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).
