Interest in Real Estate Flashcards
Freeholds
Refers to Ownership (maximum rights to)
Interest in Real Estate
- Refers to the extent of someone’s claim to real estate
- having an interest in real estate doesn’t mean you own it, just means you have the right to the property
Fee Simple Absolute
-Default ownership
-Not in any way limited; and is inheritable
- owner is entitled to the whole rights to property
Limitations are only in public vs private restrictions (e.g. zoning, building codes)
Fee Simple Defeasible
- Grant of title dependent on a specific condition
- Ownerships is an interest that is limited in some way
- Can be lost if the limitation is violated
- Holder of reversionary interest would have the right and acquire title if a condition is
broken
What are the three types of defeasible interests?
- Fee simple determinable
- Fee Simple Subject to a Condition Subsequent
- Fee Simple Subject to an Executory Limitation
Fee Simple Determinable
Automatically lost when a limitation is violated
Fee Simple Subject to a Condition Subsequent
Lost when legal action is brought due to the violation
Fee Simple Subject to Executory Limitation
Same as fee simple, where property is lost due to a violation of limitation, subject to a condition subsequent except the property would be transferred to the third party named by the grantor, rather than back to the original grantor themselves
Life Estate
- A freehold interest
- Only exists if the owner is alive
- life tenant’s deed will state who receives the life estate upon death
-Remainder of interest gets transfers as a fee simple absolute estate at death
Life Estate Reversion
When the life tenant dies, the legal title will transfer back to the original granter
Life Estate Remainderman
A life tenant dies -> legal title will transfer to some third party named by the grantor
Pur Autre Vie
When the estate ownership is based on a third parties term of life, named by the grantor
Legal life Estate
Often in cases with dowers rights (where surviving husband or wife is granted a life estate for real property that was not will to them but that was owed by their spouse tine o death. typically 1/3rd of interest.
Co-Ownership
Any freehold interest (ownership) shared by two or more persons, including corporations Types: 1. Tenancy in Common 2. Joint Tenancy 3. Tenancy by Entirety 4. Condominiums 5. Cooperatives 6. Trusts 7. Timeshares
Tenancy in Common
- default form of co-ownership
- co-owners who purchase property without specifying a type of ownership own in common
- Inheritable
Joint Tenancy
Co-ownership must be chosen by all co-owners and specified in the deed
- Not inheritable
- Survivorship is created
- Equal right of possession, purchase the property at the same time
- Can be terminated by agreement (voluntary partition), court action, or death of all joint tenants
- If one tenant survives then surviving owner owns in severalty
Tenancy by the Entirety
Joint tenancy for married couples.
includes creditor protections: a limitation on the forced sale of the property to satisfy the debts of one spouse only
- If a couple divorces defaults back to tenancy in common
- Community property states - during the marriage cannot be sold or devised w/out consent of both spouses
Condominiums
- Subdividing a building into separate unites
- Creating fee simple ownership of the individual units
- Each condo owner owns their unit via unit deed, share of the common areas in proportion to unit’s fair market value
- Tenants in common
- Master deed is created = describes how the building and condo homeowners will be set up
-Declaration of trust set up
-Bylaws of associates are rules of building
Also known as a condo conversion
What does a condo fee include
Owners responsibility for their proportionate share of common area expenses
-Owners who fail to pay fee risk of foreclosure
What are the common problems with condo’s to watch out for?
- Special assessments
- a lack of capital reserves (money held in a reserve fund account by condo associations and investors to pay for property improvement)
- Low owner occupancy rates
Cooperatives
A company (usually LLC) formed for the limited purpose of providing housing to its shareholders. -people in building own shares in the company (stock certificates)which then gives them a right to proprietry lease
Trusts
Created during a person’s life or upon their death. Trustor (person creating trust) conveys property to a trustee who cares for the assest on behald of the beneficiaries (the people who recieve money from the trust
Timeshares
A way of dividing time, rather than space, in the property. Timeshares or timesharing is a form of ownership where the owner only owns a specific part of the year in fee simple, along with a shared interest in the common areas.
Securities
Investments (e.g stocks and bonds).
What are the different types of securities:
Syndications
General Partners (management role) or Limited Partner (passive investors who do not have a management role)
REITs (Real Estate Investment Trusts
REMIC (Real Estate Mortgage Investment Conduits)
REMTs (Real Estate Mortgage Trusts)-
Why are we concerned with these investments(securities)?
A person must have a securities license to market and sell interest in an investment vehicle
Non-Freeholds
Interest confer the possession and uses of someone’s real property without transferring ownership
An example in a rental lessor is the landlord and the lessee is the tenant
Syndications
- legal entities that invest in a single piece or pieces of real estate
- Either General Partners or limited partners (passive investors)
REITS
Real Estate Investment Trusts
REMIC
Real Estate Mortgage investment conduits
REMT
Real Estate Mortgage Trusts
REITS AND REMIC
Allow indirect investment in real estate or real estate loans and provide a return based on performance.
Non-Freeholds
Confer the possession and use of someone’s real property without transferring ownership (example renter)
Leaseholds
Witten conveyance of the possession real estate for a period of time
Tenancy at Will
A verbal or written right to possess property wihtout any specifica term or stated interval
Periodic Tenancy
right to possess the property with fixed intervals
Lessor
the landlord
Lessee
the tenant
Non-Freehold Interest
Severalty
A free hold interest (ownership) held by only one person. Its roots are severed; severed from any co-owners
Master Deed
A document that creates a condominium and defines individual units and common areas
Which of the following is inheritable? A. Tenancy in common B. Tenancy by the entirety C. Life Estate in reversion D. life estate in remainder
A. Tenancy in common
