Real Property Ownership Flashcards
Possessory interest
Gives a person the right to occupy a property. (ownership interest that comes with the full bundle of rights, or it could be the possessory interest a renter has in their rental property)
Non-possessory interest
gives someone the right to exercise some amount of control over the property without actually possessing it. (comes in the form of easements, liens (including mortgages), and the gov public interest in land.
For example, the city can set zoning regulations that prevent a homeowner from building a 20-foot-high Pikachu statue in their yard, but the city can’t come and live in that Pokemon trainer’s home. The government influences what happens on the property, but they don’t have possession of it.
Leasehold estate
occurs when the estate-holder has a lease.
Freehold Estates
a type of property where you own exclusive rights to the property for an indefinite or undefined length of time
Freehold tenant
The owner of a freehold estate. Depending on the type of freehold estate, the freehold tenant may also have a right of disposition, or right to convey, the interest they own.
What are the two basic types of freehold estates
Fee simple estate and life estate
Fee Simple Estate (fee interest or simply fee estate)
grants the most unlimited, most absolute interest in real property. This means there are no conditions on the title
Indefinite duration
Freely transferable
Freely inheritable
When a grantor conveys a fee simple estate, the grantor conveys (to the grantee) full ownership of a property for the grantee’s lifetime
An estate in fee simple is the highest or fullest type of interest in real estate recognized by law. It is one in which the holder is intitled to the full bundle of rights to the property. It can also be descend to heirs.
Most people who own a home own it this way it’s the most common estate for your average homeowner.
What is absolute free simple estate
that person has the absolute right to use the land, possess it, dispose of it, and even damage it.
Defeasible fee simple estate
is 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. also called qualified fee estate.
So, defeasible estates are any estates conveyed by a grantor with conditions that if violated could make them null or void.
If it’s a defeasible estate the condition that is placed on the estate is called what?
Encumbrance is the condition placed on the estate and the encumbrance runs with the land
encumbrance is a non-possessory interest in a property that burdens the title
to run with the land means that the condition is attached to the property, not the owner. if the property is sold, the condition will apply to the next owner, too.
Encumbrance
is the condition placed on the estate and the encumbrance runs with the land
Just think of an encumbrance as a restriction or limitation on a property that might be annoying or limiting to an owner.
Scenario: Defeasible Fee
Scenario: Defeasible Fee
Let’s say Geraldine has a possessory interest in a property as a fee simple defeasible estate (meaning Geraldine owns the property). However, Geraldine’s Uncle Hoover is the one who granted the estate. When he did this, he attached the condition that Geraldine could own the property ONLY IF she cared for his 237 cats.
This condition, or encumbrance, is not a personal vendetta against Geraldine. Uncle Hoover just wants to make sure his cats are cared for. The condition is an encumbrance: It runs with the land and it is from a non-possessory interest (Uncle Hoover doesn’t own the land).
What are the two kinds of Defeasible Estates
Determinable and Condition Subsequent
A fee simple determinable estate
is type of fee simple defeasible estate which causes the title to automatically revert to the original owner if the deed requirements are violated
The estate will come to an end automatically and immediately upon the occurrence or a designated event
The time of the occurrence is uncertain (because the occurrence depends on an action, not a date).
No legal action is required of the grantor in order to assume recovery of this kind of estate
n easy way to remember this key term is by focusing on the word “determinable.”
It’s determined that ___ will regain the property if ___ happens.
Fee simple condition subsequent estate
this is the same as a determinable estate in that it comes with specific requirements
but the grantor of the estate must prove in court that the defeasible fee estate condition has been violated. this must happen within a certain time frame
Once the court is satisfied with a n established condition violation, the grantor can exercise their “right of reentry”, which is the right to retake possession of the property.
Life Estate
A life estate is so named because it is limited to the duration of a measuring life (this may be the life of the tenant or recipient of the life estate)
The life tenant enjoys the full bundle of rights of ownership but they do so only for duration of the measuring life
Life estates can be created by private parties or by law (under specific circumstances)
Life estate create a future interest for the person next in line to receive title to the property
These future interest can be reversionary interests or remainder interests
What is Reversionary interest
the property reverts back to the person who granted it in the first place once the life estate’s measuring life ends.
This may also be referred to as a right of reverter
Remainder interest
is if a life estate is designated to pass son to someone other than the person who created it the grantor after the measuring life ends, the person who will someday inherit the estate has a remainder interest in it. The recipient of the future remainder interest is referred to as the remainderman.
Act of Waste
While life estate tenants (like the ones in the examples we just went over) are entitled to the bundle of rights (of ownership), including both possession and the ordinary use and profits arising from ownership, their rights are not absolute. They must take care that the exercise of their present rights do not encroach on the future rights of the remainderman.
If the life tenant were to do anything to diminish the value of the property, they would be committing an act of waste, for which they could be held liable.
Conventional life estate
any life estate created by property owners through a grant
Legal life estate
any life estate created by a function of law
Conventional life estate is a life estate created through a grant from a property owner to another party
is a life estate created through a grant from a property owner to another party
what are the two different types of conventional life estates
Ordinary
Pur autre vie
Ordinary conventional life estate is
grants possession and limited ownership of an asset to someone for as long as they live.
Pur Autre Vie
Handling things with a life estate pur autre view means someone gives another person access to or uses of an estate, typically a residence, but only as long as a third person is alive.
Example For example, if person A holds a life estate measured by her own life and then sells or otherwise transfers her interest to person B for the rest of person C’s life, B now has a life estate pur autre vie. Person B’s estate ends when person C dies.
What is the difference between a legal life estate and conventional life estate
state law creates legal life estate
what are the three types of legal life estates
Homestead
Dower and curtesy
elective share
what is homestead laws
are state laws that prevent a person’s primary residence from being forcibly sold to pay certain kinds of debts
what is the only legal life estate that exists in AZ
The homestead exemption
It protects up to $150,000 in a property’s equity from creditors. The protected property has to be a primary residence, and the owner must be the head of the household and live in Arizona. Every homeowner (or married couple) gets one homestead exemption at a time. If you move, your exemption moves with you to your new primary residence.
Any kind of property can be protected: single-family homes, condos, townhouses, or manufactured homes. For manufactured housing, if the homeowner rents the land the home is on, only the home is protected. If they own the land and the home, both are protected.
The exemption is automatic — the homeowner doesn’t have to fill out any kind of paperwork to qualify (nice!).
What are the debts that aren’t covered by homestead exemption
Consensual lines like mortgages (the homestead exemption won’t stop a foreclosure, for example
A mechanic’s lien, which is a lien a worker can put on a homeowner for work done but not paid for
Certain judgment lines over 150,000
when does the homestead ends
A homestead is ended when the property is sold, the homeowner moves out of AZ, or the property is abandoned. In AZ, a property that has been left empty for 2 years is considered abandoned
What is Dower and Curtesy
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 used for women, curtesy for men
Dower/Curtesy Specifics
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. (If you’re a Downton Abbey fan, you may remember the “dower house,” which was the property left to the wife of the property owner after he died and his son/heir inherited it.)
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.
What are the 3 forms of ownership
Ownership in severalty
Co-ownership
Ownership in trust
Ownership in severalty
individual or sole ownership also known as tenancy in severalty
Co-ownership
ownership shared with another person (sometimes called concurrent ownership)
Ownership in trust
where a trust holds property for a person until they are ready to pass it on to their heir or beneficiary
In severalty
means that the property has only one owner, whether that is a person corporation, or other legal entity
that person/entity can sell the property, hold it, rent it, will it to someone else upon their death, or do what they please with it, without the permission of anyone else.
refers to ownership in severity
is property held by corporation an ownership in severity
Yes
even though a corporation may have several different owners or shareholders the law views corporations as single, legal entities
property held by a corporation is ownership in severalty, however weird that may seem
Undivided interest
a type of interest that gives each co-owner the right of possession of the whole property, not simply a portion of it.
Tight of survivorship
the statutory principle of survivorship tenancy, which means that when one co-owner dies, their ownership interest reverts to the surviving co-owners
Without the right of survivorship, a co-owner’s interest goes to their heirs if they die, instead of the remaining co=owners
what are the four types of co-ownerships
Tenancy in common
joint tenancy
community property
community property with the right of survivorship
What are the four unities (conditions) that help identify co-ownership form are:
Unity of possession
unity of interest
unity of time
unity of title
use acronym PITT (PITTsburgh is a city located in the UNITed States
Unity of Possession
Each co-owner has an equal ribght to enjoy the possession and use of the whole of the property (or as known as undivided interest)
Unity of Interest
Each co-owner holds an equal share in the property
Unity of Time
requirement of co-owners to acquire their ownership or interests at the same time.
In any co-ownership situation that has the unity of time, additional owners can’t be added at a later date. If a group of owners wanted to add a new owner while keeping the unity o time, they would have to make a whole new contract
Unity of Title
requires co-owners to acquire their property from the same transaction
Co-owners must also hold title under the same document such as a deed or a will
Tenancy by the entirety
a type of ownership reserved for marrieds only that only exists in certain states (AZ is not one of them)
Tenancy in common
is the most common form of co-ownership for unmarried co-owners, but that’s not why it’s called that, it’s just a happy coincidence. In AZ if non=married co-owners don’t specify how they want to take title, they’ll be tenants in common
This form of ownership gives the party
undivided interest in the property
the right of inheritance, not survivorship
the ability to own unequal shares of the property
Each co-owner can sell, mortgage, lease, or transfer their ownership share without the permission of the others, so long as the transfer doesn’t interfere with the ownership rights of the others.
Tenancy in commons requires only one unity the unity of possession also called undivided interests
Right of inheritance means that if one co-owner dies, their share goes to their heirs, not the rest of the co-owners
Unequal shares doesn not require the unity of interest: instead, co-owners can own unequal shares. Example would be 80/20 or 50/25/25 but each owner has a equal right to use the property
Joint Tenancy
Requires all four unities
Usually comes with the right of survivorship
Four unities
With right of survivorship
if one joint tenant dies, their share of the property is absorbed by the remaining joint tenants, instead of passing to their heirs. For this reason, joint tenancy will sometimes be referred to as JTROS, or joint tenancy with the right of survivorship
Only humans can be joint tenants. Corporations can never die, so they can’t own property as joint tenants
How is transferring ownership with joint tenancy work
joint tenancy is transferred by deed, whether the transfer happens after the death of a co-owner or when a co-owner is still living.
In the even of the death of a co-owner, the original deed sets in motion the equal and simultaneous survivorship rights of the surviving co-owners. They each receive an equal share of their dearly departed co-owner’s interest.
Transferring ownership while still alive
when joint tenant transfers their ownership by deed, the new co-owner has ownership, but in a different form than that of the original co-owners. The original co-owners remain in their joint tenancy arrangement; the new guy has ownership of their share as a tenant in common relative to the rest of the gang
The new owner will not inherit a portion of the property if one of the co-owners dies. On the other hand, if the new owner dies, their heirs will inherit their share instead of the other co-owners.
Joint tenancy can defeat the right of curtsey/dower, elective share and community property
You can’t change who is in ajoint tenancy agreement without dissolving the agrement and reforming it with other co-owners. Dissolving a joint tenancy agreement is called partition
Do you have to specify in some states the right of survivorship in the deed?
Yes, and if it’s assumed that means that if one half of a married couple buys property as joint tenant, when they die, their co-joint tenants are set to inherit their share of the property, and their beloved spouse is left out in the cold.
What is probate
is the expensive and complicated process of having a judge execute someone’s will
The right of survivorship, or inheriting a property from a co-owner without going to probate, is one of the main advantages of JTROS
How can parties get out of tenancy in common and joint tenancy
Through partition (this is voluntarily) is the ability to divide certain forms of co-ownership into separate interests or to convey a partial interest in a co-owned property unilaterally
Partition suit (involuntarily)
one co-owner can always sue the others to legally dissolve the co-ownership and either divide the property itself or divide the gains from the sale from the property.
Co-ownership Type 3 Married couples only
Tenancy by the entirely
Community Property
Either joint tenants or tenants in common, depending on what you choose to put in your deed
AZ is a community property state. AZ also offers a special flavor of community property ownership that features the right o inheritance.
Couple Co-ownership Type 1 Tenancy by the entirety
is a form of co-ownership where legal spouses each hold an equal and undivided interest in the property which cannot be conveyed or encumbered without consent of the other. Just like joint tenancy, it comes with the right of survivorship. There are 26 states that recognize tenancy by the entirely AZ is not one of them
Because tenancy by the entirety is a co ownership between only two people, if one of the co-owners dies, the surviving spouse would own the property in severalty
Tenancy by the Entirety: Taking the Fifth
Remember the mysterious fifth unity we talked about earlier? The fifth unity is the unity of person and states that co-owners are, for legal purposes relative to ownership of the property, a single, indivisible unit. This is the main distinguishing point between tenancy by the entirety and community property: Property held in tenancy by the entirety is held not half and half by each spouse, but by a third entity, a sort of legal fictional person.
So, in addition to the four unities required for joint tenancy (possession, interest, time, and title), tenancy by the entirety also requires the unity of person. That’s a grand total of five, count ‘em, five unities!
How does tenancy by the entirety gets terminated
By death to be avoided, if possible. when this does occur, it results in tenancy in severalty
By agreement if the spouses both agree to terminate this ownership type, they can each sign a new deed to tat effect
By divorce when a couple divorces, their tenancy by the entirety automatically becomes a tenancy in common, unless a judge rules otherwise.
Couple co ownership Type 2 Community Property
Communal property acquired during a marriage is considered to be owned equally by both spouses, and cannot be sold without the signatures of both spouses
One spouse can buy property without the other’s consent.
If a couple separates, they each get half of the property owned as community property. This applies to both real property like houses and personal property like washing machinen
Are all properties communal
No
Separate property
is type of property owned by a spouse that is not community property. Separate property can be acquired in several ways:
Purchase before the marriage
Acquired by one spouse through a gift or inheritance during the marriage
Purchased by the spouse with separate funds during the marriage
Note that for funds to be considered separate. They must always be kept apart from shared funds. If an inheritance is deposited in a joint accounts, it would become community property.
Inheritance with community property
each spouse free to will their half of the property to whoever they want to
if a spouse dies without a will, their half will be distributed according to the laws of intestate distribution. We’ll cover those more in a later level, but basically it’s a set of rules that dictates who gets what if someone dies without a will. Usually it’s split between a spouse and children, if there are any
community property with right of survivorship CPWROS
AZ offers a community property option that comes with the right of survivorship. if spouse dies, the other spouse automatically inherits the property without going through probate.
To create CPWROS ownership, survivorship must be specified on the deed.
Survivorship rights can be ended by filing an affidavit. They’re automatically ended if the couple gets divorced or has the marriage annulled.
Couple Co-Ownership Type 3 Dealer’s choice
you get to specify on the deed if they want to hold the property as tenants in common or joint tenants with the right of survivorship (in this case the parties get to pick what deed they would like).
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