Level 2 Chapter 1: Estates

Question 1

Estate

Answer 1

The degree, quantity, nature, and extent of interest a person has in real property. It can be categorized into freehold estates, like fee simple and life estates, which involve ownership, and leasehold estates, which involve renting or leasing.

Question 2

Freehold Estate

Answer 2

Can be further divided into fee simple and life estates. Fee simple estates can be absolute or defeasible, while life estates can be conventional or legal.

Question 3

Possessory

Answer 3

An interest in property that includes the right to possess and occupy the property, either now or in the future. For example, owning a home grants a possessory interest in that property.
Example: Farmer Frank has a possessory interest in his squash farm, but the county has a non-possessory interest – in the form of an agricultural conservation easement – that prevents him from building condos on the land. Not that he would ever do that! He loves growing squash!

Question 4

Non-possessory

Answer 4

Interest in property does not include the right to possess or occupy the property. Instead, it involves the right to restrict the use of the property. Examples include encumbrances, easements, and restrictive covenants. For instance, a county might have an agricultural conservation easement on a farm, preventing the owner from building on the land.

Question 5

Leasehold Estate/Leasehold Interest

Answer 5

An interest in the occupation of a property established through a lease. It allows a tenant to occupy a property they don’t own for a specified period, unlike freehold estates which include ownership and are of indefinite duration.

Question 6

Freehold Tenant

Answer 6

The owner of a freehold estate. This individual has some degree of ownership for an undetermined or unlimited period of time. Depending on the type of freehold estate, the freehold tenant may also have the right to convey or dispose of the interest they own.

Question 7

Fee Simple Estate

Answer 7

Type of freehold estate. Grants the most unlimited, absolute interest in real property. It is of indefinite duration, freely transferable, and inheritable. This type of estate provides full ownership rights, allowing the holder to use, occupy, and dispose of the property as they see fit. Most residential properties are owned this way.

Question 8

Life Estate

Answer 8

Type of freehold estate limited to the duration of a measuring life, which could be the life of the tenant or another person. The life tenant enjoys full ownership rights for the duration of the measuring life. Upon the measuring life’s end, the estate either reverts to the original owner (reversionary interest) or passes to another party (remainder interest).

Question 9

Absolute Estate

Answer 9

An estate without restrictions that is freely given to heirs (this is the most common type of residential real estate). This is also called a fee title estate.

Question 10

Defeasible Estate

Answer 10

Also called fee simple defeasible. An estate characterized by perpetual ownership on the condition that the property is used for a certain purpose or under specific conditions. Ownership reverts back to the original owner if these stipulations are violated, but the condition runs with the land. This is also called a qualified fee estate. Defeasible is a term used to indicate that something is capable of being annulled or made void. 2 Kinds: Determinable and condition subsequent.

Question 11

Encumbrance

Answer 11

Non-possessory interest in a property that burdens the title. It affects the property’s clear title and may limit the owner’s use of the property. Encumbrances are attached to the title, not the owner, and can transfer with the deed or ownership. Examples include easements, liens, and zoning restrictions.

Question 12

“Fee Simple” Determinable Estate (Defeasible)

Answer 12

Where the title automatically reverts to the original owner if the deed’s property use requirements are violated. The estate ends immediately upon the occurrence of a designated event, with no legal action required by the grantor. For example, land granted for religious purposes reverts if used otherwise.

Question 13

“Fee Simple” Condition Subsequent Estate (Defeasible)

Answer 13

Type of defeasible fee estate that comes with specific conditions. If these conditions are violated, the grantor must prove the violation in court to reclaim the property. Unlike a fee simple determinable estate, the change of ownership is not automatic.

Question 14

Life Estate

Answer 14

A type of freehold estate limited to the duration of a measuring life, which could be the life of the tenant or another person. The life tenant enjoys full ownership rights during this period. Upon the measuring life’s end, the property either reverts to the original owner (reversionary interest) or passes to another designated party (remainder interest).

Question 15

Reversionary Interest

Answer 15

Future possessory interest retained by the original owner or their heirs after granting a life estate to another person. Once the life estate ends, the property reverts back to the original owner or their heirs. For example, if Hal grants a life estate to Sandra, the property will revert to Hal or his heirs after Sandra’s death.

Question 16

Remainder Interest

Answer 16

Future interest in an estate that will pass to another party (other than the grantor) upon the death of the person upon whom the life estate is based. The recipient of this future interest is known as the remainderman. For example, if Benjamin grants a life estate to his grandmother Diana, and designates Creed to receive the estate after Diana’s death, Creed holds the remainder interest.

Question 17

Act of Waste

Answer 17

Occurs when a life estate tenant does something that diminishes the value of the property, thereby encroaching on the future rights of the remainderman. This can include actions like destroying structures or neglecting maintenance, and the tenant can be held liable for such actions.

Question 18

Conventional Life Estate

Answer 18

Type of life estate, created by property owners through a grant. 2 types: Ordinary and Pur autre vie

Question 19

Ordinary Conventional Life Estate

Answer 19

A life estate in which the measuring life is that of the life tenant. It is an estate created by a deed that lasts for the duration of the tenant’s life.

This is often referred to simply as a conventional life estate and is not always called an ordinary conventional life estate

Example:Timmy has a fee simple estate and conveys the estate to Jody for Jody’s lifetime. Jody is the life tenant and his life is the measuring life. Upon Jody’s death (moment of silence, please), the life estate terminates. Ownership of the property is passed on to Breck, as dictated in the estate’s deed.

Question 20

Pur Autre Vie Conventional Life Estate

Answer 20

French for “life of another.” A life estate in which the measuring life is someone other than the tenant. So for example, it could be life of the grantor, or the life of a person the tenant is taking care of. When the measuring life ends, the estate is returned to the original grantor or passed on to some other designated person according to the provisions of the conventional life estate.

Question 21

Legal Life Estate

Answer 21

Life estates mandated by legal action (state law). Main objective is to look out for a deceased person’s survivors. 3 types: Homestead, Dower and Curtesy, and Elective Share

Question 22

Homestead Laws

Answer 22

State laws that prevent a person’s primary residence from being forcibly sold to pay certain kinds of debts, or to give a surviving spouse a home if one spouse dies and leaves debt behind. Primary residences with associated debts are exempt from being required to be sold to pay for debts IF: - The family lives in the homestead. - The property is NOT sold or abandoned.

The estate can be conveyed to pay the debt if both spouses agree on conveyance. The debt exemption lasts for the duration of the life of the head of house (and then passes to the children, etc.).

The exemption may be automatic or owners may need to ask for it, depending on the situation.

Note: Not all debts are exempt under homestead laws. A primary residence can still be forcibly sold to satisfy tax, seller financing, home improvement, and mortgage debts.

Question 23

Dower and Curtesy

Answer 23

Refer to the right of a spouse to inherit a portion of the property held in their spouse’s name after that spouse dies; dower is the word used for women, curtesy for men. Traditionally, dower existed to give women the ability to retain part of their deceased spouse’s estate, even when it wasn’t legal for women to own property. It also gave living spouses claim to part of their deceased spouse’s estate even if they weren’t granted a portion in the will (you can’t cut a spouse out of your will even if you want to.) Laws varied by municipality, but typically a spouse could claim 1/3 of an estate, and surviving children would get the other 2/3. They are no used anymore in Pennsylvania.

Question 24

Elective Share

Answer 24

State laws that let a spouse make a claim to their deceased spouse’s property, despite what is in the will. The surviving spouse has to make a claim to the property and often gets a percentage of the value. If no claim is made, the estate passes per the will or other applicable law. Surviving spouses are eligible to get a percentage of their dead spouse’s property, even if they were not included in the will, IF the surviving spouse makes a claim on time (if they don’t, the estate goes to legal heirs).