Unit 10: Interest in Real Estate

Question 1

Identify the limitations on ownership rights that are imposed by government action.

Answer 1

The four government powers can be remembered as PETE: Police Power, Eminent Domain, Taxation, and Escheat.

Question 2

List the nine lien rights that are enforceable against Texas homesteads.

Answer 2

1 - Taxes on the property

2 - Purchase money mortgages

3 - Mechanics’ and materialmen’s claims for the cost of improvements on the homestead property

4 - A homeowners association assessment lien, if certain filing requirements have been met

5 - An owelty lien, including a loan against the homestead to settle property claims in cases of divorce or death

6 - Refinance of a lien against a homestead, including a federal tax lien

7 - Home equity loans for any purpose

8 - Reverse mortgages, under which advances against a home’s equity are provided to a borrower who is 62 years old or older

9 - Conversion and refinance of a personal property lien secured by a manufactured home to a lien on real property, including the refinance of the purchase price of the home and the land and the cost of installing the home on the land

Question 3

Describe the key components in each of the four phases of the annual tax levy process.

Answer 3

1. Property valuation
2. Protest period
3. Tax rate adoption
4. Tax collection

Question 4

Explain the various types of liens other than taxes and how they are prioritized to satisfy unpaid debts.

Answer 4

The four ways of creating a lien may be remembered by the acronym VISE: Voluntary, Involuntary, Statutory, and Equitable.

The priority of a real estate tax lien prevails, even if a debt, lien, future interest, or other encumbrance existed before the attachment of the tax lien.

Question 5

ad valorem tax

Answer 5

A tax levied according to value;

generally used to refer to real estate tax.

Question 6

allodial system

Answer 6

A system of land ownership in which
land is held free and clear of any rent or service due to the
government; commonly contrasted with the feudal system.
In the United States, land is held under the allodial system.

Question 7

appraisal review board

Answer 7

A group of people who hear
appeals concerning assessed valuations for tax purposes and
recommend or deny changes in values shown of record.

Question 8

assessment roll

Answer 8

The public record of the assessed values

of all lands and buildings within a specific area.

Question 9

attachment

Answer 9

1. The act of taking a person’s property
   into legal custody by writ or other judicial order to hold it
   available for application to that person’s debt to a creditor.
2. A process of converting personal property to real estate.

Question 10

defeasible fee estate

Answer 10

An estate in which the holder has
a fee simple title that may be divested on the occurrence
or nonoccurrence of a specified event. The two categories
of defeasible fee estates are fee simple determinable and fee
simple subject to a condition subsequent.

Question 11

determinable fee estate

Answer 11

A fee simple estate in which
the property automatically reverts to the grantor upon the
occurrence of a specified event or condition.

Question 12

easement

Answer 12

A right to use the land of another for a

specific purpose, such as for a right-of-way or utilities.

Question 13

easement appurtenant

Answer 13

An easement that passes with

the land on conveyance.

Question 14

easement by implication

Answer 14

An easement that arises when
the parties’ actions imply that they intend to create an
easement.

Question 15

easement by necessity

Answer 15

An easement allowed by law as
necessary for the full enjoyment of a parcel of real estate; for
example, a right of ingress and egress over a grantor’s land.

Question 16

easement by prescription

Answer 16

An easement acquired by
continuous, open, uninterrupted, exclusive, and adverse use
of the property for 10 years.

Question 17

easement in gross

Answer 17

An easement that is not created for
the benefit of any land owned by the owner of the easement
but that attaches personally to the easement owner; for
example, a utility easement.

Question 18

eminent domain

Answer 18

The right of a government or public
entity to acquire property for public use; the entity must
make a good-faith effort to acquire the real property
through direct negotiation and purchase from the owner.

Question 19

encroachment

Answer 19

A building or some portion of it—a wall
or fence, for instance—that extends beyond the land of the
owner and illegally intrudes on some land of an adjoining
owner or a street or alley.

Question 20

encumbrance

Answer 20

Any lien (such as a mortgage, tax, or
judgment lien) or an easement or a restriction on the use of
the land that may diminish the value of a property; a cloud
against clear, free title to property.

Question 21

equitable lien

Answer 21

A lien arising out of common law. See

statutory lien.

Question 22

equitable right of redemption

Answer 22

The right to redeem
a property before a foreclosure sale by paying the full debt
plus interest and accrued charges.

Question 23

escheat

Answer 23

The reversion of property to the state in the
event the property is abandoned or the owner dies without
leaving a will and has no heirs to whom the property may
pass.

Question 24

estate in land

Answer 24

The degree, quantity, nature, and extent

of interest that a person has in real property.

Question 25

estate taxes

Answer 25

Federal taxes on a decedent’s real and | personal property.

Question 26

federal judgment lien

Answer 26

Lien obtained by the United States or an agency, department, commission, board, or other U.S. entity that affects all real and personal property of the judgment debtor.

Question 27

fee simple

Answer 27

The maximum possible estate or right of ownership of real property, continuing forever. Sometimes called a fee or fee simple absolute.

Question 28

fee simple subject to a condition subsequent

Answer 28

An estate conveyed “provided that” or “if ” it is used for a specific purpose. If it is no longer used for that purpose, it reverts to the original grantor or his heirs by their exercise of the right of reentry.

Question 29

fuedal system

Answer 29

A system of ownership usually associated with precolonial England in which the king or other sovereign was the source of all rights. The right to possess real property was granted by the sovereign to an individual as a life estate only. On the death of the individual, title passed back to the sovereign, not to the decedent’s heirs.

Question 30

freehold estate

Answer 30

An estate in land in which ownership is for an indeterminate length of time, in contrast to a leasehold estate.

Question 31

general contractor

Answer 31

A construction specialist who enters into a formal construction contract with a landowner to construct a real estate building or project. The general contractor often contracts with several subcontractors specializing in various aspects of the building process to perform individual jobs.

Question 32

general lien

Answer 32

The right of a creditor to have all of a debtor’s property—both real and personal—sold to satisfy a debt.

Question 33

grantee

Answer 33

A person who receives a conveyance of real | property from the grantor.

Question 34

grantor

Answer 34

The person transferring title to or an interest in | real property to a grantee.

Question 35

groundwater rights

Answer 35

Water under the earth’s surface below the saturation point and used by a property owner through the rule of capture.

Question 36

homestead

Answer 36

Land that is owned and occupied as the family home. In Texas, homestead property is protected or exempt from forced sale by creditors for payments of most debts, with several exceptions.

Question 37

inheritance taxes

Answer 37

State-imposed taxes on a decedent’s | real and personal property.

Question 38

involuntary lien

Answer 38

A lien that arises by the action of | another, such as a judgment lien.

Question 39

IRS tax lien

Answer 39

l

Question 40

judgment

Answer 40

The formal decision of a court on the respective rights and claims of the parties to an action or suit. After a judgment has been entered and recorded with the county clerk, it usually becomes a general lien on the property of the defendant.

Question 41

license

Answer 41

The revocable permission for a temporary use of land—a | personal right that cannot be sold.

Question 42

lien

Answer 42

A right given by law to certain creditors to have debts paid out of the property of a defaulting debtor, usually by means of a court sale.

Question 43

life estate

Answer 43

An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person.

Question 44

littoral rights

Answer 44

1. A landowner’s claim to use water in large navigable lakes and oceans that are adjacent to the property. 2. The ownership rights to land bordering these bodies of water up to the mean vegetation line.

Question 45

mechanic's lien

Answer 45

A statutory lien created in favor of contractors, laborers, materialmen, and others (including architects, engineers, or surveyors) who have performed work or furnished materials in the erection or repair of a building.

Question 46

mortgage (deed of trust or purchase money) lien

Answer 46

A conditional transfer or pledge of real estate as security for the payment of a debt. Also, the document used to create a mortgage lien.

Question 47

police power

Answer 47

The government’s right to impose laws, statutes, and ordinances, including zoning ordinances and building codes, to protect the public health, safety, morals, and welfare.

Question 48

prior appropriation

Answer 48

A concept of water ownership in which the landowner’s right to use available water is based on a government-administered permit system.

Question 49

priority

Answer 49

The order in which unpaid debts or obligations | will be satisfied if the property goes through a court sale.

Question 50

remainder interest

Answer 50

The future interest in an estate that takes effect after the termination of another estate, such as a life estate; on the death of the life estate owner, ownership will pass to a named third party.

Question 51

restriction

Answer 51

l

Question 52

reversionary interest

Answer 52

The future interest in an estate that takes effect after the termination of another estate, such as a life estate; on the death of the life estate owner, ownership reverts to the grantor or the heirs or devisees.

Question 53

right-of-way

Answer 53

The right or privilege, acquired through accepted usage or contract, to pass over a designated portion of the property of another.

Question 54

riparian rights

Answer 54

An owner’s rights in land that borders on or includes a stream or river. These rights include access to and use of the water for domestic purposes.

Question 55

special assessment

Answer 55

A tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement like a street or paved alley.

Question 56

specific lien

Answer 56

A lien affecting or attaching only to a | certain, specific parcel of land or piece of property.

Question 57

statutory lien

Answer 57

A lien imposed on property by statute—a tax lien, for example—in contrast to an equitable lien, which arises out of common law.

Question 58

statutory right of redemption

Answer 58

The right of a defaulted property owner to recover the property after its sale by paying the appropriate fees and charges; available in Texas for tax foreclosures and homeowners associations assessment liens; not available for a deed-of-trust foreclosure.

Question 59

subordination agreement

Answer 59

A written agreement between holders of liens on a property that changes the priority of mortgage, judgment, and other liens under certain circumstances.

Question 60

surety bail bond lien

Answer 60

A pledge of real estate instead of cash | as security for bail.

Question 61

tax lien

Answer 61

A charge against property created by operation of law. Tax liens and assessments take priority over all other liens.

Question 62

tax sale

Answer 62

A court-ordered sale of real property to raise | money to cover delinquent taxes.

Question 63

taxation

Answer 63

The process by which a government or municipal quasi-public body raises monies to fund its operation.

Question 64

Uniform Commercial Code

Answer 64

A codification of commercial law that attempts to make uniform throughout the United States all laws relating to commercial transactions. Security interests in personal property are created by an instrument known as a security agreement. To give notice of the security interest, a financing statement must be recorded.

Question 65

vendee's lien

Answer 65

A buyer’s claim against a seller’s property when the seller has not delivered title to the buyer, as in an installment contract or contract for deed.

Question 66

vendor's lien

Answer 66

The equitable lien of the grantor upon the | land conveyed, in the amount of the unpaid purchase price.

Question 67

voluntary lien

Answer 67

A lien that arises because of actions permitted by a person, such as when signing a deed of trust or mortgage.

Question 68

wage lien

Answer 68

A lien ordered by the Texas Workforce Commission against all real and personal property of an employer who owes back wages to an employee.