Chapter 5/6 Flashcards
“_______________” is a form of ownership of a freehold estate held by only one owner.
In severalty
“_______________” is a form of ownership of a freehold estate held by two or more people.
In co-ownership
“_______________” is a form of ownership of a freehold estate held by a third party for the benefit of someone else.
In trust
Why is it important for a licensee to know how a property is held?
1) when selling a property the broker must know who will be required to sign all the documents to make the transaction legal, including the listing agreement, the purchase offers, the sales contract and the deed.
2) the buyers must inform the broker as to how they wish to take the title.
What is the ownership in severalty also known as?
Sole ownership or tenancy in severalty
What happens to the estate of a deceased tenant in severalty?
It passes to the heirs by probate.
What 3 types of co-ownership are recognized in Texas?
1) tenancy in common
2) joint tenancy
3) community property
A “___________” is a fiduciary who holds and manages the estate for the benefit of another party.
A trustee
What are ways a trust can be created?
1) a deed
2) a will
3) a trust agreement
True or false: in an estate in trust, a fee owner (grantor or trustor) transfers the legal title to a fiduciary (trustee) who holds and manages the estate for another party (beneficiary).
True
This type of trust allows the trustor, during his or her lifetime, to convey title to a trustee for the benefit of a third party. The trustor charges the trustee with all necessary responsibilities for managing the property, protecting its value, and securing whatever income it may produce. The trustee may also be ordered to sell the property at a given point. The beneficiary receives all income and sales proceeds, net of the trustee’s fees.
A living trust
This type of trust allows the trustor to convey the fee estate to the trustee and to name himself or herself the beneficiary. The land trust applies only to real property, not to personal property. The agreement, or deed in trust, grants the beneficiary the rights to possess and use the property, and to exercise control over the actions of the trustee.
A land trust
These are characteristics of what type of co-ownership? Two or more owners Identical rights Interests individually owned Electable ownership shares No survivorship No unity of time
A tenancy in common or “estate in common”
True or false: No co-tenant may claim to own any physical portion of the property exclusively
True - They share what is called undivided possession or unity of possession.
What does the term “no survivorship” mean in a tenancy in common ownership?
A deceased co-tenant’s estate passes by probate to the decedent’s heirs and devisees rather than to the other tenants in common. Any number of heirs can share in the ownership of the willed tenancy.
What does the term “no unity of time” mean in a tenancy in common ownership?
It is not necessary for tenants in common to acquire their interests at the same time. A new co-tenant may enter into a pre-existing tenancy in common.
How is a “joint tenancy relationship” created in Texas?
By written agreement
What are the defining characteristics and requirements of joint tenancy?
1) unity of ownership
2) equal ownership
3) transfer of interest
4) survivorship
What ownership relationship is a property owned by two or more persons collectively?
Joint tenancy
What does “unity of ownership” in a joint tenancy ownership relationship mean?
Joint tenants hold a single title to the property.
What does “equal ownership” in a joint tenancy ownership relationship mean?
Joint tenants own equal shares in the property, without exception. If there are four co-tenants, each owns 25% of the property. If there are ten co-tenants, each owns 10%.
What does “transfer of interest” in a joint tenancy ownership relationship mean?
A joint tenant may transfer his or her interest in the property to an outside party, but only as a tenancy in common interest. Whoever acquires the interest co-owns the property as a tenant in common with the other joint tenants.
The remaining joint tenants continue to own an undivided interest in the property, less the new co-tenant’s share.
What does “survivorship” in a joint tenancy ownership relationship mean?
if a joint tenant dies, all interests and rights pass to the surviving joint tenants free from any claims of creditors or heirs.
When only one joint tenant survives, the survivor’s interest becomes an estate in severalty, and the joint tenancy is terminated. The estate will be then probated upon the severalty owner’s death.
How is a joint tenancy relationship created?
All owners must acquire the property at the same time, use the same deed, acquire equal interests, and share in equal rights of possession.
What are the “four unities” in relation to the creation of a joint tenancy relationship?
1) unity of time
2) unity of title
3) unity of interest
4) unity of possession
“________________” means all parties must acquire the joint interest at the same time.
Unity of time
“________________” means all parties must acquire the property in the same deed of conveyance.
Unity of title
“________________” means all parties must receive equal, undivided interests.
Unity of interest
“________________” means all parties must receive the same rights of possession.
Unity of possession
When one of the joint tenants exercises his right to sell or give away his interest in the property, the new owner is not a joint tenant with the other owners. The new owner becomes a “________________”.
Tenant in common
A “_______________” is a legal way for an owner to dispose of his or her interest against the wishes of other co-owners.
A partition suit (the courts divide or “partition” the property)
“________________” is a form of ownership reserved exclusively for husband and wife, but it is not recognized in Texas. It features survivorship, equal interests, and limited exposure to foreclosure.
Tenancy by the entirety
“_______________” consists of property owned by either spouse at the time of the marriage, property acquired by either spouse through inheritance or gift during the marriage, property acquired with separate-property funds, income from separate property.
Separate property
How can a spouse gain an equitable interest in separate property?
The value of the separate property increases during the marriage or community property funds were used to discharge any debt on the separate property.
“_________________” consists of all other property earned or acquired by either party during the marriage.
Community property
True or false: In Texas, as a community property state, title insurance companies like to have the signatures of both spouses on a conveyance of separate property to do away with any speculation that the property is not community property.
True
True or false: Upon the death of either spouse, half of the deceased’s community property passes to the surviving spouse, and the other half passes to the decedent’s heirs.
True
The “______________” was created in 1987 by an amendment to the state constitution that states community property rights of survivorship differ from a joint tenancy rights of survivorship, when debts are incurred.
Community property right of survivorship
In a “joint tenancy”, a party is only responsible for ½ the debt.
Joint tenancy
In “______________” both parties are responsible for all debt.
Community property
An agreement to create the community property right of survivorship must:
1) be in writing
2) be signed by both spouses
3) describe the community property in the agreement
4) contain a phrase describing the intent such as “…will become the property of the survivor”
“_________________” is a form of ownership held by business partners, as provided by the Uniform Partnership Act. This type of relationship grants equal rights to all partners, but the property must be used in connection with the partnership’s business. Individual rights are not assignable.
Tenancy in partnership
In a “______________”, one person owns the whole business and reports all the profits and losses on his or her personal income tax return.
Sole proprietorship
A “_______________” is when two or more people become associated to carry on a business for profit.
A partnership
A “_______________” is an active partner in the partnership who has unlimited personal liability for the debts of the partnership
General partner
True or false: If a new general partner joins an existing partnership, he or she would have unlimited liability for future debt to the partnership, but his or her liability for the existing partnership debts would be limited to the extent of his or her investment of capital.
True
What rights did the Uniform Partnership Act of 1994 give general partners?
1) equal rights to use partnership property for partnership purposes
2) cannot transfer their interest to another without the consent of the other partners.
Who has first claim on the assets of a partnership?
Creditors
What happens when a partner files bankruptcy?
It would dissolve the partnership as it applies to the bankrupt partner and the creditors would be able to get to the bankrupt partner’s share of the partnership assets.
“_______________” are partnerships in which the limited partners have limited liability as opposed to the unlimited liability of a general partnership.
Limited partnerships
A limited partnership must have at least one ____________ who has unlimited liability.
General partner
How is a limited partnership created?
In writing and the partnership must file a formal certificate of limited partnership.
True or False: A limited partner cannot permit his or her name to be used in a way that would signify that he or she is a general partner.
True
According to the _________________, partners may contribute services to the partnership instead of only money.
1983 Revised Limited Partnership Act
True or False: Any limited partner may ask for an accounting from a general partner.
True
True or False: Limited partners have the authority to get rid of the general partner for cause
True
The __________________ eliminated many of the tax advantages for limited partnerships in real estate investment. These tax changes led to a significant decline in the real estate syndicate’s use of the limited partnership form of ownership.
Tax Reform Act of 1986
“_____________” are partnerships for a single undertaking rather than a continuing business.
Joint venture
What is the most common partnership form of a joint venture?
Limited partnership
Generally in real estate, _____________ are the investors that provide most of the equity capital, while _____________are usually responsible for managing the partnership assets and they may contribute a relatively small amount of the required capital.
Limited partners, general partners
True or False: Since a joint venture is considered a partnership, it is taxed in the same way as a partnership; that is, the individual joint venture members are responsible for paying the taxes.
True
