CO Real Estate - Law and Practice (Unit 1-11) Flashcards
Six categories of real property
Residential
Commercial
Mixed use
Industrial
Agricultural
Special Purpose
When supply increases and demand goes down, prices…
Go down
When demand increases and supply decreases, prices…
Go up
Two characteristics that govern the way the market reacts to pressures of supply and demand
Uniqueness
Immobility
Factors affecting real estate supply are:
- labor force, construction and material costs
- government controls and financial policies
- local government factors
Factors affecting real estate demand are:
- Population
- Demographics
- Employment and wage levels
Advantages of real estate as an investment
Rate of return
Control
Appreciation
Equity Build up
Leverage
Tax Benefits
Disadvantages of real estate as an investment
Liquidity
Active Management
Risk
What can the use of property exchanges do for an investor?
Avoid taxation
Three physical characteristics of land
Immobility
Indestructibility
Uniqueness
What is the bundle of legal rights?
- right of possession
- right to control property lawfully
- right of enjoyment
- right of exclusion
- right of disposition
A right or privilege associated with the property, although not physically part of it
Appurtenance (parking spaces, water rights, easements)
Difference between riparian and littoral rights
Riparian: Common law rights granted to owners of land along the course of a flowing body of water (unrestricted right to use the water) and own the land under the water
Littoral: Owners whose land borders a commercially navigable body of water, do not own the actual land under water
Process of increasing land resulting from deposit of soil by water’s action
Accretion
Gradual wearing away of land by natural forces
Erosion
Sudden removal of land due to an act of nature
Avulsion
Under this doctrine, right to use the water, with exception of limited domestic use, is controlled by the state rather than land owner adjacent to water
Prior Appropriation
Four economic characteristics of real estate
Scarcity
Improvements
Permanence of Investment
Area preference or situs (location)
Items of personal property
Chattels
Annually cultivated crops such as fruit, veggies and grain
Emblements
An item of real property can become personal property through the process of
Severance
The process of changing personal property into real property
annexation
Personal property that has been so attached to land that by law it becomes part of the real property
Fixture
Legal tests of a fixture
Method of annexation
Adaptability of the item for land’s ordinary use
Relationship of the parties
Intention of the person in placing the item on the land
Agreement of the parties
A piece of personal property owned by the tenant, attached to a rented space for business purposes
Trade Fixture
Landlord’s can acquire trade fixtures through the process of
Accession
Type of estate ownership interest that continues for an indefinite period
Freehold Estate
What defines the degree, quantity, nature and extent of an owner’s interest in real property?
An estate in land
What is the highest interest in real estate recognized by the law?
A fee simple, or fee simple absolute estate
Type of qualified fee estate that is subject to the occurrence or nonoccurrence of some specified event
Fee simple defeasible estate
A type of fee simple defeasible estate that may be inherited and uses language like “so long as, or while, or during”
A fee simple determinable estate
A type of fee simple estate given on condition of ownership
A fee simple subject to a condition subsequent
A freehold estate limited to the duration of either the life of the holder or the life of some other designated party
A life estate
Definition of pur autre vie
a life estate based on the lifetime of a person other than the life tenant, provides for inheritance of the property right by the life tenant’s heirs but that right only exists until the death of the identified persons
Remainder vs Reversionary Interest
Both considered future interests
Remainder: the creator of the life estate names a remainderman as the person to whom the property will pass when the life estate ends
Reversionary: Creator of life estate chooses not to name a remainderman, in which case ownership returns to the original owner upon the end of the life estate
Types of legal life estates
Dower
Curtsey
Homestead
A legal life estate in real estate occupied as the family home
HOmestead, protects home from most creditors during the occupant’s lifetime
NOT protected from debt secured by the property itself or from real estate taxes
A type of interest in real estate that does not rise to the level of ownership or possession, but gives a degree of use
Encumbrance
The right to use land of another for a particular purpose
Easement
For an easement appurtenant to exist…
Two parcels must be owned by different owners. Parcel that benefits is the dominant tenement, the parcel providing is the servient tenement.
Individual or company interest in or right to use someone else’s land
Easement in Gross
How can you create an easement?
Easement by Necessity (right of ingress and egress)
Easement by Prescription (based on if you’ve already been using it for a period of time)
An easement terminates in any of the following situations
When need no longer exists
When owner of either tenement becomes sole owner
By release of right of easement to the owner of the servient tenement
By abandonment of easement
By the nonuse of a prescriptive easement
A personal privilege to enter the land of another for a specific purpose
License
When a building, fence, driveway illegally extends beyond boundaries of land it creates an
Encroachment
What are the four main governmental powers
Police Power
Eminent Domain
Taxation
Escheat
The power to enact legislation to preserve order, protect the public health and safety, and promote general welfare of its citizens is known as
Police Power
The right of the government to acquire privately owned real estate for public use is known as
Eminent domain
Action brought by property owner seeking compensation for land adjacent to land used for public purpose when the property’s use and value have been diminished
Inverse condemnation
The process by which the state may acquire privately owned real or personal property when an owner dies and leaves no heirs or will
Escheat
Four types of co-ownership
Tenancy in common
Joint tenancy
Tenancy in entirety
Community Property
When a parcel of land is owned by 2 or more people with an undivided interest and unity of possession
Tenancy in common
Distinguishing feature of joint tenancy is…
right of survivorship
If a joint tenant dies, the deceased’s interest transfers directly to the surviving joint tenants with no legal action required
The four unities necessary to establish a joint tenancy (PITT)
Possession - all joint tenants hold an undivided right to possession
Interest - all joint tenants hold an equal ownership interest
Time - all joint tenants acquire their interest at the same time
Title - all joint tenants acquire their interest on the same document
The legal way to dissolve the relationship between co-owners of real estate when the parties do not voluntarily agree to its termination
Partition
When type of tenancy allows a spouse to inherit the other spouse’s ownership interest upon death?
Tenancy by the entirety
A trust that is created by an agreement during a property owner’s lifetime
A living trust
A trust that is established by will after owner’s death is a
Testamentary trust
The three basic methods of describing real estate (legal descriptions)
Metes and Bounds - relies on property’s physical features to determine the boundaries and measurements of a parcel
Rectangular Survey - (gov) standardized description of land based on two sets of intersecting lines (principal meridians and base lines
Lot and Block method - uses plat maps and includes lot and block number, name or number of subdivision plat and name of county and state
How many square miles are in a township? (sections)
36
A point, line or surface from which elevations are measured or indicated
A datum
Legal term for transfer of title during property owner’s lifetime
Voluntary Alienation
A clause that begins with the words “to have and to hold” used in deeds when its necessary to define or explain the ownership to be enjoyed by the grantee
Habendum Clause
A formal declaration under oath that the person who signs a written document does so voluntarily and that signature is genuine, made before a notary
Acknowledgment
When does title officially pass from grantor to grantee?
When deed is delivered and accepted
Type of deed that provides the greatest protection to the buyer because the grantor is legally bound by certain convenants
General warranty deed
The basic warranties covered by a general warranty deed
Covenant of seisin - right to convey title
Covenant against encumbrances - property is free from liens or encumbrances, unless stated
Covenant of further assurance - promise to obtain and deliver any instrument needed to make title good
Covenant of quiet enjoyment - grantee’s title will be good against any third party who might be a court action against
Covenant of warrant forever - grantor promises to compensate grantee for loss sustained if the title fails at any time in the future
Type of deed that limits the grantor’s defense of the title transferred by warranting
- that the grantor received title
- that the property was not encumbered during the time the grantor held title unless stated
Special Warranty Deed
Type of deed that contains no express warranties against encumbrances but it does IMPLY that the grantor holds title and possession of property (grants and releases) (grants, bargains and sells)
Bargain and Sale Deed
Type of deed that provides the least protection of any deed and carries no warranties or covenants (remises, releases and quitclaims)
Quitclaim Deed, frequently used to cure a title defect (cloud on a title)
Type of deed by which a trustor conveys real estate to a trustee
Deed of trust
Type of deed used by a trustee to return title to the trustor
Reconveyance Deed
Type of deed used when trustee conveys title to anyone but the trustor
Trustee’s deed
Title to property may be transferred without the owner’s consent through process called
Involuntary alienation
Four types of involuntary alienation
Escheat (when someone dies intestate, no will)
Condemnation by state’s power of eminent domain
Foreclosure
Adverse Possession
Required characteristics of an adverse possession (ONCHA)
Open
Notorious
Continuous
Hostile
Adverse
When title passes by will or descent, estate must go through this type of judicial process, during which the successor will be recognized
Probate
What state must probate procedures take place?
In the county in which the decedent last resided
If they owned real estate in another county, probate will take place in that county as well
the legal presumption that information has been obtained by an individual through due diligence
Constructive Notice
Information of an interest in property is available but also someone is actually aware of it is called
Actual Notice
The order in which documents or liens are recorded is called
Priority
The record of a property’s ownership
Chain of title
Court action used to establish ownership when it cannot be traced through an unbroken chain of title
Action to Quiet Title
An examination of public records to determine whether any defect exists in chain of title
Title Search
Summary report of what the title search found in the public records
Abstract of title - all recorded liens and encumbrances are included
Is a certificate of title a guarantee of ownership?
No
A contract under which the policyholder is protected from losses arising from defects in the title
Title Insurance
When a title company makes a payment to settle a claim covered by a policy, that company acquired the right to any remedy or damages available to the insured..called the right of
subrogation
Type of covered that covers: defects found in public records, forged documents, incompetent grantors, incorrect marital settlements, improperly delivered deeds
Standard Coverage
Type of coverage that covers property inspection, including unrecorded rights of persons in possession, examination of survey, and unrecorded liens not known by policy holder
Extended Coverage
What is not covered by either standard nor extended coverage?
Defects and liens listed in the policy
Defects known to buyer
Changes in land use brought about by zoning ordinances
A legal registration system used to verify ownership of real estate
Torrens System
The following three requirements must be met for a sales associate to be a nonemployee
- sales associate must have a current real estate license
- sales associate must have a written contract with a broker that specifies that the sales associate will not be treated as an employee
- substantial portion of the sales associates income as a real estate professional must be based on sales production (commission)
Four anti trust laws
Price fixing - competitors agree to set prices or other terms and conditions for products or services rather than letting competition in the open market establish those prices
Group boycott - 2 or more business conspire against another business or agree to withhold their patronage to reduce competition
allocation of customers/markets
tie-in agreements - agreements to sell one product only if the buyer purchases another
Two federal acts governing electronic contracting
- Uniform electronic transactions act
- Electronic signatures in Global and National Commerce act
Rules established by tradition and court decisions
Common Law
Laws enacted by the legislature
Statutory Law
Rules and regulations created by a real estate commissions and departments
Administrative Law
Agency relationship created by an oral or written agreement between parties
Express agency
Agency relationship resulting from the parties’ behavior is creating an
implied agency
The six common law fiduciary responsibilities of an agent COLD-AC
Care
Obedience
Loyalty
Disclosure
Accounting
Confidientialtiy
Agent who is a person empowered to do anything the principal could do personally
Universal Agent
Agent who may represent the principal in a broad range of matters
General agent
Agent who is authorized to represent principal is one specific act
Special Agent
When an agent represents only one party in a transaction
Single Agency
When an agent represents two principals in the same transaction
Dual agency
When two sales associates from the same broker are involved in a transaction but represent different principals
Designated Agency
Exaggeration of a property’s benefits is called
Puffing
The intentional misrepresentation of a material fact in such a way as to harm or take advantage of another person
Fraud
This occurs when an agent should have known that a statement about a material fact was false
Negligent Misrepresentation
Type of listing agreement where listing broker is paid regardless of who sells the property
Exclusive right to sell
Type of listing where broker is only paid if they are procuring cause of sale, but only one broker
Exclusive agency
Type of listing where seller employs multiple brokers and only pays one if they are the procuring cause
Open listing
Type of listing where broker is entitled to any amount exceeding the seller’s stated net proceeds
Net Listing
What can cancel a listing or buyer rep agreement?
- Closing of transaction
- Term expires
- property is destroyed
- title is transferred by operation of law
- mutual agreement to cancel
- either party breaches
- either party dies or becomes incapacitated
What must a contract be in order to be legitimate?
- voluntary
- agreement or promise
- legally competent parties
- legal act
- lawful consideration
Parties state terms of a contract orally or in writing creating an
express contract
Agreement of parties is demonstrated by their acts and conducts creates an
implied contract
If both parties promise to do something in a contract, this is
a bilateral contract
What kind of a contract is a one-sided agreement?
A unilateral contract
Executed vs Executory
Executed - fulfilled contract
Executory - when one or both parties still has an act to perform in order to fulfill
Essential elements of a contract (5)
Offer & acceptance
Consideration
Legal Purpose
Consent
Legal Capacity
Three methods of discharging a contract
- performance
- breach
- remedies (damages specific performance or rescission)
Validity of a contract - a contract may be
- valid
- void (lacks one or more elements)
- voidable (appears to have all elements but my be rescinded or disaffirmed)
- unenforceable (appears to have all elements but cannot be enforced in court)
Assignment vs Novation of contracts
Assignment = substitution of parties
novation = substitution of a new contract
A change or modification to an existing contract is considered an
Amendment
A provision added to an existing contract that may change or be an addition to the content of the original contract is an
Addendum
