Module 3 Rights and Interest in Real Estate

Question 1

Identify distinction between freehold and leasehold estates

Answer 1

Freehold

• Full bundle of rights
• No limit to how long it lasts “Indetermined Duration”
• Fee simple
  
  • defeasible
  • leased fee interest
  • leasehold interest
• Life Estate

Leasehold

• “Defined duration”
• Possessory
• Includes the revision of possessory rights when lease terminate
  
  • Lessor
  • Lessee
  • Estate at will
  • Estate for years
  • Estate for period to period
  • Estate at sufferance

Question 2

Types of Leasehold Estates:

Estate at Sufferance

Answer 2

1) Created when tenant lawfully takes possession but stays after lease expires without consent of owner
2) Used to distinguish between (above) and a trespasser who never had permission to enter the land
3) Tenant has no current rights to possess the property, but owner must follow legal procedures for eviction

Question 3

Types of Leasehold Estates:

Estate at Will

Answer 3

1) Unspecified period of time, similar to a period to period except that it never originated with any specific term
2) Automatic renewal unless notice of termination is given
3) Terminates upon the death of landlord or tenant

Question 4

Types of Estates

Estate from Period to period

Answer 4

a) Tenancy is for an indefinite period of time with no specific expiration date. Notice must be given to terminate
b) Typically comes about as an extension or holdover from a tenancy for years. Original lease term was likely set as a month to month or some other period of time
c) For this type of extended tenancy, periodic renewal are automatic

Question 5

Types of Leasehold Estates (tenancies)

Estate for Years

Answer 5

a) Tenancy is for a definite or fixed period of time
b) Lease automatically terminates at expiration
c) Mutual consent required if either party wants to terminate before the end of the term (surrender)
d) Unless prohibited in the lease agreement, an estate for years is assignable by the tenant, tenant can sublease to another
e) Does not terminate upon death of landlord

Question 6

Characteristics of Freehold Estates

Answer 6

1) Present or future possession
2) Indeterminate Duration
3) Considered to be an ownership positon
* Possession is required to be considered free hold but can be present or future

Question 7

Types of Freehold Estates : Fee simple

Fee Simple Absolute (Inheritable)

Answer 7

Most complete form of ownership with unlimited duration and subject only to governmental powers

Question 8

Types of Freehold Estates : Fee simple

Fee Simple Defeasible (Inheritable)

Answer 8

Subject to the occurance of a specific event or non-occurance of a specific event.

Two types

1. Qualified by a special limitation
2. Subject to a condition subsequent

Question 9

Types of Freehold Estates : Fee simple

Leased Fee Interest (Inheritable)

Answer 9

An ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others

The rights of the lesso (leased fee owner) and the lessee are specified by contract terms contained within the lease

Question 10

Types of Freehold Estates

Life Estate (Non-Inheritable)

Answer 10

• Rights of use, occupancy and control limited to the life time of a designated party: Life Tenant
• Life tenant, one who owns an estate in real property for his or hoer own lifetime, the lifetime of another person or an indefinite period limited by a lifetime
• When life tenant dies estate reverts back to grantor
• Grantor has reversionary interest or future interest
• Life tenant can sell property but when they die property reverts back to grantor
• If grantor is already dead, property goes to a remainder interest designated by grantor called remainderman

Question 11

Recognize distinctions between liens and other types of encumbrances

Answer 11

• Liens are a monetary claim against property
• Encumbrance affects use or physical condition

“All liens are encumbrances; not all encumbrances are liens”

Question 12

Distinguish types of non-lien encumbrances

Answer 12

• Easements: Apputenant & Gross
• Encroachments
• Deed Restrictions (CC&R’s)
• Reservations
• Licenses

Question 13

Easement Appurtenant

Answer 13

This type of easement attaches to the land so that when
the property is sold it is transferred to the new owner. An
easement appurtenant burdens one property while
benefiting another property

Question 14

Dominant and Servient Estate in an Easement Appurtenant

Answer 14

The property that benefits from the easement is called the
dominant estate, while the property that is burdened by the
presence of the easement is called the servient estate. When
either property sells, the easement passes with the title transfer
because it is permanently attached to the property’s ownership

Question 15

Easement Appurtenant cont’d

Answer 15

The dominant estate is the “owner” of the easement

The dominant estate is the land parcel to which the easement is attached

It is not attached to the servient estate, but instead burdens the servient estate

Question 16

Easement in Gross

Answer 16

This easement is personal in nature and does not have a servient or dominant estate, but it does burden the servient estate. Easements in gross are generally retained by a governmental entity at the federal, state or local level.

example, drainage and utility easements

There is no dominant estate

The “owner” of an easement in gross is a person or entity
often a public body or governmental agency.

It is not attached to any land, but burdens the parcels subject to the easement in gross.

Question 17

Encroachment

Answer 17

Trespassing on the domain of another. Occurs when a portion of an improvement extends beyond the site boundary of it’s owners land.

• Most encroachments are unintentional
• May reduce the value, use or enjoyment of the property that has been intruded upon.
• If left unresolved could mature into an easement by prescription

Question 18

Deed Restriction

Answer 18

a provison written into a deed that limits the use of land.
usually remain in effect when the title passes to subsequent owners

Types of use (Residential, multi family etc)
Types of construction (brick exterior, wood)
Size of buildings (minimum or maximum)
Prohibited Practices (parking RVs, building fences)

Question 19

Reservations

Answer 19

encumbrances that are used by the grantor or the government, to set aside certain rights that do not transfer with an ownership change of the property. For example, the government will typically reserve the mineral rights in the original land grant, so that would be a reservation. While title passes to the grantee, some uses or income is reserved for the grantor, like mineral rights, rental income,or easements

Question 20

Licenses

Answer 20

not encumbrances because they involve a personal agreement that is not attached to the land. However, because they involve property issues, they are sometimes mistaken as an encumbrance

1. Revocable oral or written agreement granting privilege to use property
2. Not an estate or an interest in land (thus not an encumbrance)
3. Not assignable and cant be sold
4. A personal agreement usually granted for a specified period of time

Question 21

Estates in land can be broken down into which two categories? 
A) Freehold and leasehold
B)	Fee simple and life
C)	Riparian and littoral
D)	Suprasurface and subsurface

Answer 21

A) Freehold and leasehold

Feedback: Correct. See page 33 of your Course Handbook and the online content under the heading of Estates in Land.
Freehold and leasehold are the two legal categories of estates.

Question 22

What is a tenancy (also known as an estate) in which a lessee remains in possession of the property without the lessor's consent?
A)	Tenancy for years
B)	Tenancy from period to period
C)	Tenancy at sufferance
D) Tenancy at will

Answer 22

C) Tenancy at sufferance

Feedback: Correct. See page 38 of your Course Handbook and the online content under the heading of Leasehold Estates. This type of tenancy helps to distinguish a tenant from a trespasser (i.e., someone who never had permission to enter the land).

Question 23

Which of the following is NOT a characteristic of a freehold estate?
A)	Ownership
B)	Defined duration
C)	Present or future duration
D)	Indeterminate duration

Answer 23

B) Defined duration
Feedback: Correct. See page 33 of your Course Handbook and the online content under the heading of Estates in Land. A freehold estate has an indeterminate duration.

Question 24

The remainder interest in a life estate is also known by what term or phrase?
A)	The grantor
B)	The life tenant
C)	The reversionary interest
D)	The remainderman

Answer 24

D) The remainderman

Feedback: Correct. See page 35 of your Course Handbook and the online content under the heading of Estates in Land. After a life estate ends it goes back to the grantor, or the grantor has passed away, the estate goes to the Remainderman (also known as the remainder interest).

Question 25

Neighborhood owners have been upset since a privately owned airport opened a new east-west runway and air traffic over their neighborhood has significantly increased The subdivision was originally purchased and subdivided nine years ago from a surplus of land previously owned by the airport. The owners are now researching their property rights to put an end to the noisy situation, but they will likely discover that the rights to the airspace over their neighborhood are owned by the airport due to:

A) A right of way easement retained by the airport.
B) A license agreement that was retained by the airport.
C) An airspace reservation in the original land grant that was included with each property’s conveyance.
D) An avigation easement retained by the airport.

Answer 25

C) An airspace reservation in the original land grant that was included with each property’s conveyance.

Feedback: Correct. See page 43 of your Course Handbook and the online content under the heading of Encumbrances. The airport set up a reservation to allow it to use the airspace above the neighborhood. Thus, the right to the airspace did not transfer with the properties at the time of sale. The federal government generally reserves air rights in the land grant.

Question 26

Hooper gave permission to a nearby business neighbor to place a sign on his corner property to advertise the neighbor’s liquidation sale. What has Hooper given his neighbor?

A) A license
B) An estate
C) A personal easement in gross
D) A partial interest in his property

Answer 26

A) A license

Feedback: Correct. See page 43 of your Course Handbook and the online content under the heading of Encumbrances.
A license is not an encumbrance and it does not create an estate in land. A license is a personal agreement between a property owner and an outside party for a specified period of time.

Question 27

In order to make his retirement community more picturesque and to add to the site values, the developer of Reed Lake Subdivision placed a wide, shallow lake in the center of his development. However, the developer wanted no docks to be permitted on the sites that front the lake. What is the best way for the developer to limit the future owner’s rights in the development and keep the lake free of boat docks?

A) Obtain a license to restrict the use of the water frontage.
B) Create an easement to restrict the construction of docks on any of the lakefront properties.
C) Create an encroachment to restrict the construction of docks on any of the lakefront properties.
D) Incorporate a deed restriction to control the construction of docks on any of the lakefront properties.

Answer 27

D) Incorporate a deed restriction to control the construction of docks on any of the lakefront properties.

Feedback: Correct. See page 43 of your Course Handbook and the online content under the heading of Encumbrances. A deed restriction, also known as a restrictive covenant, prohibiting the construction of docks would make it illegal for anyone to build in this manner. Furthermore, this restriction would apply to the entire subdivision and transfer each time the properties sell.

Question 28

Jerald and Cindy inherited her grandmother’s home which includes both a large two-story one-unit dwelling and an additional rental property located behind the main house on the same lot. Access to the rental property requires the use of the driveway of the primary residence. They would like to sell off the rear portion of the site with the rental dwelling, but the new owner needs access by using their driveway. What type of encumbrance is needed to resolve this issue?

A) A lien.
B) An easement appurtenant.
C) encroachment reservation. D) An easement in gross.

Answer 28

B) An easement appurtenant.

Feedback: Correct. See page 40 of your Course Handbook and the online content under the heading of Encumbrances. An easement appurtenant would allow Jerald and Cindy to retain ownership of their driveway while giving street access to the rear property. If either property sells in the future, the driveway easement will continue to apply to the properties.

Question 29

Which of the following statements is correct?
A) All liens are encumbrances; not all encumbrances are liens
B) All encumbrances are liens; all liens are encumbrances
C) All encumbrances are liens; not all liens are encumbrances
D) Not all liens are encumbrances; not all encumbrances are liens

Answer 29

A) All liens are encumbrances; not all encumbrances are liens
Feedback: Correct. See page 39 of your Course Handbook and the online content under the heading of Encumbrances. Encumbrances fall under two categories; liens and encumbrances. Therefore all liens are encumbrances, but there are also non-lien encumbrances.