Section 1 Unit 2

Question 1

A simple definition of real estate is:

Answer 1

it is air, water, land, and everything affixed to the land.

Question 2

To understand real estate rights and interests, one must first recognize the distinctions between:

Answer 2

land and real estate
real estate and property
real property and personal property

Question 3

The legal concept of land encompasses:

Answer 3

the surface area of the earth
everything beneath the surface of the earth extending downward to its center
all natural things permanently attached to the earth
the air above the surface of the earth extending outward to infinity.

Question 4

A parcel, or tract, of land is:

Answer 4

a portion of land delineated by boundaries.

Question 5

Land has three unique physical characteristics:

Answer 5

immobility, indestructibility, and heterogeneity.

Question 6

Land is non-homogeneous:

Answer 6

since no two parcels of land are exactly the same, they are inherently different because each parcel has a unique location.

Question 7

The legal concept of real estate encompasses:

Answer 7

• land

* all man-made structures that are “permanently” attached to the land

Question 8

Real estate therefore includes, in addition to land, such things as:

Answer 8

fences, streets, buildings, wells, sewers, sidewalks and piers. Such man-made structures attached to the land are called improvements.

Question 9

if a person constructs a house with the intention of creating a permanent dwelling:

Answer 9

the house is considered real estate.

Question 10

If a camper affixes a tent to the land with the intention of moving it to another camp in a week:

Answer 10

the tent would not be considered real estate.

Question 11

Rights commonly known as the “bundle of rights” are:

Answer 11

property is not only the item that is owned but also a set of rights to the item enjoyed by the owner.

Question 12

In owning property, one has the right to possess and use it as the law allows:

Answer 12

The owner has the right to transfer ownership of the item (sell, rent, donate, assign, or bequeath). The owner may also encumber the item by mortgaging it as collateral for debt. Finally, the owner has the right to exclude others from use of the item.

Question 13

Our legal system recognizes two classifications of property: real property and personal property.

Answer 13

Real property is ownership of real estate and the bundle of rights associated with owning the real estate. Personal property is ownership of anything which is not real estate, and the rights associated with owning the personal property item. Items of personal property are also called chattels or personalty.

Question 14

Since all real estate in the United States is owned by some person, private organization, or government entity, all real estate in the country is real property.

Answer 14

Given that fact, this text will follow the customary practice of using the two terms interchangeably and synonymously.

Question 15

Real and personal property may be further categorized as tangible or intangible property.

Answer 15

Tangible property is physical, visible, and material. Intangible property is abstract, having no physical existence in itself, other than as evidence of one’s ownership interest.

Question 16

The right to use a property refers to:

Answer 16

the right to use it in certain ways, such as mining, cultivating, landscaping, razing, and building on the property. The right is subject to the limitations of local zoning and the legality of the use. One’s right to use may not infringe on the rights of others to use and enjoy their property. For example, an owner may be restricted from constructing a large pond on her property if in fact the pond would pose flooding and drainage hazards to the next door neighbor.

Question 17

The right to transfer interests in the property includes:

Answer 17

the right to sell, bequeath, lease, donate, or assign ownership interests. An owner may transfer certain individual rights to the property without transferring total ownership. Also, one may transfer ownership while retaining individual interests. For example, a person may sell mineral rights without selling the right of possession. On the other hand, the owner may convey all rights to the property except the mineral rights.

Question 18

While all rights are transferrable, the owner can only transfer what the owner in fact possesses.

Answer 18

A property seller, for example, cannot sell water rights if there are no water rights attached to the property.

Question 19

The right to encumber the property essentially means:

Answer 19

the right to mortgage the property as collateral for debt. There may be restrictions to this right, such as a spouse’s right to limit the degree to which a homestead may be mortgaged.

Question 20

The right to exclude gives the property owner the legal right to:

Answer 20

keep others off the property and to prosecute trespassers.

Question 21

The bundle of real property rights also applies separately to the individual components of real estate:

Answer 21

the air, the surface, and the subsurface. An owner can, for example, transfer subsurface rights without transferring air rights. Similarly, an owner can rent air space without encumbering surface or subsurface rights. This might occur in a city where adjoining building owners want to construct a walkway over a third owner’s lot. Such owners would have to acquire the air rights for the walkway. If the city wants to construct a subway through the owner’s subsurface, the city has to obtain the subsurface rights to do so.

Question 22

An ordinary lease is a common example of the transfer of a portion of one’s bundle of rights.

Answer 22

The owner relinquishes the right to possess portions of the surface, perhaps a building, in return for rent. The tenant enjoys the rights to possess and use the building over the term of the lease, after which these rights revert to the landlord. During the lease term, the tenant has no rights to the property’s subsurface or airspace other than what the building occupies. Further, the tenant does not enjoy any of the other rights in the bundle of rights: he cannot encumber the property or transfer it. To a limited degree, the tenant may exclude persons from the property, but he may not exclude the legal owner.

Question 23

Surface rights apply to the real estate contained within the surface boundaries of the parcel.

Answer 23

This includes the ground, all natural things affixed to the ground, and all improvements. Surface rights also include water rights.

Question 24

Air rights apply to the space above the surface boundaries of the parcel, as delineated by imaginary vertical lines extended to infinity.

Answer 24

Since the advent of aviation, air rights have been curtailed to allow aircraft to fly over one’s property, provided the overflights do not interfere with the owner’s use and enjoyment of the property. The issue of violation of air rights for the benefit of air transportation is an ongoing battle between airlines, airports, and nearby property owners.

Question 25

Subsurface rights apply to land beneath the surface of the real estate parcel extending from its surface boundaries downward to the center of the earth.

Answer 25

Notable subsurface rights are the rights to extract mineral and gas deposits and subsurface water from the water table.

Question 26

Water rights basically concern the rights to own and use water found in lakes, streams, rivers, and the ocean. In addition, they determine where parcel boundaries can be fixed with respect to adjoining bodies of water. What water rights does an owner of a property that contains or adjoins a body of water enjoy? The answer depends on three variables:

Answer 26

whether the state controls the water
whether the water is moving
whether the water is navigable

Question 27

Doctrine of Prior Appropriation.

Answer 27

Since water is a resource necessary for survival, some states —particularly those where water is scarce —have taken the legal position that the state owns and controls all bodies of water. Called the Doctrine of Prior Appropriation, this position requires that property owners obtain permits for use of water. If a proposed usage is reasonable and beneficial, the state will grant a permit which, over time, can attach to the property of the permit holder. If a state does not operate under prior appropriation, it operates under the common law doctrines of littoral rights and riparian rights.

Question 28

Littoral rights.

Answer 28

Littoral rights concern properties abutting bodies of water that are not moving, such as lakes and seas. Owners of properties abutting a navigable, non-moving body of water enjoy the littoral right of use, but do not own the water nor the land beneath the water. Ownership extends to the high-water mark of the body of water.

Question 29

Riparian rights.

Answer 29

Riparian rights concern properties abutting moving water such as streams and rivers. If a property abuts a stream or river, the owner’s riparian rights are determined by whether the water is navigable or not navigable. If the property abuts a non-navigable stream, the owner enjoys unrestricted use of the water and owns the land beneath the stream to the stream’s midpoint. If the waterway in question is navigable, the waterway is considered to be a public easement. In such a case, the owner’s property extends to the water’s edge as opposed to the midpoint of the waterway. The state owns the land beneath the water.

Question 30

One’s riparian rights to use flowing water are subject to the conditions that:

Answer 30

the usage is reasonable and does not infringe on the riparian rights of other owners downstream
the usage does not pollute the water
the usage does not impede or alter the course of the water flow.

Like littoral rights, riparian rights attach to the property.

Question 31

In conveying real property, it is vitally important to recognize the distinctions between personal property and the real property that is to be conveyed.

Answer 31

Confusion can arise because items of property may be either personal property or real property, depending on circumstances.

Question 32

The primary criterion for distinguishing real from personal property is whether the item is permanently attached to the land or to structures attached to the land.

Answer 32

For example, a tree growing in one’s yard is an item of real property. However, when the owner cuts the tree down, it becomes personal property. Similarly, a swimming pool pump on a shelf in the owner’s garage is personal property. When it is installed with the rest of the pool, it becomes real property.

While the “attachment” criterion is pivotal in distinguishing between real and personal property, there are other tests to be applied. In addition, the attachment rule is subject to exceptions.

Question 33

A personal property item that has been converted to real property by attachment to real estate is called a fixture. Typical examples are chandeliers, toilets, water pumps, septic tanks, and window shutters.

Answer 33

The owner of real property inherently owns all fixtures belonging to the real property. When the owner sells the real property, the buyer acquires rights to all fixtures. Fixtures not included in the sale must be itemized and excluded in the sale contract.

Question 34

In the event that the attachment criterion is insufficient to determine whether an article of property is real or personal, a court may apply one or more of the following additional criteria:

Answer 34

Intention.
Adaptation.
Functionality. 
Relationship of parties. 
Sale or lease contract provisions.

Question 35

Intention.

Answer 35

One’s original intention can override the test of movability in determining whether an item is a fixture or not. If someone attached an item to real property, yet intended to remove it after a period of time, the article may be deemed personal property. If a person intended an article to be a fixture, even though the item is easily removable, the article may be deemed a fixture.

For example, an apartment renter installs an alarm system, fully intending to remove the system upon lease expiration. Here, the alarm system would be considered personal property.

Question 36

Adaptation.

Answer 36

If an item is uniquely adapted to the property, or the property is custom-designed to accommodate the item, it may be deemed real property whether the item is easily removable or not. House keys, a garbage compactor, and a removable door screen are examples.

Question 37

Functionality.

Answer 37

If an item is vital to the operation of the building, it may be deemed a fixture, even though perhaps easily removable. Window-unit air conditioners and detachable solar panels are possible examples.

Question 38

Relationship of parties.

Answer 38

If a tenant installs a fixture in order to conduct business, the fixture may be considered a trade fixture, which is the tenant’s personal property.

Question 39

Sale or lease contract provisions.

Answer 39

In a sale or lease transaction, the listing of an item in the contract as a personal property item or a fixture overrides all other considerations. Unless otherwise stated as exceptions, all fixtures are included in the sale. For example, if a sale contract stipulates that the carpeting is not included in the sale, it becomes a personal property item. If the carpeting is not mentioned, it goes with the property, since it is attached to the floor of the building.

Question 40

Trade fixtures, or chattel fixtures, are items of a tenant’s personal property that the tenant has temporarily affixed to a landlord’s real property in order to conduct business.

Answer 40

Trade fixtures may be detached and removed before or upon surrender of the leased premises. Should the tenant fail to remove a trade fixture, it may become the property of the landlord through accession. Thereafter, the fixture is considered real property.

Examples of trade fixtures include a grocer’s food freezers, a merchant’s clothes racks, a tavern owner’s bar, a dairy’s milking machines, and a printer’s printing press.

Question 41

Growing plants, including agricultural crops, may be either real property or personal property. Plants and crops that grow naturally without requiring anyone’s labor or machinery are considered real property.

Answer 41

Plants and crops requiring human intervention and labor are called emblements. Emblements, despite their attachment to land, are considered personal property. If an emblement is owned by a tenant farmer, the tenant has the right to the harvested crop whether the tenant’s lease is active or expired. If the tenant grew the crop, it is his or her personal property, and the landlord cannot take it.

Question 42

Factory-built housing consists of dwelling units constructed off-site and transported to and assembled on a building site. The category also includes readily moveable housing of the type that can be relocated from place to place, once known by the term mobile home.

Answer 42

The National Manufactured Housing Construction and Safety Standards Act of 1976 defined the types of factory-built housing and retired the mobile home designation. Manufactured housing is factory-built housing that conforms to HUD standards. Factory-built housing may be considered real property or personal property, depending on whether it is permanently affixed to the ground, and according to state law. Real estate practitioners should understand the local laws before selling any kind of factory-built housing.

Question 43

The classification of an item of property as real or personal is not necessarily fixed. The classification may be changed by the process of conversion.

Answer 43

Severance is the conversion of real property to personal property by detaching it from the real estate, such as by cutting down a tree, detaching a door from a shed, or removing an antenna from a roof. Affixing, or attachment, is the act of converting personal property to real property by attaching it to the real estate, such as by assembling a pile of bricks into a barbecue pit, or constructing a boat dock from wood planks.

Question 44

Government entities regulate the following aspects of real property interests:

Answer 44

the bundle of rights: possession, usage, transfer, encumbering and exclusion
legal descriptions
financing
insurance
inheritance
taxation

Regulation takes the form of federal and state laws and regulations; county and local ordinances and codes; and court decisions in the judicial system.

Question 45

In regulating real property rights, the federal government is primarily concerned with broad standards of real property usage, natural disaster, land description, and discrimination

Answer 45

Federal agencies such as the Federal Housing Administration promote and regulate home ownership. The Environmental Protection Agency establishes protective usage restrictions and guidelines for dealing with hazardous materials and other environmental concerns. Federal flood insurance legislation requires certain homeowners to obtain flood insurance policies. Federal laws such as the Federal Fair Housing Act of 1968 prohibit discrimination in housing based on race, religion, color, or national origin. Such laws as the Americans with Disabilities Act prescribe design and accessibility standards.

Question 46

State governments are the primary regulatory entities of the real estate business. State governments establish real estate license laws and qualifications. In addition, state governments have established real estate commissions to administer license laws and oversee activities of licensees.

State governments also exert regional influence in the usage and environmental control of real estate within the state. Relevant state laws might include laws relating to flood zones, waste disposal, drainage control, shore preservation, and pollution standards.

Answer 46

States also play a role in defining how real property may be owned, transferred, encumbered, and inherited. For example, in some states a mortgaged property becomes the legal property of the lender until the mortgage loan is paid.

States have the power to levy real estate taxes but generally pass this power to local government.

Question 47

County and local government regulation focuses on land use control, control of improvements, and taxation. Land use regulations and ordinances control how all property within the jurisdiction may be developed, improved, demolished, and managed.

Answer 47

County and local governments have the power to zone land, take over land for the public good, issue building permits, and establish the rules for all development projects.

County and local governments, along with school districts and other local jurisdictions, have the power to levy real estate taxes.

Question 48

The judicial system exerts an influence on real estate ownership and use through decisions based on case law and common law, as distinguished from statutory law.

Answer 48

Case law consists of decisions based on judicial precedent. Common law is the collective body of law deriving from custom and generally accepted practice in society.

Question 49

Which level of government controls zoning laws?

Answer 49

County and local

Question 50

What guarantees the right of private ownership of real estate in the United States?

Answer 50

The Constitution

Question 51

Which of the following is the best definition of real estate?

Answer 51

Land and everything permanently attached to it

Question 52

Which of the following is considered real property?

Answer 52

A tree growing on a parcel of land

Question 53

Which of the following is an example of intangible property?

Answer 53

Stock

Question 54

What is the primary thrust of federal involvement in real estate law?

Answer 54

broad regulation of usage

Question 55

The major sources of real estate law are legislation at federal, state and local level, and

Answer 55

court decisions.

Question 56

The primary distinction between the legal concepts of land and real estate is that

Answer 56

land does not include man-made structures.

Question 57

What is an emblement?

Answer 57

A plant or crop that is considered personal property

Question 58

Under the doctrine of littoral rights, an owner claims ownership of all of the land underlying a lake where there are three other abutting property owners. Which of the following is true?

Answer 58

The owner’s claim is invalid, because the state owns the underlying land.

Question 59

Which of the following is included in the legal concept of land?

Answer 59

The surface of the earth and all natural things permanently attached to the earth.

Question 60

The right to use real property is limited by

Answer 60

the right of others to use and enjoy their property.

Question 61

An item can be converted from real to personal property and vice versa by means of which processes?

Answer 61

Affixing and severance

Question 62

A grocer temporarily installs special fruit and vegetable coolers in a leased grocery store in order to prevent spoilage. The coolers would be considered which of the following?

Answer 62

Trade fixtures that are personal property

Question 63

The primary distinction between the legal concepts of real estate and real property is that

Answer 63

real property includes ownership of a bundle of rights.

Question 64

Surface rights, air rights and subsurface rights are

Answer 64

separable.

Question 65

What is the “Doctrine of Prior Appropriation?”

Answer 65

A doctrine that gives the state control of water use and the water supply

Question 66

What part of a non-navigable waterway does the owner of an abutting property own?

Answer 66

middle of the waterway

Question 67

What are the three unique physical characteristics of land?

Answer 67

Immobile, indestructible, heterogeneous

Question 68

The overriding test of whether an item is a fixture or personal property is

Answer 68

its definition as one or the other in a sale or lease contract.

Question 69

Which of the following is included in the bundle of rights inherent in ownership?

Answer 69

to transfer

Question 70

Which of the following terms refers to the rights of a property that abuts a stream or river?

Answer 70

Riparian