Level 2 Chapter 1: Estates Flashcards
Estate
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.
Freehold Estate
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.
Possessory
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!
Non-possessory
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.
Leasehold Estate/Leasehold Interest
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.
Freehold Tenant
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.
Fee Simple Estate
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.
Life Estate
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).
Absolute Estate
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.
Defeasible Estate
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.
Encumbrance
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.
“Fee Simple” Determinable Estate (Defeasible)
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.
“Fee Simple” Condition Subsequent Estate (Defeasible)
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.
Life Estate
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).
Reversionary Interest
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.
