the subdivision.
In a large subdivision, lots may be grouped together into blocks for ease of reference.
Entire subdivision is surveyed to specify the size and location of each lot and block.
Surveyor then incorporates the survey data into a plat of survey, or subdivision plat map, which must comply with local surveying standards and ordinances.
Describing Elevation
To describe property located above or below the earth’s surface, such as the air rights of a condominium, a surveyor must know the property’s elevation.
Standard elevation reference points, called datums, have been established throughout the country.
To simplify matters, surveyors have identified local elevation markers, called benchmarks, to provide reference elevations for nearby properties.
Interests
ownership of any combination of the bundle of rights to real property, including the rights to: Possess. Use. Transfer. Encumber. Exclude.
Undivided Interest
owner’s interest in a property in which two or more parties share ownership.
If two co-owners have an undivided equal interest, one owner may not lay claim to the northern half of the property for his or her exclusive use.
Examples of Interests (12)
Owner’s enjoyment of the complete bundle of rights
a tenant’s temporary enjoyment of the right to use and exclude.
Lender’s enjoyment of the right to encumber the property over the life of a mortgage loan.
Repairman’s right to encumber the property when the owner fails to pay for services.
Buyer’s right to prevent an owner from selling the property to another party under the terms of the sale contract.
Mining company’s temporary right to extract minerals from the property’s subsurface.
Local municipality’s right to control how an owner uses the property.
Utility company’s right to have access to the property in accordance with an easement.
Length of time a person may enjoy the interest
the portion of the land, air, or subsurface the interest applies to.
Public or private nature of the interest.
Inclusion or exclusion of legal ownership of the property.
Estates in Land
If the interest-holder enjoys the right of possession, the party is considered to have an estate in land, or familiarly, an estate.
Estates in Land - Encumbrance
If a private interest-holder does not have the right to possess, the interest is an encumbrance.
Enables a non-owning party to restrict the owner’s bundle of rights.
Ex. tax liens, mortgages, easements, and encroachments are examples.
Estates in Land - Public Interest
If the interest-holder is not private, such as a government entity, and does not have the right to possess, the interest is some form of public interest.
Ex. police power or the right of the local or county government to zone.
Eminent Domain
right of the government to take private property for a necessary public use, with just compensation paid to the owner.
The government’s right to take a property voluntarily from an owner is limited by three requirements:
Property owner must be paid compensation for the property.
Property must be used for the public good.
Owner must have due process in the court’s system.
Ex. the state may use eminent domain to acquire land for streets, parks, public buildings, public rights-of-way, and similar uses. No private property is exempt from this exercise of government power.
Condemnation
instituted to take property by eminent domain when no accepted negotiation between government and property owner.
Escheat
process of reversion to state ownership.
Since property cannot be without an owner, if an owner dies without a will and without heirs, the property reverts to the state.
Similarly, if the property is abandoned (by failure to pay taxes), the ownership of the property goes to the state.
Freehold Estate
duration of the owner’s rights cannot be determined: the rights may endure for a lifetime, for less than a lifetime, or for generations beyond the owner’s lifetime.
Commonly equated with ownership of the property
Leasehold Estate
distinguished by its specific duration, as represented by the lease term.
Not so considered because the leaseholder’s rights are temporary.
Tenancies
Applies to both leasehold and freehold estates.
The owner of the freehold estate is the freehold tenant, and the renter, or lessee, is the leasehold tenant.
Freehold Estate: Fee Simple Estate
A freehold estate of potentially unlimited duration.
Highest form of ownership.
An estate limited to the life of the owner is a life estate.
Remain subject to government restrictions and private interests.
Freehold Estates: Fee Simple Absolute
Perpetual estate that is not conditioned by stipulated or restricted uses.
May also be freely passed on to heirs.
Freehold Estates: Fee Simple Absolute - Bundle of Rights (6)
Right of quiet enjoyment. Right to give away. Right to sell by deed. Right to will. Right to exclude. Right to control within what is allowed by law.
A fee simple owner may: (5)
Pass a life estate in reversion or remainder to another person.
Use the property as security for a debt.
Grant an easement.
Allow another person to lease the property.
Give permission for another to conduct an activity on the property.
Freehold Estates: Fee Simple Defeasible
Deeds that create what starts out as a fee simple, but attach some sort of condition or limitation.
Ownership can continue indefinitely, provided the use of the property conforms to certain stated conditions.
Freehold Estates: Fee Simple Defeasible - Essential Characteristics (2)
Property must be used for a certain purpose, or under certain conditions.
If the use changes or if prohibited conditions are present, the estate reverts to the previous grantor of the estate.
Freehold Estates: Types of Fee Simple Defeasible (2)
Determinable.
Condition subsequent.
Determinable
Deed to the determinable estate states usage limitations. If the restrictions are violated, the estate automatically reverts to the grantor or heirs.
Condition Subsequent
If any condition is violated, the previous owner may repossess the property.
However, reversion of the estate is not automatic; the grantor must re-take physical possession within a certain time frame.
Freehold Estates: Life Estates
Freehold estate that is limited in duration to the life of the owner or other named person.
Upon the death of the owner or other named individual, the estate passes to the original owner or another named party.
The holder of a life estate is called the life tenant.
The life tenant does not have the right to pass ownership to his or her heirs.
Distinguishing characteristics of the life estate (3)
The owner enjoys full ownership rights during the estate period.
Holders of the future interest own either a reversionary or a remainder interest.
The estate may be created by agreement between private parties, or it may be created by law under prescribed circumstances.
Life Estate: Remainder
If a life estate names a third party to receive title to the property upon termination of the life estate, the party enjoys a future interest, called a remainder interest or a remainder estate.
Reversion
If no remainder estate is established, the estate reverts to the original owner or the owner’s heirs.
In this situation, the original owner retains a reversionary interest or estate.
Type of Life Estates
Conventional
Legal.
Conventional
A conventional life estate is created by grant from a fee simple property owner to the grantee, the life tenant. Following the termination of the estate, rights pass to a remainderman or revert to the previous owner.
Types of Conventional Life Estates
Ordinary.
Pur autre vie.
Ordinary Life Estate
ends with the death of the life estate owner and may pass back to the original owners or their heirs (reversion) or to a named third party (remainder).
Pur Autre Vie
endures over the lifetime of a third person, after which the property passes from the tenant holder to the original grantor (reversion) or a third party (remainderman).
Legal Life Estate
Created by state law, as opposed to, being created by a property owner’s agreement.
Provisions vary from state to state.
The focus of a legal life estate is defining and protecting the property rights of surviving family members upon the death of the spouse.
Legal Life Estate - Marital Rights
legal life estate makes it impossible for one partner to sell the property without the consent of the other partner, or to own property in one name only.
Types of Legal Life Estate
Homestead.
Dower and Curtesy.
Elective share.
Legal Life Estate - Homestead
One’s principal residence.
Homestead laws protect family members against losing their homes to general creditors attempting to collect on debts.
All or portions of one’s homestead are exempt from a forced sale executed for the collection of general debts (judgment liens).
Tax debts, seller financing debt, debts for home improvement, and mortgage debt are not exempt.
The family must occupy the homestead.
The homestead interest cannot be conveyed by one spouse; both spouses must sign the deed conveying homestead property.
The homestead exemption and restrictions endure over the life of the head of the household and pass on to children under legal age.
Homestead interests in a property are extinguished if the property is sold or abandoned. If the owner does not intend to use it again as a home, then the rights are extinguished.
Legal Life Estate - Dower and Curtesy
Dower: wife’s life estate interest in the husband’s property. When the husband dies, the wife can make a claim to portions of the decedent’s property.
Curtesy: identical right enjoyed by the husband in a deceased wife’s property. Property acquired under dower laws is owned by the surviving spouse for the duration of his or her lifetime.
If both parties sign the conveyance, the dower right is automatically extinguished.
Legal Life Estate - Elective Share
State-level statute enabling a surviving spouse to make a minimum claim to the deceased spouse’s real and personal property in place of the provisions for such property in the decedent’s will.
Ex. a husband’s will excludes the wife from any property inheritance, the wife may, upon the husband’s death, make the elective share claim.
Surviving spouse is entitled to a percent of the deceased spouse’s property, excepting homestead property and property the decedent owned exclusively.
Surviving spouse must file for the elective share within a limited time period.
If the spouse fails to file, the estate passes on according to the will, or the state’s laws of descent.
Elective share right pertains only to the surviving spouse and is not transferable.
Life Tenant Responsibilities
Constitutes true ownership of the property for the owner’s life. That means that the life tenant can use and enjoy the property, lease it, and receive any income and profits that the property generates.
Has the responsibility to protect the property for the remainderman or the revisionary interest.
He or she may not do injury to the property in any way.
If the life tenant damages or misuses the property, it is known as an Act of Waste.
Act of Waste Examples (4)
Using the property for something other than was intended.
Causing a fire that destroys the home.
Neglecting to pay property taxes.
Conducting activities that would decrease the value of the property.
Leasehold Estate (Leasehold)
Arises from the execution of a lease by a fee owner– the lessor, or landlord– to a lessee/tenant.
Since tenants do not own the fee interest, a leasehold estate is technically an item of personal property for the tenant.
Leasehold tenants are entitled to possess and use the leased premises during the lease term in the manner prescribed in the lease.
Types of Leasehold Estates (4)
Estate for Years.
Estate from Period to Period.
Estate at Will.
Estate at Sufferance.
