Real Estate Interests - Part 1 - Chapters 3-4

Question 1

Distinguish between personal property and real estate

Answer 1

Property is divided into two primary categories:
* real estate and
* personal property - chattel moves like cattle
Real estate is immovable where as personal property is movable.

The right to possess and use property includes the right to:

• occupy the property.
• sell the property.
• lease the property.

Question 2

Comprehend the physical characteristics of real estate

Answer 2

The physical components of real estate include:

• the land
• anything affixed to the land
• anything appurtenant (incidental rights in adjoining property) to the land and
• anything which cannot be removed from the land by law.

Real estate includes buildings, fences, trees, water courses and easements within a parcels horizontal and vertical boundaries. Anything below the surface, such as water and minerals, or above the surface in the airspace, such as crops and timber, is a part of the real estate.

Question 3

Understand a property’s appurtenant and riparian rights

Answer 3

Water in its natural state is considered real estate since it is part of the material of the earth. While water is real estate, the right to use water is an appurtenant (incidental) right to the ownership of real estate. THREE key rights in water need to be separately understood:

• the right to use water
• the right to take water by appropriation rights and
• the right to take water by prescriptive rights.

The first component of real estate is land, which includes materials of Earth and reasonable air space above the Earth. Oil and gas are incapable of being owned until they are actually possessed. Once they have been removed, they become personal property. While water is considered real estate, the right to use water is appurtenant (incidental) right to the ownership of Real Estate.

Incidental property rights are those rights that are said to be “attached” to the land. As such, they will pass from to the recipient when the land is conveyed, unless the grantor indicates otherwise.

Appurtenance is a legal term denoting the attachment of a right or property to a more worthy principal. Appurtenance is a noun; describing an item that is attached to something. An appurtenance can be something tangible like a tree, barn, water tank, or something abstract such as an easement.

Question 4

Determine whether an item is a property fixture or trade fixture

Answer 4

Real estate also includes objects which are affixed to the land, such as fixtures. A fixture is personal property which has become permanently attached to real estate and is conveyed with it. Fixtures which are used to render services or make products for the trade or business of a tenant are trade fixtures. Trade fixtures are removed by the tenant on termination of the tenancy, unless agreed to the contrary with the landlord or the removal will cause undue damage to the real estate.

Question 5

appurtenant rights

Answer 5

APPURTENANT RIGHTS are incidental property rights which are not located on a parcel of real estate nor reflected on its title, including the right of Ingress and egress across adjoining properties.

Real estate also includes incidental rights, such as an appurtenant easement held by an owner of one parcel of real estate to use adjoining real estate.

Appurtenant rights held by an owner of one property are a recorded encumbrance on title to the adjacent property burdened by the appurtenant rights, such as an easement.

Question 6

common interest development (CID)

Answer 6

A COMMON INTEREST DEVELOPMENT (CID) is condominium projects, cooperatives or single-family residences in a planned unit development. In the case of a condominium unit, the air space enclosed within the walls is the real estate.

Question 7

lien

Answer 7

A LIEN is an interest in real estate which secures payment or performance of a debt or other monetary obligation.

Question 8

personal property

Answer 8

Property is divided by types into two primary categories

• REAL ESTATE, also called real property or Realty and
• PERSONAL PROPERTY, also called personalty.

REAL ESTATE is land and anything permanently affixed or appurtenant to it. Real Estate is characterized as IMMOVABLE.

Personal property is defined as MOVABLE property not classified as part of real estate, such as trade fixtures.

Question 9

real estate

Answer 9

Property is divided by types into two primary categories

• REAL ESTATE, also called real property or Realty and
• PERSONAL PROPERTY, also called personalty.

REAL ESTATE is land and anything permanently affixed or appurtenant to it. Real Estate is characterized as IMMOVABLE.

Personal property is defined as MOVABLE property not classified as part of real estate, such as trade fixtures.

Question 10

profit a prendre

Answer 10

PROFIT A PRENDRE is the right to remove minerals from another person’s real estate.

Question 11

riparian right

Answer 11

RIPARIAN RIGHTS are the rights of a real estate owner to take surface water from a running water source contiguous to their land. The right to use water is called a riparian right.

Question 12

appropriation right

Answer 12

APPROPRIATION RIGHTS is the right to divert water from a river or Watercourse to real estate for reasonable use. the right to take water may be acquired by appropriation. The appropriator of water diverts water from a river or Watercourse to their real estate for reasonable use.

Question 13

prescriptive right

Answer 13

PRESCRIPTIVE RIGHTS are the rights to use water established by appropriating non surplus water openly and adversely for an uninterrupted period of five years without documentation of a legal right.

Question 14

fixture

Answer 14

A FIXTURE is personal property permanently attached to real estate and conveyed with it. As it is permanently attached, it effectively becomes part of the real estate and is conveyed with it. Fixtures maybe be attached by bolts or screws or concrete, but also items that are heavy or sizable where gravity keeps them in place give them a character of permanence and affixation to be real estate.

Question 15

trade fixture

Answer 15

TRADE FIXTURES are fixtures used to render services or make products in the trade or business of a tenant. Trade fixtures are considered personal property.

Question 16

Identify the different possessory interest held in real estate, and the rights and obligations associated with each.

Answer 16

The ownership interest a person may hold in real estate are called Estates. Four types of Estates exist in real estate:
* Fee Estates, aka fee simple, inheritance estates, perpetual estates or ‘the fee’
* Life Estates
* Leasehold Estates, sometimes called Leaseholds, or estates for years
Estates at Will - aka Tenancies at Will is a leasehold estate

In practice, these estates are separated into THREE CATEGORIES:

• Estates,
• Life Estates and
• Leasehold Estates.

ESTATES AT WILL are considered part of the Leasehold Estates category. Leasehold Estates are controlled by landlord tenant law.

Question 17

Distinguish the individual rights which collectively comprise real property.

Answer 17

An easement is a right to use another’s property for a specific purpose. An easement is an interest in someone else’s real estate, as it grants its holder the right to limit the activities of others on the property which is burdened by the easement.

A license grants its holder a personal privilege to use another’s property, but no right to occupy it to the exclusion of anyone.

Question 18

Identify the different types of leasehold interests held by tenants.

Answer 18

FOUR TYPES of LEASEHOLD ESTATES exist and maybe held by tenants. The interests are classified by the length of their term:

• Fixed Term Tenancy, simply known as a lease and legally called an Estate for “a Year” Years
• a Periodic Tenancy, usually referred to as a rental
• a Tenancy at Will, previously introduced as an Estate at Will and
• a Tenancy at Sufferance, commonly called a holdover tenancy

A fixed term tenancy last for a specific length of time as stated in a lease agreement entered into by a landlord or tenant. On expiration of the lease term, the tenants right of possession automatically terminates unless it is extended or renewed by another agreement.

Periodic tenancy also last for a specific length of time, such as a week, month, or year. Under a periodic tenancy, the landlord and tenant agree to automatic successive rental periods of the same length of time, such as in a month-to-month tenancy, until terminated by notice by either the landlord or the tenant.

Under a tenancy at will, the tenant has the right to possess a property with the consent of the fee owner. Tenancies at will maybe be terminated at any time by an advance notice from either the landlord or the tenant or as set by agreement. Tenancies at will do not have a fixed duration and are usually not in writing. A rent obligation typically does not exist.

A tenancy at sufferance occurs when a tenant retains possession of the rented premises after the tenancy granted terminates.

Question 19

Understand leasehold interest which conveys special rights, such as a ground lease, Master Lease or sublease

Answer 19

In addition, several special-use leases exist, including ground leases, Master leases and subleases.

Question 20

covenants, conditions and restrictions (CC and ours)

Answer 20

COVENANTS, CONDITIONS, RESTRICTIONS (CCRs) are recorded restrictions against the title to real estate prohibiting or limiting specific uses of the property. CCRs are collectively called encumbrances and are recorded against title to a property and limit an owners right to use their property.

Question 21

Profit a prendre

Answer 21

PROFIT A PRENDRE is the right to remove minerals from another’s real estate. If the profit a prendre is created by a lease agreement, it is a type of easement.

Question 22

estate

Answer 22

An ESTATE is the ownership interest a person may hold in real estate.

Question 23

fee estate

Answer 23

A FEE ESTATE is an indefinite exclusive an absolute legal ownership interest in a parcel of Real Estate. A person who holds a fee estate interest in real estate is a fee owner. A fee owner has the exclusive right to use and enjoy the property.

Question 24

life estate

Answer 24

A LIFE ESTATE is an interest in a parcel of real estate lasting the lifetime of the life tenant. Life Estates are granted by a deed entered into by the fee owner, and executor under the owners will or by a trustee under the owners inter vivos Trust. Life Estates are commonly established by a fee owner who wishes to provide a home or Financial Security for another person (hear the life tenant) during that person’s lifetime, called the controlling life.

Life estates terminate on the death of the controlling life. On the relative’s death, possession of the property reverts to the fee owner, their successors or heirs. The right of possession under the life estate is extinguished on the relative’s death. A life estate does not require rent to be paid. However the holder of a life estate is responsible for taxes, maintenance and a reasonable amount of property assessments.

Question 25

leasehold estate

Answer 25

A LEASEHOLD ESTATE is the right to possess a parcel of real estate, conveyed by a fee owner (landlord) to a tenant. Tenancies are created when the landlord and the tenant enter into a rental or lease agreement that conveys a possessory interest in the real estate to the tenant. The tenant becomes the owner of a leasehold with the right to possess and use the entire property they lease until the lease expires. In exchange for conveying the right to occupy and use the property, the landlord is entitled to rental income from the tenant during the period of tenancy.

Question 26

fixed term tenancy

Answer 26

A FIXED TERM TENANCY is a leasehold interest which lasts for the specific lease period set forth in a lease agreement. A fixed term tenancy automatically terminates at the end of the lease period. A fixed term tenancy is simply known as a lease and legally called an estate for years.

Question 27

periodic tenancy

Answer 27

A PERIODIC TENANCY is a leasehold interest which lasts for automatic successive rental periods of the same length of time, terminating upon notice from either party. Example of a periodic tenancy is a month-to-month tenancy or rental.

Question 28

tenancy at will

Answer 28

A TENANCY AT WILL is also known as an estate at will, is a leasehold interest granted to a tenant, with no fixed duration or rent owed. A tenancy at will can be terminated at any time by an advance notice from either party.

Question 29

tenancy at sufferance

Answer 29

A TENANCY AT SUFFERANCE is a leasehold condition created when a tenant retains possession of the rented premises after the tenancy has been terminated.

Question 30

ground lease

Answer 30

A GROUND LEASE is a leasehold interest for which rent is based on the rental value of the land, whether the parcel is improved or unimproved. Fee owners of unimproved land use leases to induce others to acquire an interest in the property and develop it. Ground leases are common in densely populated areas. Developers often need financial assistance from fee owners to avoid massive cash outlays to acquire unimproved parcels.

Question 31

master lease

Answer 31

A MASTER LEASE is a leasehold interest granted to a Master tenant with the right to sublease the property in exchange for rent paid to the fee owner. The Master Lease is sometimes called a sandwich lease since the master tenant is sandwiched between the fee owner (the landlord on the Master Lease) and the many sub tenants with their possession under subleases. The Master Lease is a regular, non residential lease agreement form with the clauses prohibiting subletting removed.

Question 32

sublease

Answer 32

A SUBLEASE is a leasehold interest subject to the terms of a Master Lease. A sublease is also a regular, non residential lease agreement with an additional Clause referencing the attached Master Lease and declaring the sublease subject to the terms of the Master Lease.

Question 33

easement

Answer 33

An EASEMENT is the right to use another’s property for a specific purpose. EASEMENTS and USE LICENSES are not real estate, but they give a holder of the rights a LIMITED and NONEXCLUSIVE USE of someone else’s property.

An easement is the EXCLUSIVE RIGHT to use another’s property for a specific purpose. An easement is an interest in someone else’s real estate, as it grants is holder the right to limit the activities of others on the property which is burdened by the easement.

For example a landholder holds an easement allowing them to construct and have access to a pipeline across their neighbor’s property. The neighbors right to develop their own property is limited since they may do nothing to interfere with the easement owners access to the pipeline.

Question 34

license

Answer 34

A LICENSE is the personal, unassignable right held by an individual to the non-exclusive use of property owned by another. A license grants its holder a personal privilege to use another’s property, but no right to occupy it to the exclusion of anyone. Unlike easements, licenses are not exclusive rights - an owner may give many licenses to perform the same or different activity in the same area, such as advertising with billboards. Unlike an easement, a license may be revoked at the will of the person who grants it, unless agreed to the contrary or it has become irrevocable.

A(n) ___license_____ grants its holder a nonexclusive PERSONAL privilege to use property.