Unit 5 Review questions Flashcards
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?
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.
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?
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.
What kind of ownership do the horizontal property acts regulate?
Condominiums
Why.
Condominiums are regulated by the horizontal property acts enacted in most states.
The four unities characteristic of a tenancy in common are possession, interest, title, and time.
False. The four unities characteristic of a joint tenancy are possession, interest, title, and time.
The management and operation of a cooperative are determined by the bylaws of the corporation that owns the property.
True. The bylaws of the corporation that owns the property determine the management and operation of a cooperative.
An owner can transfer or sell a condominium unit to anyone, unless the condominium association provides for a right of first refusal.
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.
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?
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.
In the case of land trusts, the beneficiary is usually also the
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.
Condominium owners hold their own units in fee simple and the common elements under proprietary leases.
False
Why
Condominium owners hold their own units in fee simple and the common elements as tenants in common.
Ownership of a cooperative interest is personal property.
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.
The three basic ways in which a fee simple estate may be held are in severalty, in co-ownership, and in trust.
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.
When a corporation takes complete ownership of a property, it is considered to be ownership in
Corporations are artificial persons, and therefore, hold ownership in severalty.
Shareholders in a cooperative receive shares of stock that entitle them to a
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.
Which of these cannot take title as a joint tenant with right of survivorship?
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.
In a large highrise condominium, each unit is owned by individual owners. The elevators, parking garage, and swimming pool are called
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
All of these are characteristics of a tenancy by the entirety EXCEPT
the surviving spouse automatically owns one-half of the property acquired during the marriage.
Co-tenants may terminate their co-ownership by asking a court to partition the property.
True
Why.
Partition is a legal way to dissolve the relationship when the parties do not voluntarily agree to its termination.
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?
The man and the remaining woman will be tenants in common
In a community property state, community property includes all property, both real and personal, acquired by either party prior to or during the marriage.
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
Membership camping is similar to
cooperative ownership.
A limited liability company (LLC) combines the most attractive features of land trusts and testamentary trusts.
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.
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?
$50,000
Why
The limited partners are limited in liability to the $50,000 amount of their original investment.
The term severalty means that there is only one owner of a single property.
True
Why
Ownership in severalty occurs when property is owned by one individual or corporation.
A time-share estate includes the right to use the property for a certain specified period of time.
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.
In a tenancy in common, if the fractions of ownership are NOT stated in the deed, how are they determined?
The tenants are presumed to hold equal shares.
What form of ownership is employed when one person transfers ownership to someone else to hold and manage for a third person?
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.
In a tenancy in common, property is owned by two or more owners with the right of survivorship.
False
Why?
In a joint tenancy, property is owned by two or more owners with the right of survivorship.
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
condominium
A major advantage of living trusts is that they reduce the time and costs of probate.
True.
Why
Living trusts have become a major estate planning tool used to minimize the time and costs of probate.
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.
False.
Why
A joint tenancy continues indefinitely, until there is only one remaining owner, who then holds title in severalty.
The person who creates a trust is called the trustor.
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.
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?
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.
When title to a single parcel of real estate is held by two or more individuals, the parties may be called concurrent owners.
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.
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.
True.
During their lives, under tenancy by the entirety, a husband and wife can convey title only by a deed signed by both parties.
The ownership of an undivided fractional interest in a property is characteristic of a tenancy in common.
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.
All of these unities are required for a joint tenancy EXCEPT
unity of time
Why?
To create joint tenancy ownership, four unities are required: possession, interest, time, and title;
When two or more individuals decide to buy a property together, it results in a
co-ownership
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?
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.
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
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.
When a joint tenant conveys interest in the jointly held property to a new owner, the new owner becomes a joint tenant.
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.
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?
Suggest that they consult with an attorney
In a general partnership, the death of one of the partners automatically bankrupts the remaining partners.
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.
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?
)
Tenancy in common
