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Real Estate Principles > Unit 11 > Flashcards

Unit 11 Flashcards

1
Q

Explain the basic forms of ownership, including co-ownership and trusts, and how each is created and terminated.

A

Ownership forms range from sole ownership (severalty) to co-ownership forms like joint tenancy and tenancy in common. Trusts involve a trustor, trustee, and beneficiary, and the ownership can be transferred based on conditions set in the trust agreement.

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2
Q

Describe the ways in which various business organizations may own property.

A

Businesses can own property under structures such as sole proprietorships, partnerships, corporations, and limited liability companies (LLCs). Each structure offers different liabilities and tax treatment.

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3
Q

State the common business entities through which real estate brokerages are organized and the filing requirements and License Act/TREC Rules by which they are governed.

A

Real estate brokerages can operate under various business entities such as sole proprietorships, partnerships, LLCs, or corporations. The Texas Real Estate Commission (TREC) requires brokerages to register and meet specific filing and licensing regulations.

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4
Q

Distinguish among cooperative ownership, condominium ownership, and time-share ownership.

A

Cooperatives involve buying stock in a corporation and receiving a proprietary lease. Condominiums involve ownership of individual units plus shared ownership of common elements. Time-shares involve ownership or the right to use property for a limited time annually.

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5
Q

Common elements

A

Shared parts of a condominium building or complex, such as hallways, elevators, or recreational facilities.

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6
Q

Beneficiary

A

The person or entity for whom a trust is managed.

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7
Q

Community property

A

Property owned jointly by a married couple, acquired during the marriage.

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8
Q

Community property right of survivorship

A

A form of community property ownership where, upon the death of one spouse, the surviving spouse automatically receives the deceased spouse’s share of the property without probate.

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9
Q

Condominium

A

Ownership of an individual unit in a building along with shared ownership of common elements.

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10
Q

Cooperative

A

A form of ownership in which individuals own shares in a corporation that owns the entire property and each shareholder has a proprietary lease for a specific unit.

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11
Q

Co-ownership

A

Ownership of property by two or more individuals or entities.

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12
Q

Deed in trust

A

A deed used to transfer real estate into a trust.

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13
Q

Corporation

A

A legal entity, separate from its owners, that can own real estate in its name.

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14
Q

General partnership

A

A partnership where all partners share equally in liability and responsibility for the business.

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14
Q

Joint tenancy

A

A form of co-ownership with rights of survivorship, meaning that when one owner dies, the surviving owners automatically inherit the deceased owner’s share.

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15
Q

Limited partnership

A

A partnership with one or more general partners who manage the business and limited partners who invest but are not involved in management.

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16
Q

Limited liability company (LLC)

A

A hybrid business entity offering the limited liability of a corporation with the tax benefits of a partnership.

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17
Q

Partition

A

The legal process to divide co-owned property among the owners.

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18
Q

Partnership

A

A business organization where two or more individuals share ownership and operation responsibilities.

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19
Q

Right of survivorship

A

The right for co-owners to inherit each other’s share of property upon death, typically found in joint tenancy.

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20
Q

Separate property

A

Property owned by one spouse before marriage or acquired by gift or inheritance during the marriage.

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21
Q

Severalty

A

Ownership of property by one person or entity.

22
Q

Sole proprietorship

A

A business owned and operated by one individual, who is personally liable for all debts and obligations.

23
Q

Syndicate

A

A group of individuals or entities who come together to invest in a real estate project.

24
Q

Tenancy in common

A

A form of co-ownership without rights of survivorship. Each owner can sell or bequeath their share independently.

25
Q

Trust

A

A legal arrangement in which one person (the trustee) holds and manages property for the benefit of another (the beneficiary).

25
Q

Trustee

A

The person or entity who manages property in a trust.

26
Q

Time-sharing

A

A form of ownership where multiple individuals own or lease a property for specific time periods throughout the year.

27
Q

Trustor

A

The person who creates a trust by transferring ownership of property to a trustee.

28
Q

Undivided interest

A

Ownership of a share of property that is not divided into specific sections, but instead shared with other owners.

29
Q

Which BEST describes ownership of a time-share?

A. The purchaser owns a right to use the facilities in a specified project(s) for a specified length of time for a specified number of years.
B. Two or more purchasers become members of a business organization and receive a proprietary lease to a condominium for the life of the corporation.
C. Two or more people or firms join together to make and operate a real estate investment.
D. An association of two or more people operates a business as co-owners and share in the business profits and losses.

A

Answer: A. The purchaser owns a right to use the facilities in a specified project(s) for a specified length of time for a specified number of years.
Reasoning: Time-sharing involves purchasing a right to use a property for a set period each year. This is common in vacation properties and resorts where owners have specified usage periods.

30
Q

Howard and Tinker purchased a parcel of real estate. The seller’s deed received at the closing conveyed the property “to Howard Evers and Tinker Chance” without further explanation. Thus Howard and Tinker

A. are joint tenants.
B. are tenants in common.
C. hold community property rights.
D. hold equal shares in a land trust.

A

Answer: B. are tenants in common.
Reasoning: In the absence of specific language, co-owners are presumed to hold title as tenants in common, meaning each owns a share of the property without rights of survivorship.

31
Q

Martin, Eduardo, and Shari are joint tenants owning a tract of land. Shari conveys her interest to Sandra. After the conveyance, which relationship exists?

A. Martin, Eduardo, and Sandra are joint tenants.
B. Martin, Eduardo, and Sandra are all tenants in common.
C. Martin, Eduardo, and Shari are all tenants in common.
D. Martin and Eduardo are joint tenants; Sandra is a tenant in common.

A

Answer: D. Martin and Eduardo are joint tenants; Sandra is a tenant in common.
Reasoning: When one joint tenant sells or conveys their interest, the new owner (Sandra) becomes a tenant in common with the remaining joint tenants, who still hold joint tenancy between themselves.

32
Q

The four unities of time, title, interest, and possession are associated with which of the following?

A. Community property right of survivorship
B. Ownership in severalty
C. Tenancy in common
D. Joint tenancy

A

Answer: D. Joint tenancy
Reasoning: The four unities—time, title, interest, and possession—are the defining features of joint tenancy. They must all be present for a joint tenancy to exist, providing equal ownership and the right of survivorship.

33
Q

Ownership of real property by one person without the ownership participation of others is called

A. joint tenancy.
B. severalty.
C. solety.
D. condominium.

A

Answer: B. severalty.
Reasoning: Ownership in severalty means the property is owned by one person or entity exclusively, without any co-owners.

34
Q

A purchaser under the cooperative form of ownership receives

A. stock in the corporation and a proprietary lease.
B. ownership of the airspace within the unit and a prorated portion of the common elements.
C. the advantage of not having ownership interest destroyed by default of other occupants/shareholders.
D. the statutory right to sell his interest back to the cooperative at the current market price.

A

Answer: A. stock in the corporation and a proprietary lease.
Reasoning: In a cooperative, the buyer becomes a shareholder in the corporation that owns the property, and they receive a proprietary lease granting them the right to occupy a unit.

35
Q

The term right of survivorship is closely associated with

A. a corporation.
B. a trust.
C. a joint tenancy.
D. a tenancy in common.

A

Answer: C. a joint tenancy.
Reasoning: Right of survivorship is a key feature of joint tenancy, meaning that when one joint tenant dies, their share automatically passes to the surviving joint tenants.

36
Q

Because a corporation is a legal entity (an artificial person), real estate owned by it is owned in

A. joint tenancy.
B. partnership.
C. severalty.
D. survivorship tenancy.

A

Answer: C. severalty.
Reasoning: Corporations hold property in severalty, as they are considered a single legal entity owning the property outright.

37
Q

Under community property law in Texas, which of the following would be considered separate property?

A. Income from separate property
B. Inheritance of one spouse during marriage
C. Earnings of both spouses during marriage
D. Real estate acquired after marriage

A

Answer: B. Inheritance of one spouse during marriage
Reasoning: In Texas, community property law considers property acquired by inheritance, gift, or owned before marriage as separate property, while earnings and property acquired during marriage are generally community property.

37
Q

Anthony and Anita purchased a block of apartment buildings in Houston and, for business reasons, took ownership to the real estate under a land trust, as permitted in Texas. Under this ownership arrangement

A. their identities will not appear in the public records.
B. they will be unable to control the property or personally participate in the building’s management.
C. the land trust exists in perpetuity.
D. legal title is held by the beneficiaries.

A

Answer: A. their identities will not appear in the public records.
Reasoning: In a land trust, the trustor (beneficiary) retains privacy because their name does not appear in public records; only the trustee’s name appears as the property holder.

38
Q

An ownership interest that can be an estate interest or a right of use is a

A. condominium.
B. time-share.
C. trust.
D. cooperative.

A

Answer: B. time-share
Reasoning: A time-share can provide either an estate interest (ownership) or merely a right of use (leasehold interest) for a specified time each year, typically in vacation properties.

39
Q

All of the following are forms of co-ownership EXCEPT

A. tenancy in common.
B. tenancy by the entirety.
C. tenancy in severalty.
D. joint tenancy.

A

Answer: C. tenancy in severalty
Reasoning: Tenancy in severalty is ownership by a single person or entity, while tenancy in common, tenancy by the entirety, and joint tenancy involve shared ownership among multiple parties.

39
Q

A statutory life estate that a family has in its residence is called

A. an encumbrance.
B. a homestead.
C. a leasehold.
D. dower.

A

Answer: B. a homestead
Reasoning: The homestead exemption protects a family’s residence from certain creditors and judgments under Texas law. It is a statutory life estate ensuring that families are not left without shelter due to debt.

39
Q

Which of the following is NOT a form of co-ownership?

A. Tenancy by the entirety
B. Tenancy in common
C. Ownership in severalty
D. Joint tenancy

A

Answer: C. Ownership in severalty
Reasoning: Ownership in severalty refers to sole ownership by one individual or entity. The other forms—tenancy by the entirety, tenancy in common, and joint tenancy—are forms of co-ownership involving multiple owners.

40
Q

Which of the following is recognized under Texas community property law?

A. Property owned before marriage and inherited property are considered separate property.
B. Separate property acquired before marriage is considered community property.
C. Property purchased after marriage is always considered separate property.
D. Both spouses automatically have joint tenancy rights.

A

Answer: A. Property owned before marriage and inherited property are considered separate property.
Reasoning: In Texas, community property law distinguishes separate property as property owned before marriage or acquired through inheritance or gift, while property acquired during the marriage is generally community property.

41
Q

If the co-owners of a property disagree on how to divide the property, they can file a suit in court for

A. partition.
B. division.
C. severance.
D. possession.

A

Answer: A. partition
Reasoning: A partition suit allows co-owners to legally divide property or force its sale, with the proceeds distributed among the owners according to their ownership shares.

42
Q

Upon the death of the owner of a condominium, ownership of the unit is most likely to pass according to

A. the provisions of the deceased owner’s will.
B. the laws of descent and distribution.
C. a proprietary lease.
D. the master deed.

A

Answer: A. the provisions of the deceased owner’s will.
Reasoning: Since a condominium is real property, it passes to heirs according to the deceased owner’s will or, if there is no will, through the laws of intestate succession.

43
Q

The type of business entity that combines the tax advantages of a partnership and the limited liability offered by a corporation is a

A. general partnership.
B. limited liability company (LLC).
C. corporation.
D. joint venture.

A

Answer: B. limited liability company (LLC)
Reasoning: A limited liability company (LLC) offers the pass-through tax benefits of a partnership while limiting the liability of its owners, much like a corporation. It is a popular structure for real estate investments.

44
Q

All of the following involve ownership of real property EXCEPT

A. condominium.
B. cooperative.
C. tenancy in common.
D. ownership in severalty.

A

Answer: B. cooperative
Reasoning: In a cooperative, owners purchase shares in a corporation that owns the property, and they receive a proprietary lease to occupy a unit, rather than owning real property directly.

45
Q

The property in a trust is held by the

A. trustor.
B. trustee.
C. beneficiary.
D. trust agent.

A

Answer: B. trustee
Reasoning: In a trust, the trustee holds legal title to the property and manages it for the benefit of the beneficiary, following the instructions of the trustor.

45
Q

When a corporation takes complete ownership of a property, it is considered to be ownership in

A. joint tenancy.
B. tenancy in common.
C. severalty.
D. trust.

A

Answer: C. severalty
Reasoning: A corporation, like an individual, can own property in severalty, meaning sole ownership. The corporation is treated as a single legal entity that holds full ownership of the property.

45
Q

All of the following unities are required for joint tenancy EXCEPT

A. title.
B. time.
C. possession.
D. ownership.

A

Answer: D. ownership
Reasoning: Joint tenancy requires the unities of title, time, interest, and possession. All owners must acquire their interest at the same time, from the same deed, with equal rights to possess the property.

46
Q

Which of the following statements applies equally to both joint tenancy and tenancy by the entirety?

A. The last survivor becomes a severalty owner.
B. A deed signed by one owner will convey a fractional interest.
C. A co-owner may bequeath their interest to another party.
D. A deed will not convey any interest unless signed by both spouses.

A

Answer: A. The last survivor becomes a severalty owner
Reasoning: Both joint tenancy and tenancy by the entirety include the right of survivorship, meaning the last surviving co-owner becomes the sole owner of the property in severalty.

Real Estate Principles (18 decks)

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