Unit 4: Forms of Real Estate Ownership Flashcards
Real estate may be held in one of three ways:
- Ownership in severalty (one owner)
- Co-ownership (more than one owner)
- Ownership by a trust (property held for the benefit of another
Ownership in severalty occurs when…
property is owned by one individual, corporation, or other entity.
The owner in severalty has sole rights to the property and sole discretion to….
sell, lease, leave as a bequest in a will, or otherwise transfer part or all of the ownership rights to another person
Co-ownership (or concurrent owners)
when a title to a parcel of real estate is held by two or more individuals
Forms of co-ownership
- Tenancy in common (TIC)
- Joint tenancy
- Tenancy by the entirety
- Community property
Tenancy in common (TIC)
Each tenant holds an undivided interest in the property.
In TIC, co-owners have unity of possession, meaning that each owner is…
entitled to possession and use of the entire property, even though each holds only a fractional ownership interest
If no fractions are stated in the deed creating a TIC, the tenants are presumed to hold equal shares
True
A share owned by a married couple can be transferred only with the agreement of both parties.
True
The TIC has become popular in expensive urban areas because it allows a multi-family dwelling to be sold to multiple owners without the need to convert the entire property to the condominium form of ownership (long and expensive process).
True
The downside of co-owner’s TIC interest is that it may not be as easy to _________ as property held in a different form of ownership.
sell
Joint Tenancy
property owned by two or more people whether married or unmarried. The distinguising feature is right of surviorship.
Right of Survivorship
Upon the death of a joint tenant, the deceased’s interest transfers directly to the surviving joint tenant or tenants.
The last survivor takes title in severalty and has all the rights of sole ownership, including the rights to pass the property to any heirs.
True
A joint tenancy can be created only by the ____ act of conveying a deed or giving the property by will or living trust
intentional
To create a joint tenancy, four elements or unities are needed (PITT)…
- Unity of possession
- Unity of interest
- Unity of time
- Unity of title
unity of possession
all joint tenants hold are undivided right to possession
Unity of interest
all joint tenants hold an equal ownership interest
Unity of time
all joint tenants acquire their interests at the same time
Unity of title
all joint tenants acquire their interests by the same document
The four requirements or unities are met when the right to posession of a property is acquired by all of the joint owners by means of a single instrument that conveys an equal undivided interest to all of them, stipulating that they are to be joint owners “with the right of surivorship”
True
A joint tenancy is destroyed when…
any one of the four unities of joint tenancy is terminated
If the joint tenacy has more than two owner to begin with, and one of them conveys that interest, there will still be a joint tenacy but only as to the interests held by the remaining joint tenants; the new owner is a…
tenant in common (TIC)
Partition
a legal way to dissolve the relationship between co-owners of real estate when the parties do not voluntarily agree to its termination
Tenancy by entirety
special form of co-ownership used in some states that allows a spouse to inherit the other spouse’s ownership interest upon death
Early common law viewed a married couple as
one legal person (entirety)
Community Property Law
any property acquired during marriage is considered to be obtained by mutual efforts
Separate property
real or personal property that was owned soley by either spouse before the marriage, acquired by gift or inheritance by one spouse during the marriage, or purchased with separate funds during the marriage
Any conveyance or encumbrance of community property requires the signatures of both spouses in ______ property.
Community
Trust
a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party
Trustor
creates the trust
beneficiary
the person who benefits from the trust
Trustee
is the party who holds legal title to the property and is entrusted with carrying out the trustor’s instructions regarding the purpose of the trust
Fiduciary
A person who acts in confidence or trust and has a special legal relationship with the beneficiary
Living trust
created by agreement during the property’s owner’s lifetime
Testamentary Trust
established by will after the owner’s death
Trustors expect that the trustee will complete certain duties indicated such as care and investment of the trust assets to produce an income.
True
Living trusts minimize the time and costs of probate
True
The trustee is often the trustor
True
Upon the death of the trustee, the property passes to the beneficiary or beneficiaries without the need for probate.
True
Land trust
Real estate is the only asset and the beneficiary is also the trustor which can help them manage, control, right of posession, right of income or proceeds. Continue on definitie terms, usually 20 years
One of the distinguishing charachteristics of a land trust is that the public records usally do not….
name the beneficiary
A beneficial interest in property can be transferred by assignment
True
The beneficial interest in property can be pledged as security for a loan without having a mortgage recorded
True
Ownership by a business organization makes it possible for many people to hold an interest in the same parcel of real estate
True
Partnership
an association of two or more people who carry on a business for profit as co-owners
General Partnership
all the partners participate in the operation and management of the business and share full liability for business losses and obligations
Limited Partnership
Consists of one or more general partners, as well as limited partners
Limited partners are not legally permitted to participate, with the result that each can be held liable for business losses only to the amount invested
True
Limited partnership allows for investors to organize and invest small amounts of capital to a large real estate project with minimal risk
True
Uniform Partnership Act
Provides for the continuation of the existing business even under the circumstances of partners death, withdrawl, or bankruptcy
Corporations
a legal entity created under the authority of the laws of the state from which it receives its charter
Board of Directors
Manage and operate the corporation and are elected by its shareholders
BC the Corporation is a legal entity, it can own real estate in SEVERALTY or as TENANT IN COMMON with other natural/articial persons
True
LLC
combines the most attractive features of limited partnerships and corporations. Members enjoy the limited liability of a corp, tax advantages of a partnership-income flows directly to members and is not faced with double taxation
Condominiums, cooperatives, and time-share arrangements are three types of property ownership that have arisen in residential, commercial, and industrial markets
True
Condominiums
Single units are located in lowrise and highrise complexes, as town houses or stand-alone units
____ owners have fee title to interior space of units and share title to common areas
Condominium Ownership
Condominiums are transferred by
deed, will, or living trust
Cooperative
single units are located in lowrise and highrise complexes
Tenants own shares in a corporation, partnership, or trust that holds title to the building. Tenants have proprietary leases and the right to occupy their respective units
Cooperative Ownership
Shareholders may sell or transfer shares. Check bylaws.
Cooperative Transfers
Time-share
Multiple purchasers buy interests in real estate-usually resort or hotel property. Each purchaser has right to use unit for set time each year or a number of usuage points
Fee simple interest. Use agreement is personal property that expires after a specified time period.
Time-Share Ownership
Time-share Transfer
An interest in a time-share estate may be conveyed by deed or will by the owner. An interest in time-share use is personal property that may or may not be transferable according to the contract.
Horizontal property acts
Also known has Condominium laws, the owner of each unit holds a fee simple title to the unit
Common elements
land, coutryard, lobbies, the exterior structure, hallways, elevators, stairways, and the rood, as well as recreational facilities like pools, tennis coutrs, and golf courses
Lowrises, town houses that share a wall, and detached structure can all be condominiums
True
RIght of first refusal
the owner is required to offer the unit at the same price to the other owners in the condominium or the association before accepting an outside purchase offer.
In a ________, a corporation holds title to the land and the building, which the corporation sell shares of stock to prospective tenants
Cooperative
In a Cooperative, the purchaser becomes a shareholder in the corporation by virtue of stock ownership and receives a proprietary lease to the apartment for the life of the corporation
True
Cooperative tenant-owners do not own real estate instead they own an interest in a corporation that has only one asset: the building
True
An important issue in most cooperatives is the
method by which shares in the corporation may be transferred to new owners
The burden of any defaulted payment in a cooperative falls on…
the remaining shareholders
Approval of prospective tenants by the board of directors in a cooperative will include_________ because the property may be sold by court order in a foreclosure suit.
financial evaluation
time-share use is a contract right under which______ owns the real estate
the developer
