Unit 5 Review questions

Question 1

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

Answer 1

The man and woman are tenants in common

Why

Because there are two deeds made at different times, the four unities of joint tenancy have not been met. Therefore, the man and woman are tenants in common.

Question 2

Three people own a large parcel of undeveloped land in joint tenancy. One of them wants to build a shopping center on the property, while the other two want to use it as an organic farm. The individual tries to buy the other tenants’ interests, but they refuse to sell. Which of these is the individual’s BEST option?

Answer 2

File a suit for partition

Why.
When co-owners cannot come to an agreement, they must file for partition in court. The property will not physically be divided; rather, one or more will be given the opportunity to buy the others out. If this is not possible, then the property will be sold, and the money will be divided appropriately.

Question 3

What kind of ownership do the horizontal property acts regulate?

Answer 3

Condominiums

Why.

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

Question 4

The four unities characteristic of a tenancy in common are possession, interest, title, and time.

Answer 4

False. The four unities characteristic of a joint tenancy are possession, interest, title, and time.

Question 5

The management and operation of a cooperative are determined by the bylaws of the corporation that owns the property.

Answer 5

True. The bylaws of the corporation that owns the property determine the management and operation of a cooperative.

Question 6

An owner can transfer or sell a condominium unit to anyone, unless the condominium association provides for a right of first refusal.

Answer 6

True

Why.
Under condominium ownership, each unit becomes a separate parcel of real estate that is owned in fee simple and may be transferred to whomever the owner chooses, unless the condominium association provides for a right of first refusal.

Question 7

A man creates a trust to pay for a broker’s real estate education. The trust is operated by a woman, who makes payments on behalf of the broker directly to the real estate school. Based on these facts, which of these statements BEST characterizes the relationships among these parties?

Answer 7

The man is the owner-trustor, the broker is the beneficiary, and the woman is the person who manages the trust—that is, the trustee.

Question 8

In the case of land trusts, the beneficiary is usually also the

Answer 8

trustor.

Why.

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

Question 9

Condominium owners hold their own units in fee simple and the common elements under proprietary leases.

Answer 9

False

Why

Condominium owners hold their own units in fee simple and the common elements as tenants in common.

Question 10

Ownership of a cooperative interest is personal property.

Answer 10

True. When buying into 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.

Question 11

The three basic ways in which a fee simple estate may be held are in severalty, in co-ownership, and in trust.

Answer 11

True. Although the forms of ownership available are controlled by state laws, a fee simple estate may be held in three basic ways: in severalty, in co-ownership, and in trust.

Question 12

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

Answer 12

Corporations are artificial persons, and therefore, hold ownership in severalty.

Question 13

Shareholders in a cooperative receive shares of stock that entitle them to a

Answer 13

The proprietary lease

Why

is part of the ownership of the cooperative stock and gives the owner the right to occupy a specific apartment. Common elements refer to the property owned jointly by condominium owners.

Question 14

Which of these cannot take title as a joint tenant with right of survivorship?

Answer 14

corporation

Why.
Because a corporation continues indefinitely until terminated by legal action, a corporation may never take title as a joint tenant. It would never die.

Question 15

In a large highrise condominium, each unit is owned by individual owners. The elevators, parking garage, and swimming pool are called

Answer 15

common elements.

Why
The property that condominium owners own together is called common elements. Community property is a system of property ownership based on the theory that each spouse has an equal interest in property acquired during the marriage, making a distinction from property acquired before marriage, that is, separate propert

Question 16

All of these are characteristics of a tenancy by the entirety EXCEPT

Answer 16

the surviving spouse automatically owns one-half of the property acquired during the marriage.

Question 17

Co-tenants may terminate their co-ownership by asking a court to partition the property.

Answer 17

True

Why.
Partition is a legal way to dissolve the relationship when the parties do not voluntarily agree to its termination.

Question 18

Two women own an apartment building together as joint tenants. They share equally in the expenses and profits. One day, one of the women decides to end the relationship. If she sells her interest to a man by signing and delivering a deed, which of these statements is TRUE?

Answer 18

The man and the remaining woman will be tenants in common

Question 19

In a community property state, community property includes all property, both real and personal, acquired by either party prior to or during the marriage.

Answer 19

False.

Why

In a community property state, community property includes all property, both real and personal, acquired by either party only during the marriage, except by gift or inheritance

Question 20

Membership camping is similar to

Answer 20

cooperative ownership.

Question 21

A limited liability company (LLC) combines the most attractive features of land trusts and testamentary trusts.

Answer 21

False

Why

An LLC combines the most attractive features of limited partnerships and corporations. The members of an LLC enjoy the limited liability offered by a corporate form of ownership. In addition, the LLC offers the tax advantages of a partnership—income flows directly to the member of the LLC, instead of being subject to the double taxation of a corporation.

Question 22

Based on the facts in the previous question, if the property collapses, resulting in injury and property damage worth $275,000, what will be Mike’s liability?

Answer 22

$50,000

Why

The limited partners are limited in liability to the $50,000 amount of their original investment.

Question 23

The term severalty means that there is only one owner of a single property.

Answer 23

True

Why
Ownership in severalty occurs when property is owned by one individual or corporation.

Question 24

A time-share estate includes the right to use the property for a certain specified period of time.

Answer 24

True

Why?

 Time-share ownership permits multiple purchasers to buy interest in real estate; each purchaser receives the right to use the facilities for a certain period.

Question 25

In a tenancy in common, if the fractions of ownership are NOT stated in the deed, how are they determined?

Answer 25

The tenants are presumed to hold equal shares.

Question 26

What form of ownership is employed when one person transfers ownership to someone else to hold and manage for a third person?

Answer 26

Trust

Why?

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. Severalty indicates one owner. Joint tenancy is a form of ownership whereby, as joint owners die, the surviving owners acquire the deceased tenant’s interest.

Question 27

In a tenancy in common, property is owned by two or more owners with the right of survivorship.

Answer 27

False

Why?

In a joint tenancy, property is owned by two or more owners with the right of survivorship.

Question 28

A man owns and lives year-round in a cottage in a lakefront community. His ownership of the cottage is in fee simple. He 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 man’s ownership is probably BEST described as a

Answer 28

condominium

Question 29

A major advantage of living trusts is that they reduce the time and costs of probate.

Answer 29

True. 
Why
Living trusts have become a major estate planning tool used to minimize the time and costs of probate.

Question 30

When all of the other owners’ interests in a joint tenancy have passed to the one surviving owner, that owner then holds title in entirety.

Answer 30

False. 

Why
A joint tenancy continues indefinitely, until there is only one remaining owner, who then holds title in severalty.

Question 31

The person who creates a trust is called the trustor.

Answer 31

True. 
A trust is a device by which one person, called the trustor, transfers property to the trustee, who is entrusted to carry out the trustor’s instruction regarding the trust. The party who benefits from the trust is called the beneficiary.

Question 32

A will provided that the local banker take care of the deceased person’s estate until the children reach age 25. What kind of trust is this?

Answer 32

Testamentary trust

Why?

A testamentary trust is established by will after the trustor’s death. A living trust is established during the trustor’s lifetime. Real estate is the only asset in a land trust. A deed of trust (also called a trust deed) is a financing instrument.

Question 33

When title to a single parcel of real estate is held by two or more individuals, the parties may be called concurrent owners.

Answer 33

True. 
Why
When title to one parcel of real estate is held by two or more individuals, those parties are called co-owners or concurrent owners.

Question 34

In a tenancy by the entirety, neither spouse can convey a half-interest to a third party, and neither spouse may take court action to partition or divide the property.

Answer 34

True. 
During their lives, under tenancy by the entirety, a husband and wife can convey title only by a deed signed by both parties.

Question 35

The ownership of an undivided fractional interest in a property is characteristic of a tenancy in common.

Answer 35

True. 
Why?
In a tenancy in common, each tenant holds an undivided fractional interest in the property; the co-owners have unity of possession, meaning that they are entitled to possession of the whole property. It is the ownership interest not the property that is divided.

Question 36

All of these unities are required for a joint tenancy EXCEPT

Answer 36

unity of time
Why?
To create joint tenancy ownership, four unities are required: possession, interest, time, and title;

Question 37

When two or more individuals decide to buy a property together, it results in a

Answer 37

co-ownership

Question 38

Mike, Rebecca, and Noah agree to purchase and operate a property as a permanent investment. Mike and Rebecca each contribute $50,000. Noah contributes $30,000 and agrees to run the day-to-day operations of the business, which they call “Property Group Partners.” Neither Mike nor Rebecca has any right to participate in the operation of the venture. Based on these facts, what type of business organization has Mike, Rebecca, and Noah established?

Answer 38

Limited partnership

Why?

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

Question 39

A company is a legal entity, created by charter under the laws of the state. The company is managed and operated by a board and is permitted to buy and sell real estate. When one of its directors dies, the company continues to operate. Because of its structure, the company’s income is subject to double taxation. The company is BEST described as a

Answer 39

corporation.

Why?

The corporation would not be affected if one of the directors dies. The particular tip-off to this answer is double taxation, which applies to corporations.

Question 40

When a joint tenant conveys interest in the jointly held property to a new owner, the new owner becomes a joint tenant.

Answer 40

False. 
Why.?
A joint tenant may freely convey interest in the jointly held property to a new owner; however, doing so will destroy the unities of time and title, and the new owner cannot become a joint tenant.

Question 41

A man with two sons and a woman with two daughters are getting married, and they are buying a house together. They ask the real estate professional for advice about how to take title. What advice should the real estate professional offer?

Answer 41

Suggest that they consult with an attorney

Question 42

In a general partnership, the death of one of the partners automatically bankrupts the remaining partners.

Answer 42

False. 
Why?
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.

Question 43

Three brothers bought a farm together, and the deed listed only each of their names. What form of ownership are they presumed to have taken?

Answer 43

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Tenancy in common