Estates in Land

Estates

Interest in land that is or may become possessory.

Someone has now or will have in the future, the absolute and exclusive right to possess the property.

Freehold Estates

An interest in real property that has an indeterminable (not fixed or certain) duration.

The holder of such an estate is usually called an owner.

2 Types: Fee Simple Estates & Life Estates.

Fee Simple Estates

Also called a Fee Estate.
The greatest estate in land.
Can be inherited and transferred.
Is either absolute or defeasible.

FEE SIMPLE ABSOLUTE

When a grantee receives title in fee simple, it is assumed to be a fee simple absolute estate (unconditional).

FEE SIMPLE DEFEASIBLE

If the deed is conveyed on the condition that the property be used only as a church, a failure to use it as a church could result in a reversion of title to the grantor.

Pop Quiz

Which of the following is NOT a characteristic of a fee simple estate?

a) Free of real encumbrances
b) Freely transferable with or without consideration
c) Freely inheritable, by will or intestate succession
d) Of infinite duration

A

Most fee simple estates have at least some form of encumbrance against them: a lien, an easement, or private restrictions.
Even though some fee simple estates have no encumbrances, that isn't a necessary characteristic of a fee simple estate.

Life Estates

Estate for Life; a freehold estate because it is an ownership interest that will last for an uncertain duration.

Limited to the lifetime of a specified person or persons.

Estate in Reversion

If the deed that delivered title to the life tenant states that title shall revert to the grantor on the death of the measuring life, then even while the life tenant is alive the grantor has a present estate called an estate in reversion.

Estate in Remainder

If the deed states that title shall pass to a third party on the death of the measuring life, that third party has a present estate called an estate in remainder.

Less than Freehold

More commonly called "leasehold estates". Because a lease is considered to be personal property, it may also be called chattel real.

Pop Quiz

The phrase "of infinite duration" would be associated with which type of estate?

a) Estate for years
b) Periodic estate
c) Less-than-freehold estate
d) Estate of inheritance

D

An estate of inheritance - in other words, a fee simple estate - is an estate that can potentially last forever.

Term Tenancy

Also called an estate for years.

Tenancy for a fixed period of time. The name "estate for years" is misleading; a one-week lease is an estate for years.

Periodic Tenancy

Sometimes called a periodic estate.
No definite termination date. For a specific period, such as a month, and willl continue from month to month until one party gives notice to terminate. Failure to give property notice of termintion results in automatic extension of lease for additional period.

Tenancy at Will

Lease has expired and the parties are in the process of negotiating the terms of a new lease.

They have no agreement, but the tenant remains in possession at the will of the landlord.

Tenancy at Sufferance

Lowest type of estate, in fact, not an estate at all. One who came into possession of land lawfully, but who holds over at the "sufferance" of the landlord after the lease ends.

Pop Quiz

If a man leases a property for a period of six months, what type of interest would he have?

a) Estate from period to period
b) Estate for years
c) Estate at will
d) Estate at sufferance

B

Any leasehold estate for a fixed term is known as an estate for years, even if it is for a period of less than a year.
It may also be known as a term tenancy.

Methods of Holding Title

Title to real property may be held by one person, known as ownership in severalty, or it may be held by two or more persons at the same time, called concurrent ownership.

Ownership in Severalty

When one person (or corporation or city) holds title to property individually.

Concurrent Ownership

When two or more people own the property at the same time.

There are FOUR TYPES:

Tenancy in common

Two or more people have an undivided interest in one single piece of property. Each tenant in common has a right to share possession of the whole property, not just a specified part of it.
"Unity of Possession".

Interests can be unequal, but even the smallest interest is still entitled to share possession of the whole property.

Interest is willable to an outside party.

Joint Tenancy

Two or more people are joint and equal owners.

Right of survivorship: On the death of one of the joint tenants, his interest automatically passes to the other joint tenant.
A joint tenant cannot will his interest.

T.T.I.P.

T.T.I.P.

• Time: Must receive interest at same time
• Title: Must receive title in same document
• Interest: Must have equal interest
• Possession: Must have equal right of possession

Community Property

All property owned by a married couple is classified as either (a) the separate property of one spouse, or (b) the community property of husband and wife.

Each spouse has an undivided ½ interest in the community property.

Pop Quiz

A joint tenant cannot dispose of his interest in real property through a:

a) will
b) lease
c) gift
d) sale

A

A joint tenant cannot will his interest in property. Because of the right of survivorship, the other joint tenants automatically receive the deceased tenant's interest in the property without having to go through the probate process.

Tenancy in Partnership

Exists when a business organized as a partnership owns property.

Forms of Business Ownership

General Partnerships

Formed by written or oral contract.
Each parter shares equally in the profits from and management of the partnership, and can be held personally liable for the debts of the partnership.

Advantage to General Partnership

Limited Partnerships

Formed by written contract only.
Most real estate syndicates in CA are limited partnerships. One General Partner and one Limited Partner.

Limited Partners:

Corporations

Owned by shareholders (stockholders). They have the following characteristics:

1. Artificial persons
2. Perpetual Existence
3. Debts
4. Double Taxation

REITs

In a trust, one or more trustees manage real property for the benefit of its investors, the beneficiaries.

Unincorporated and not subject to double taxation.
Beneficiaries are shielded from liability for the debts of the REIT.

Pop Quiz

A General Partnership is characterized by:

a) limited liability and double taxation
b) limited liability and single taxation
c) unlimited liability and double taxation
d) unlimited liability and single taxation

D

A general partner has unlimited liability - in other words, she is personally liable for all the partnerships debts, not just up to the amount of her investment. However, unlike a corporation, a partnership's earnings are taxed only once. Each partner is taxed, but the partnership is never taxed.

Untitled Slide

Condos and Co-ops

Condominiums and Cooperatives are properties that combine elements of both individual ownership and co-ownership.

Condominiums

Someone who buys a unit in a condominium owns the unit in severalty, but shares ownership of the common areas with other unit owners as tenants in common.

CC&Rs

An elected governing board usually manages the condominium and establishes its bylaws. A seller of a condominium unit must give a prospective buyer a copy of the bylaws, the latest financial statements, and the CC&Rs of the project.

Cooperatives

Ownership of the entire project is vested in a single entity, which is usually a corporation.

Pop Quiz

A sidewalk that is part of a condomimium complex would usually be a:

a) minimum of 4 feet
b) tarmac
c) common area

C

Sidewalks are found outside of individual condominium units and would be considered part of the common areas, unless there was an agreement to the contrary. Their is no standard width or construction material for condominium sidewalks.

"_______________"

A real estate broker appointed by the seller to represent the seller.

Seller's Agent

"_______________"

The real estate agent who sells or finds and obtains a buyer for the property in a real estate transaction.

Selling Agent

"_______________"

A natural person who is employed by a licensed real estate broker to perform acts that require having a real estate license.

Salesperson

"_______________"

A borrower who executes a deed of trust.

Trustor

"_______________"

A person who holds something of value in trust for the benefit of another; under a deed of trust, a neutral third-party who holds naked legal title for security.

Trustee

Sample Exam #1

#1: Which of the following persons owes a fiduciary duty to clients?

a. a salesperson
b. a broker
c. b not a
d. both a and b

d. A broker owes fiduciary duties to his or her clients and the salesperson owes the same duties to the employing broker's clients as does the broker.

#2: A real estate agent generally is a(n):

a. special agent
b. specific agent
c. express agent
d. both a and c

d. Real estate agents are nearly always agents of a principal for a specific transaction, and the agreement between the principal and the agent nearly always is (and definitely should be) in writing.

#3: Conversion is

a. an attempt by alchemists to convert silver into gold
b. the process of converting property into cash via a sales transaction
c. the failure to properly segregate the funds belonging to a broker from the funds received and held on behalf of the seller or buyer
d. none of the above

d. Conversion is the unauthorized misappropriation and use of another's funds or other property.

#4: A broker's trust fund records must be kept for a minimum of:

a. 2 years
b. 3 years
c. 4 years
d. 5 years

b. A broker's trust fund records must be kept for a minimum of 3 years.

#5: Who is entitled to receive any proceeds from the trustee's sale that are left over after all liens and foreclosure costs are paid?

a. the beneficiary
b. the trustor
c. the sheriff
d. the trustee

b. If after the sale there are any proceeds remaining after all liens and foreclosure expenses have been paid, such remaining proceeds would belong to the borrower (trustor).

#6: Jane and Bob are neither married nor registered domestic partners. If they acquire real property together, title is presumed to be held as

a. tenants in common
b. joint tenants
c. community property
d. there is no presumption as to the form of property ownership in this case.

a. Under these circumstances, unless there is an agreement otherwise, acquisition of real property by two or more persons is presumed to create a tenancy in common.

#7: Separate property consists of property acquired

a. before marriage
b. by inheritance after marriage
c. both a and b
d. not both a and b

c. Property acquired before marriage or by inheritance is separate property unless there is an agreement otherwise or unless commmunity property is used to maintain the acquired properties.

#8: Jane and Susan own a condo as tenants in common. Susan dies having willed her interest to Joe.

a. Jane owns the condo in severalty, free of Susan's debts
b. Jane owns the condo in severalty, subject to Susan's debts
c. Jane and Joe own the property as joint tenants
d. none of the above.

d. Jane and Joe would own the property as tenants in common.

#9: Which of the following is not an essential element of a valid contract?

a. writing
b. mutual consent
c. consideration
d. capable parties

a. A valid contract does not have to be in writing.

#10: The unities necessary to create a joint tenancy include

a. freehold estate
b. title
c. relationship
d. all of the above

b. The four unities of joint tenancy are possession, title, interest, and time.

See you next Monday in Simi!