Unit 4: Forms of Real Estate Ownership- 6%

Question 1

Common Elements

Answer 1

Parts of a property that are necessary or convenient to the existence, maintenance, and safety of a condominium or are normally in common use by all the condominium residents. Each condominium owner has an undivided ownership interest in the common elements.

Question 2

Community Property

Answer 2

A system of property ownership based on the theory that each spouse has an equal interest in the property acquired by the efforts of either spouse during marriage. A holdover of Spanish law found predominantly in the western U.S. states; the system was unknown under English common law.

Question 3

Condominium

Answer 3

The absolute ownership of a unit in a multiunit building based on a legal description of the airspace the unit actually occupies, or a separate dwelling unit in a multiunit development, plus an undivided interest in the ownership of the common elements in the building or development, which are owned jointly with the other condominium unit owners.

Question 4

Cooperative

Answer 4

A residential multiunit building whose title is held by a trust or corporation that is owned by and operated for the benefit of people living within the building who are the beneficial owners of the trust or shareholders of the corporation, each possessing a proprietary lease to a property unit.

Question 5

Co-ownership

Answer 5

Title ownership held by two or more persons.

Question 6

Corporation

Answer 6

An entity or organization, created by operation of law, whose rights of doing business are essentially the same as those of an individual. The entity has continuous existence until it is dissolved according to legal procedures.

Question 7

General Partnership

Answer 7

See partnership.

all the partners participate in the operation and management of the business and share full liability for business losses and obligations

a typical form of joint venture in which each general partner shares in the administration, profits, and losses of the operation.

Question 8

Joint Tenancy

Answer 8

Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, the decedent’s interest passes to the surviving joint tenant or tenants by the right of survivorship.

Question 9

Limited Liability Company (LLC)

Answer 9

A form of business organization that combines the most attractive features of limited partnerships and corporations.

Question 10

Limited Partnership

Answer 10

See partnership.

consists of one or more general partners, as well as limited partners.

Question 11

Partnership

Answer 11

An association of two or more individuals who carry on a continuing business for profit as co-owners. Under the law, a partnership is regarded as a group of individuals rather than as a single entity separate from the individual owners. A general partnership is a typical form of joint venture in which each general partner shares in the administration, profits, and losses of the operation. A

Question 12

Partnership

Answer 12

is an association of two or more persons who carry on a business for profit as co-owners. In a general partnership, all the partners participate in the operation and management of the business and share full liability for business losses and obligations. A limited partnership consists of one or more general partners, as well as limited partners. The business is run by the general partner or partners. The 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. The limited partnership is a popular method of organizing investors because it permits investors with small amounts of capital to participate in large real estate projects with minimum personal risk.

If a partner in a general partnership dies, withdraws, or goes bankrupt, the traditional common law result would be to dissolve the partnership, which could be reorganized as a partnership of the surviving partners in order to conduct business. Nearly every state has now adopted the Uniform Partnership Act, which provides for the continuation of the existing business even under these circumstances.

In a limited partnership, the partnership agreement may provide for the continuation of the organization after the death or withdrawal of one of the partners.

Question 13

Right Of Survivorship

Answer 13

See joint tenancy.

Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, the decedent’s interest passes to the surviving joint tenant or tenants by the right of survivorship.

Question 14

Separate Property

Answer 14

Under community property law, property owned solely by either spouse before the marriage, acquired by gift or inheritance during the marriage, or purchased with separate funds after the marriage

Question 15

Severalty

Answer 15

Ownership of real property by one person only; also called sole ownership.

Question 16

Tenancy By The Entirety

Answer 16

The joint ownership, recognized in some states, of property acquired by husband and wife during marriage. Upon the death of one spouse, the survivor becomes the owner of the property.

Question 17

Tenancy In Common (TIC)

Answer 17

A form of co-ownership by which each owner holds an undivided interest in real property as if each were sole owner. Each individual owner has the right to partition. Unlike joint tenants, tenants in common have the right of inheritance.

Question 18

Time-share

Answer 18

A form of ownership interest that may include an estate interest in property and that allows use of the property for a fixed or variable time period.

Question 19

Town House

Answer 19

A type of residential dwelling with two floors that is connected to one or more dwellings by a common wall or walls. Title to the unit and lot vest in the owner who shares a fractional interest with other owners in any common areas.

Question 20

Trust

Answer 20

A fiduciary arrangement whereby property is conveyed to a person or an institution, called a trustee, to be held and administered on behalf of another person, called a beneficiary. The one who conveys the trust is called the

Question 21

A corporation is a legal entity, recognized as an artificial person. Property owned solely by the corporation is owned in

Answer 21

severalty.

The term person does not always refer to a natural individual—a human; the law regards a corporation as an artificial person. Because this is so, a corporation can own real estate in severalty (alone).

Question 22

Which of the following refers to ownership by one person?

Answer 22

Severalty

Severalty ownership is ownership by one person severed—cut off—from all others.

Question 23

A legal arrangement under which the title to real property is held to protect the interests of a beneficiary is

Answer 23

a trust.

Trusts protect beneficiaries. Partnerships can protect limited partners; corporations can protect stockholder-owners.

Question 24

The real property interest that takes the form of personal property is

Answer 24

cooperative unit ownership.

Because it involves receiving shares of stock and a leasehold—both of which are considered by common law to be personal property—cooperative ownership is personal, not real, property.

Question 25

Default in payment of real estate taxes by a condominium unit owner

Answer 25

can result in a forced sale of that unit

The default by a condominium unit owner in payment of taxes or a mortgage loan can result in a tax or foreclosure sale of that unit.

Question 26

Which of the following is TRUE regarding community property rights?

Answer 26

Any property acquired during a marriage is considered to be obtained by mutual effort.

Community property laws are based on the idea that spouses, rather than merging into one entity, are equal partners in the marriage. Under community property laws, any property acquired during a marriage is considered to be obtained by mutual effort. Community property law varies among the states, but all recognize two kinds of property: separate property and community property.

Question 27

One of the distinguishing characteristics of a land trust is that

Answer 27

public records usually do not name the beneficiary.

One of the distinguishing characteristics of a land trust is that the public records usually do not name the beneficiary.

Question 28

If property is held by two or more owners as joint tenants, the interest of a deceased co-owner will be passed to

Answer 28

the surviving owner or owners.

Survivorship means that the interest of a deceased cotenant will pass to, and be divided equally among, the still-living (surviving) cotenants.

Question 29

A resident owns and lives year-round in a cottage in a lakefront community. The resident’s ownership of the cottage is in fee simple. The resident also owns an undivided percentage interest in a parking lot, a golf course, and a swimming pool, all located in the development. Based on these facts alone, the resident’s ownership is probably BEST described as

Answer 29

a condominium.

t appears that the resident has condominium ownership, because the resident owns the cottage as well as the interest in the common elements. Cooperative ownership is ruled out, because the resident does not have a proprietary lease. It is not a time-share, because the resident clearly owns more than the right to use the property only at specific times.

Question 30

Which of the following is NOT one of the four unities of title?

Answer 30

Insurance

The unities are PITT: possession, interest, time, and title.

Question 31

What kind of ownership do the horizontal property acts regulate?

Answer 31

Condominiums

Condominiums are regulated by the horizontal property acts enacted in most states.

Question 32

A brother and sister were co-owners of a lot. The sister became the sole owner automatically when the brother died. The form of ownership they had was

Answer 32

joint tenancy.

Because the sister automatically inherited, she and her brother must have been joint tenants.

Question 33

A fee simple estate may be held

Answer 33

in three basic ways.

A fee simple estate may be held in three basic ways: in severalty, in trust, or in co-ownership.

Question 34

Title to a property is held by two or more individuals; this property is held in

Answer 34

co-ownership

When title to a property is held by two or more individuals, the property is being held in co-ownership.

Question 35

Membership camping is similar to

Answer 35

time-share use.

The owner of a membership interest in a campground purchases the right to use the developer’s facilities, which is similar to time-sharing; however, the owner may not be limited to a specific time as in the case of a typical time-share arrangement.

Question 36

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

Answer 36

a time-share.

A real property interest and the right to use the facilities for a certain period of time is called a time-share.

Question 37

In February, a seller conveyed an undivided one-half interest in a parcel of land to buyer A. In March, the seller conveyed the remaining one-half interest to buyer B. The deed to buyer B included the statement: “Buyer B is to be a joint tenant with buyer A.” Both deeds were recorded. Based on these facts, which of these statements is TRUE?

Answer 37

Buyer A and buyer B are tenants in common.

Because there are two deeds made at different times, the four unities of joint tenancy have not been met; therefore, buyer A and buyer B are tenants in common.

Question 38

A man owns one of 20 units in fee simple, along with a 5% ownership share in the parking facilities, recreation center, and grounds. What kind of property does he own?

Answer 38

Condominium

When a person owns part of a development in fee and a percentage of the rest in common with the other unit owners, this is condominium ownership.

Question 39

Real estate can be owned under a variety of trusts, including living or testamentary trusts and

Answer 39

land trusts.

Real estate can be owned under a variety of trusts, including living or testamentary trusts and land trusts.

Question 40

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

Answer 40

severalty.

A corporation is an artificial person, which means that it can hold ownership in severalty.

Question 41

A trust is a device by which one person transfers ownership of property to someone else to hold or manage for

Answer 41

the benefit of a third party.

A trust is a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party.

Question 42

A married couple co-owns a farm and has the right of survivorship. This arrangement is MOST likely

Answer 42

an estate by the entirety.

Married persons may own property together as tenants in common, joint tenants, or as community property. Being more than one person, a couple cannot own in severalty. The right of survivorship is a distinguishing feature of tenancy by the entirety, which some states recognize as a form of joint tenancy reserved for a married couple.

Question 43

Ownership in severalty means

Answer 43

a sole owner’s interest is separate from any other property interest.

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, will, lease, or otherwise transfer part or all of the ownership rights to another person.

Question 44

A grandparent creates a trust to pay for a grandchild’s education. The trust is operated by an attorney who makes payments directly to the school. Based on these facts, which of these statements BEST characterizes the relationships among these parties?

Answer 44

The grandparent is the trustor, the grandchild is the beneficiary, and the attorney is the trustee.

The grandparent is the owner-trustor, the grandchild is the beneficiary, and the attorney is the person who manages the trust—that is, the trustee.

Question 45

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

Answer 45

Joint tenancy

A joint tenancy can only be created by an intentional act and requires the four unities—PITT—to be present.

Question 46

Three friends agree to purchase and operate a property as a permanent investment. Two friends each contribute $50,000. The third contributes $30,000 and agrees to manage the day-to-day operations of the business, which the friends call “Property Group Partners.” Only the third friend has any right to participate in the operation of the venture. Based on these facts, what type of business organization have these friends established?

Answer 46

Limited partnership

A limited partnership limits the participation of the silent partners, and also limits their liability. A general partnership would require that all are equally involved in running the operation, which would mean that all are exposed to liability.

Question 47

In a land trust, the beneficiary is usually also

Answer 47

the trustor.

In a land trust, the beneficiary is usually also the trustor. The beneficiary retains management and control of the real property and has the right of possession as well as the right to any income.

Question 48

An estate in severalty is associated with which of the following?

Answer 48

Sole and separate ownership

An estate in severalty is “severed” from other estates and is held by an individual owner.