Final Exam Flashcards
Real Property
Generally immovable. Goes with the real estate.
Personal Property
Generally movable. Goes with the person. Personal property can be hypothecated, alienated and become real property (a fixture).
Chattel Real
Often merely refers to tangible movable personal property.
Fixture
Personal property that is now real property- for example, a pool covering or a painting that has been nailed to the wall. The acronym MARIA is a test for whether or not something is a fixture (Method Adaptability Relationship Intention Agreement).
Trade Fixture
Linked to a business. They are personal property- for example, a hairdresser’s chair or a dentist chair. Although the chair is attached to the ground, it is not real property- it is personal because when the hairdresser sells her property, the chair will be going with her as part of her business. The chair is personal because it belongs with the person, not the land.
Riparian Rights
Water rights over a moving body of water- for example, a river or a stream.
Littoral Rights
Land which abuts a body of static water- for example, a lake, sea or ocean.
Accretion
An increase in actual land due to natural causes- for example, from the gradual action of the ocean or river waters.
Avulsion
Land is washed away by water- for example, a dam breaks and the rushing water washes away a strip of land.
Reliction
Gradual recession of water, leaving land permanently uncovered.
Appurtenances
Appurtenances include easements, stock in a mutual water company, covenants, and minerals (still in the ground). They are considered real property and “run with the land.”
Freehold Estate
Estate where ownership is held for an undefined length of time.
Fee Simple Estate
Also known as an “Estate of Inheritance” or “Fee Simple Absolute”, this is a type of freehold estate. A Fee Simple Estate can be sold or inherited, and is not free of encumbrances (taxes). Fee Simple Absolute is the most interest that one can hold in land.
Fee Simple Defeasible
Puts conditions on the use of a property- for example, if the deed had a condition that no alcohol would be sold on the property and that was violated, the owner could lose title.
Life Estate
An interest in real property that lasts the length of someone’s life. It is a type of freehold estate because it is indefinite in duration. When the life tenant’s life ends, title reverts to the original owner (reversion) or a remainderman.
Life Estate Pur Autrie Vie
An interest in real property that lasts the length of someone’s life (who is not the life tenant). It is a type of freehold estate because it is indefinite in duration. When the “measuring life” ends, title reverts to the original owner (reversion) or a remainderman.
Less Than Freehold Estate
An estate interest held for a defined period of time.
Estate for Years
Estate or tenancy lasting a fixed period of time- for example, a summer rental lasting from April 5 to September 19.
Periodic Tenancy
Estate where tenancy is renewed periodically- for example, week to week, month to month or year to year.
Estate at Will
Estate that can be ended at any time by the landlord or the tenant.
Estate at Sufferance
Estate where a tenant continues to occupy a property after a lease or rental agreement has ended- for example, a deadbeat tenant.
Bundle of Rights
Legal rights of the real estate title holder. Includes the right of possession, the right of control, the right of exclusion, the right of enjoyment and the right of disposition.
Lease
A contract between a lessor and a lessee which gives possession but not ownership, to the lessee. Also known as a “Leasehold Estate”. The tenant doesn’t need to sign a lease to become a lessee, acting as a lessee is enough. This is NOT real property, a lease is considered personal property. Think of them as a piece of paper- a lease is a piece of paper, and you can move a piece of paper, so leases are personal property.
Percentage Lease
Lease where the amount of rent paid by the lessee is a percentage of the gross income of the lessee’s business- for example, a commercial parking lot.
Net Lease
Also known as a Triple Net Lease, this is a lease in which the tenant pays for taxes, insurance and maintenance in addition to other fees like rent and utilities.
Gross Lease
Lease in which the tenant pays a fixed amount to the landlord- for example, a standard residential lease.
Sandwich Lease
A lease in which an existing tenant sub-lets (or leases again) the property to a third party. The lessee becomes the lessor.
Sale Leaseback
Seller leases the recently-sold building from the new owner. The Vendor becomes the Lessee. This allows the seller to deduct all future rent payments as business expenditures.
Tenant Improvement Allowance
The amount a landlord is willing to spend so the tenant can retrofit or renovate a commercial space.
Abandonment
Voluntarily giving up the rights and responsibilities of possession of a property.
Subleases
When an existing tenant sub-lets (or leases again) the property to a third party. The lessee becomes the lessor.
Assignment
When one party passes responsibility on to another.
Surrender
Giving up possession of a property.
Constructive Eviction
When a landlord does something, or fails to do something, that he or she is legally obligated to do, rendering the property uninhabitable.
Estoppel Statement
A signed statement certifying that certain facts are correct, which cannot be later contradicted by the signer- for example, that a lease exists or that rent is paid to a certain date.
Deed
Evidence of property transfer.
Grant Deed
A deed that includes two implied warranties: 1- The grantor has not already given the title to another person; and 2- The estate has no undisclosed encumbrances. It is not necessary to record the deed. Grant deeds are considered officially executed when signed by the grantor.
Quitclaim Deed
A deed that operates as a release. It transfers property quickly, but without any warranties on the title of any kind.
Warranty Deed
A deed in which a property owner, when transferring the title, warrants that he owns the property free and clear of all liens.
Special Warranty Deed
A deed in which the grantor warrants only against defects that occurred during their ownership (the grantor of a special warranty deed does not provide a warranty or guarantee against any defects in clear title that existed before their ownership).
General Warranty Deed
A type of deed where the grantor or the seller guarantees that s/he holds clear title to a piece of real estate and has a right to sell it. The guarantee is not limited to the time the grantor owned the property- it extends back to the property’s origins.
Bargain and Sale Deed
A deed that “conveys real property without covenants”. The grantor is implied to hold title and possession, but there is no warranty against encumbrances.
Reconveyance Deed
A deed which indicates that the borrower is released from a mortgage debt and transfers the property title from the lender (or beneficiary) to the borrower. Most commonly issued when a mortgage has been paid in full.
Title
Way of holding title to real property. Title means ownership of the bundle of rights in a property.
Chain of Title
Record of all prior transfers and/or encumbrances for a particular parcel of land. It is important when deciding to issue the title insurance.
Abstract of Title
A summary that provides details of the title deeds and documents that prove an owner’s right to dispose of land, together with any encumbrances that relate to the property.
Cloud on Title
A defect in title- for example, an unreleased lien or encumbrance that might invalidate or impair a title.
Quiet Title Action
Court action to remove a cloud or another claim that has been placed on title to property, thus “quieting” any challenges or claims to the title.
Alienation of Title
A loss of title. The opposite is acquisition of title (gain possession of title).
Title Insurance
Insures against any losses due to defects or problems with the title after it has been searched or examined. Ensures the buyer is getting a clean title. No title policy covers everything, however- for example, zoning.
Standard Policy of Title Insurance
Insurance policy most buyers get to protect themselves from forgery in the chain of title or defective delivery of a deed. A standard policy DOES NOT cover a site inspection or a survey.
Extended Policy of Title Insurance
Insurance policy with increased coverage. Helps with a dispute over property lines which are disclosed by a survey. Covers improvements on adjoining land.
Estate in Severalty
Property owned by just one individual (or corporation).
Concurrent Estate
Property owned by more than one person.
Joint Tenancy
Concurrent ownership with unities of Time, Title, Interest and Possession (TTIP). Has right of survivorship, meaning If one joint tenant dies, the surviving joint tenants take the remaining interest.
Tenancy in Common
Concurrent ownership with unity of possession only. No automatic right of survivorship, meaning a tenant in common can leave her interest to someone in her will.
Encumbrance
Burden on the property. It is a claim, lien, charge, or liability attached to real property. Title can still be transferred.
Easement
The right to use or enter someone else’s land for a special purpose, within limits. Land with an easement on it is encumbered.
Dominant Tenement
The land enjoying the easement. Can terminate an easement by recording a “quitclaim deed”.
Servient Tenement
The land burdened by the easement.
Easement by Prescription
Easement granted after someone has used or entered land for a period of time and is given a legal right to continue to do so. Requires “open, notorious, hostile, and continuous” use. Confrontation with the owner should not be involved. Can be lost or gained based on time of use.
Appurtenant Easement
Easement attached a property which allows the owner the use of the neighbor’s land- for example, using your neighbor’s driveway to get to your garage. “Runs with the land”, so the easement passes to the next owner.
Easement in Gross
Easement which attaches to an individual (person or entity). There is no dominant tenement- for example, the power company’s right to access utility lines.
Encroachment
When a neighbor is using land which they do not own- for example, if the owner of a parcel of land built a driveway on his own land that accidentally crossed two feet over onto his neighbor’s land. Can be considered trespass.
Lien
When money is owed. It is a claim against property, usually to secure payment of a debt.
General Lien
Lien which attaches to all of the owner’s property- for example, income tax liens or liens resulting from a court judgment.
Specific Lien
Lien which attaches to a specific parcel of the owner’s property- for example, trust deeds, mortgages, mechanic’s liens, or property taxes.
Voluntary Lien
Lien obtained voluntarily- for example, when you get a mortgage or trust deed from the bank and a lien is placed on your property in exchange for a loan.
Involuntary Lien
Lien that is imposed on a person- for example, a property tax lien imposed for unpaid property taxes.
Mechanic’s Lien
Lien filed for to benefit someone who worked on the property. Only considered valid if they have been verified and recorded. Take priority depending on when work began- they may take priority earlier than their date of recording. Notices for mechanic’s liens can be for completion, cessation, and non-responsibility.
Judgement Lien
Lien imposed upon someone by a court. It is a general involuntary lien.
Government Powers
PETE- Police power, Eminent domain, Taxation, Escheat.
Police Power
The government’s right to regulate conduct or property to protect the health, safety, welfare, and morals of the community. Includes regulations like zoning laws.
Zoning
An ordinance (regulation or law) that defines how property in specific geographic zones can be used. Ideally to promote public health & safety, but sometimes they are set for reasons of moral and general welfare. The planning commission is responsible for the zoning of all properties in the local area.
Variance
Request to deviate from zoning laws- for example, when a landowner wants a building 3 feet higher than the zone’s height restrictions allow. Variance is done lot by lot.
Down Zoning
Changing a zone from commercial to residential.
Grandfather Clause
Allows a property to continue it’s existing use, even if it doesn’t comply with zoning laws.
Nonconforming Use
Allows a property to continue it’s existing use when it no longer complies to zoning regulations, but did at the time the property’s use was established.
Multi-family Residential
An R-3 zone is for Multi-family Residential use.
Building Codes
Establish minimum standards of construction for public safety. Local building codes usually set high standards. When they are different from state standards or federal standards, the builder must follow whichever standards are highest- for example, if the local codes requires 1 handrail and federal law requires 2 hand rails, the builder must install 2 handrails.
Escheat
When property is returned to the state because there is no individual owner- for example, when a property owner dies intestate (without a will), and without heirs. An individual cannot get property through escheat, it is a government power.
Intestate
Without a will.
Testate
Having a will.
Probate Sale
The selling of a property when a homeowner dies and the property needs to be divided among inheritors or sold to pay debts. The broker’s commission is set by the court in a probate sale.
Holographic Will
Handwritten will.
Taxation
Financial charge (or some other type of levy imposed) upon a taxpayer by a governmental organization.
1031 Tax Deferred Exchange
Process which allows investors to sell a property and reinvest the proceeds into a new property (as part of a qualifying like-kind exchange) while postponing the payment of capital gain taxes.
Boot
Cash or property used to balance out the equities of properties being exchanged. Receipt of boot may result in a recognized gain. Cost basis of the old property will be the same as Cost Basis of the new property being acquired, regardless of any boot given in the exchange.
Ad Valorem
When something is taxed based on its value. Latin for “According to Value.”
Tax Shelter
General term for any property (or other investment) which gives the owner income tax advantages (such as deductions for property taxes, mortgage interest, or depreciation).
Property Tax
An involuntary, specific lien levied against real property.
Income Tax
An involuntary, general lien levied against income.
Marginal Tax Rate
Percentage of tax applied to your income for each tax bracket in which you qualify. In essence, the percentage taken from your next dollar of taxable income above a predefined income threshold. It is applied to the nearest dollar of taxable earned income.
Unadjusted Cost Basis
Original price of a property. Used to calculate capital gains. It is usually just the purchase price.
Adjusted Cost Basis
Takes into account changes to a property which would affect its cost. To calculate, start with the amount originally paid, add the cost of improvements and assessments, then subtract deductions taken (such as depreciation and depletion)- for example, adding the cost of a new concrete patio on your personal residence. Mortgage payments are not included in this calculation.
Eminent Domain
Property taken by the government for public use in exchange for just compensation. Government power.
Condemnation
Action which results in compensation for a property when eminent domain rights are exercised by the government.
Inverse Condemnation
Legal action to force payment for property taken by the government when eminent domain proceedings were not correctly followed, or when the government failed to provide just compensation.
Lis Pendens
A pending legal action- for example, a notice that a property is due to be taken to court which, depending on the results of the court case, could affect the title. A lis pendens remains in effect until there is a judgment or the court case is dismissed.
Injunction
A court order to stop certain actions by certain individuals- for example, local homeowners could seek an injunction to stop another homeowner from putting up a large neon sign over his home that says “Motel”.
Writ of Execution
A court order to enforce a judgement- for example, to sell a property to satisfy a judgment against the owner.
Constructive Notice
A “legal fiction” that says someone has been notified of something even though actual notice didn’t happen. With property, once a document is recorded, subsequent buyers are deemed to have received “constructive notice” regarding the document and its effect on the property. Constructive Notice can also be given by taking possession.
Actual Notice
When first-hand knowledge of something’s provided to an individual-for example, if a buyer knows that someone has taken possession of the property that is for sale.
Material Fact
Fact that a reasonable person would think was relevant to a decision being made- for example, un-repaired water damage in the attic of a home for sale. If knowing something could cause a person to change their mind about a transaction, legally it’s a material fact.
Acknowledgement
An affirmation or declaration used to authenticate legal instruments, usually done by a notary (a public figure who can oversee the signing of documents, such as deeds or mortgages). An Acknowledgment may only be carried out by a notary public who has no interest in the transaction.
Escrow
Neutral third party hired to handle a property transaction, the exchange of money and any related documents. The rules of escrow vary state-to-state. Escrow duties usually include: ensuring that the terms and conditions of transfer are met before closing; asking for the funding of the buyer’s loan; releasing funds when appropriate; and reporting to the IRS on sales transactions.
Debit
Money owed when escrow is closed- for example, the purchase price of a property is a debit for the buyer.
Credit
Money owed to you when escrow is closed- for example, prepaid taxes are a credit for the seller.
Short Rate
Method used by your insurance company to calculate any refund or premium due after you cancel your policy, especially with early cancellation.
Impounds
Account maintained by the mortgage company to collect recurring costs such as insurance and tax payments that are necessary for you to keep your home, but are not technically part of the mortgage.
R.E.S.P.A.
The Real Estate Settlement Procedures Act mandates that certain disclosures be provided so buyers can make informed decisions, and prohibits certain practices like referral fees and kickbacks. Applies to 1-4 family residential dwellings.
T.I.L.A.
The Truth In Lending Act is designed to protect borrowers by requiring that lenders explain full credit terms to the borrower, like the amount of a loan, APR, finance charges, payment schedule, and total paid over the life of a loan. T.I.L.A. does not cover agricultural loans. Includes right of rescission for re-finance loans, which begins when loan documents are signed by the borrower.
T.R.I.D.
The TILA/RESPA Integrated Disclosure, also called the “Know Before You Owe” rule, combines several documents required by RESPA and TILA into two: one provided at the beginning of the process called a “Loan Estimate”, and one provided at the end called a “Closing Disclosure”.
A.P.R.
The Annual Percentage Rate is the cost of credit that consumers pay, expressed as a simple annual percentage. If an ad only states the APR, then other disclosures are not necessary.
F.H.A.
The Federal Housing Administration was created by the National Housing Act of 1934 with the intention of regulating the rate of interest and the terms of mortgages that it insured in order to make home ownership more accessible.
Jones vs. Mayer
The U.S. Supreme Court judgment which, under the Thirteenth (13th) Amendment, upheld anti-discrimination laws as constitutional in 1968.
Sherman Anti-Trust Act
Federal Law that promotes free market competition by prohibiting any contract, trust, or conspiracy in restraint of interstate or foreign trade.
Americans with Disabilities Act
A civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public. Became law in 1990.
Steering
A form of racial discrimination where brokers or salespeople direct interested buyers away from or toward certain neighborhoods to control racial composition- for example, an agent that only shows minority buyers houses that are located in segregated areas. An agent should choose houses that he would show to a minority in the same way that he would choose houses for any other buyer.
Blockbusting
Discriminatory practice of trying to convince owners in a neighborhood to sell their homes because members of a minority group are moving into the neighborhood. This is a violation of state and federal laws, and is not the same as duress. May also be referred to as Panic Selling or Panic Peddling.
Panic Selling
Discriminatory practice of trying to convince owners in a neighborhood to sell their homes because members of a minority group are moving into the neighborhood. This is a violation of state and federal laws, and is not the same as duress. May also be referred to as Panic Peddling or Blockbusting.
Panic Peddling
Discriminatory practice of trying to convince owners in a neighborhood to sell their homes because members of a minority group are moving into the neighborhood. This is a violation of state and federal laws, and is not the same as duress. May also be referred to as Panic Selling or Blockbusting.
Redlining
Discriminatory practice of mortgage lenders in which they draw “red lines” around portions of a map to indicate areas or neighborhoods where they don’t want to make loans.
Specific Performance
Court order requiring a party to perform. In real estate, a buyer can force a seller to go through with the sale of property (according to a contract) when money is not sufficient compensation for a buyer. A broker cannot sue for specific performance.
Misrepresentation
A misstatement about some material feature of a property- for example, when a broker fails to address or reveal a material feature of the property entirely. Can be fraudulent, negligent, or innocent. Misrepresentation by a licensee can lead to disciplinary action, as well as potential civil and criminal suits.
Actual Fraud
An act intended to deceive another like making a false statement, making a promise without intending to perform it, or suppressing the truth- for example, a licensee who made a promise to advertise a property in a local newspaper, and then did not.
Constructive Fraud
A circumstance in which a person or entity gains an unfair advantage over another by deceitful or unfair methods. Intent does not need to be shown, as in the case of actual fraud.
Commingling
When personal funds are mixed with those of a client. It is illegal. By law, brokers must use a separate trust or escrow account for other people’s funds.
Puffing
Exaggerating the benefits or features of a property. It is recognized in law.
Caveat Emptor
Latin for “Buyer Beware”.
Valid Contract
The four elements of a contract that make it valid are Capable parties, Mutual consent, Consideration, and Lawful object. It does not necessarily have to be written to be valid, nor does it have to be performed to be valid.
Void Contract
A contract that lacks one of the four essentials.
Voidable Contract
A contract that can be rejected at a later date for a specific reason- for example, contracts signed under duress, contracts entered into with threat or menace, or contracts entered into with a minor.
Competent or Capable Parties
All parties entering into a contract must be “legally fit” (having the necessary age, ability, and authority to accomplish any given acts or duties) for the contract to be valid.
Mutual Consent
Also known as offer and acceptance or meeting of the minds, an agreement by the parties is necessary for the contract to be binding.
Consideration
An exchange of one or more items; “Sufficient”, “Valuable”, “Good”, and “Adequate” are all words that are often used to describe Consideration.
Lawful Object
A contract must be legal. If a contract has an illegal purpose, it is void.
