Real Estate Exam

Definitions

Surface Rights

Ownership of rights that are limit to the surface of the earth

Subsurface Rights

The rights to natural resources below the earths surface. The Owner can transfer these rights without having to transfer surface rights. These include: Natural gases, oil and minerals

Riparian Rigths

Common law rights - granted to an owner that possess propert along RIVERS or STREAMS

The owner owns water down to the tide mark or under the water for dock building purposes. Runs with the land

Littoral Rights

Owners whose rights border Lakes, seas and oceans. Only own the land to the high water mark. All land below that point is owned by the government. Runs with the land

Physical Characteristics of Land

(I-I-U)

Immobility - geographical location in any given land can never be changed

Indestructibility - The geographical location remains whatever the condition of what was built or what was growing on it

Uniquness (nonhomegenity) - no parcels of land are ever the same

Accretion

the increasing of the land resulted from the deposition of soil by the water action. The owner is entitled to own this land - land increases

Reliction

The disappearing of body of water causing the land beneath to appear. Can also be the result of a shift of a river - land increases

Erosion

the gradual wearing away of land by natural forces. these forces could be wind, rain or flowing water - land decreases

Avulsion

the sudden removal of soil by nature. this can be caused by earthquakes or mudslide

Economic Characteristics of Land

(SIPA)

Scarcity - The amount of land on earth is finite

Improvements - Building on land can affect the lands value as well as the value of the neighbouring land

Permanence of investment - the money someone puts into investing stays put

Area preference- location is importnat this can determine cost (location, location, location!)

Real Estate

land plus permanent human made additions such as a home

Real Property

The Real Estate + The bundle of legal rights

Title to real property

the right of ownership of the property including the bundle of legal rights and /or evidence of ownership by a deed

Appurtance

Something that runs with the land / is a right or a privilege

Personal Property

aka Personalty or Chattels. it is movable. transferred by bill of sale to new owner.

examples: chairs, tables

Fixtures

a personal property that has been so attached to land or the building that it becomes real property by law. belong to the owner

Trade Fixtures

fixtures that are used for a business and owned by a tenant, ex: dining booth, bowling alley. They must be removed before the lease expires. the owner is responsible for any damages made during the removal process

Severalty

the process of real propert becoming personal property

Annexation

The process of personal property becoming real property

Legal test of a fixture

(MARIA)

Method of attachement - can it be removed without causing damage?

Agreement - have the parties agreed whether the item is real or personal property ?

Relationship of the parties - the court favours the buyer and the tenant over the landlord or the seller

Intention - was this intended to be temporary ?

Adaptability - Is this being used a real property or personal property?

Nonfreehold estate

a leasehold estate

Fee simple absolute

ownership that entitles owner to all rights to the owner. it is intended to run forever upon death and to he passes it on to

fee simple defeasible

this type of ownership can be terminated if a specific condition is violated or a specific event occurs.

Fee simple determinable

this type of ownership can be terminated if a specific condition is violated or a specific event occurs. ‘as long as etc..” doesnt need to be brought to court for the owner to take back property

Encumbrance

ex. easements, licenses, liens, encroachments

Lien

a charge againt the property that proides security of the debt and creates the obligation to pay for the owbner

deed restiction

a limitstion placesd in a deed that controls how the property can be used

aka COVENANTS, CONDITIONS AND RESTRICTIONS

COVENANTS, CONDITIONS AND RESTRICTIONS

are used by a subdivision or developer to stick to specific guidlines for your home such as not painting your home pink. this document should be given to future purchasers for review

Easement

the right to use the land of another for a particular purpopse

easement appurtand

An easement appurtenant is a right to use another person's land for a specific purpose that benefits a neighboring property

Dominant tenement:

The property that benefits from the easement

Servient tenement

The property that allows the easement

the creation of an easement

a written agreement between both parties that establishes the easement right

Easement by necessity

when an owner sells a parcel of land and has no legal access to a street or publicway except though someones property. This is created by courtorder

Easement in gross

an individual or company’s interest in or right to use someones land eg for a railroad. commercial easement in gross can be assigned, conveyed or inherited. if its a personal easement in gross terminates after the death of the easement owner.

a liscense

a privilage to enter the land of another for a purpose. the right to do so can be given orally or informally. this ends at the death of either party

police power

zoning regulations , building codes. environmental regulations, land use restrictions

Eminent Domain

the right of the government to use privately owned real estate for public use. CONDEMNATION is the power they exercise in this process

Taxation

a way that the government to impose taxes on real property to raise revenue for public services and government operations ex. real property tax

Escheat

Property passes to the government when there are no legally entitled heirs or claimants

Lis pendends

a ‘pending lawsuit’. a notice filed in the public record of a pending legal action affecting the title and possession of the property. if theres isn’t enough evidence for the creation of the lis pendends the owner may remove this

Tenancy in common

2 or more owners.

the owners have unity of possession.

shares can be equal or unequal.

owners can sell their share their interest without consent of the other unless the owners are married.

when one co owner dies, the share goes to deceased heirs

Joint Tenancy

• Right to survivorship

• Easy transfer after death, death certificate must be sent to public record

• when last person remains it becomes severalty

• if an ‘outsider joins their share is tenancy in common

Creating a joint Tenancy

(PITT)

unity to possess

unity to interest

unity of time

unity of title

Tenancy by the entirety

ownership of home for married couple

survivor inherits the home

they can only transfer title if both both parties sign

one party cannot convey half the interest

Trust

A trust is a legal arrangement in which one person or organization holds and manages property for the benefit of another person.

• Trustor: The person who creates the trust and places property into it.

• Trustee: The person or organization responsible for holding and managing the property. (trust company or a bank) They hold title

• Beneficiary: The person who benefits from the trust.

Land trust

• A land trust is a legal arrangement in which a trustee holds title to real estate for the benefit of another person, called the beneficiary.

• The main purpose is often to hold and manage real estate while providing the beneficiary with privacy and flexibility.

• It is often used if the conservation of farmland

• the beneficiary is often not named

Partnership

an association of 2 or more persons who carry on a business for profit as co owners

general partnership

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

Limited Partnership

• ran by one or more general partners and limited partners

• limited partners are not allowed to participate and are only help liable for business losses to the amount invested

Limited Liability Companies (LLC)

• offers tax advantage

• Members' personal assets are generally protected from the company's debts and obligations

• The LLC can hold legal title to real estate in its own name

Condominium

• A condominium is a form of real estate ownership in which a person owns an individual unit (fee simple) and shares ownership of the common elements with other unit owners.

• Shared areas are owned collectively by the unit owners

• has HOA rules (Covenants, Conditions, and Restrictions)

• transferred by deed

Horizontal property acts

Laws establishing condominium ownership

Coorperative

• Single units located in lowrise or highrise complexes

• Tenants own shares in the corporation, partnership or trust

• The shares are considered personal property

• The board of directors elect the shareholder / they can deny new members

• Each shareholder is affected by the financial ability of others

Time Share

• purchasers buy interest in real estate that are usually in resort or hotels

• each purchaser has the righrtto use the unit for a set time of the year

• this is considered personal property

monuments

• Monuments are fixed objects or markers used by surveyors to identify property boundaries and establish reference points

• Natural monuments: Rivers, trees, rocks, or other natural landmarks.

• Artificial monuments: Iron pins, concrete markers, stone posts, or other man-made markers.

Metes and Bounds

Metes and bounds is a method of legally describing land using distances, directions, and physical landmarks (monuments) to establish property boundaries

• Metes = Measurements

• Bounds = Boundaries

• POB = Point of Beginning

Voluntary Alienation

• the transfer of ownership (title) of real property from one person to another by the owner's free will

• The transfer is either done by sale, gifting or transfer through will

Involuntary Alienation

• Title transfers without the awners consent

• this can be due to : Foreclosure, Eminent domain (Condemnation)

• Adverse possession

Deed

A deed is a document by which the owner of real estate transfers the title, the right or interest owned to another.

This document needs to be in writing

Grantor

The owner who transfers the property is known as the grantor

Grantee

The person who receives the property through deed

Consideration - (in a deed)

a valid deed must contain a clause acknowledging that the grantor has received some form of consideration (something in return) usually money but can be love and care

Granting Clause

• A granting clause is the section of a deed that states the grantor's intention to transfer ownership of real property to the grantee.

• may include words such as grant, convey, or transfer

Habendum Clause

• A habendum clause is the section of a deed that defines the type and extent of ownership or interest being transferred to the grantee

• begins with the words “to have and to hold.”

Expectations 

• Exceptions are provisions in a deed that exclude certain rights or portions of the property from the ownership being transferred.

• eg. Sarah sells her property to John but retains the mineral rights

Restrictions

• Limit how the property may be used

• Concern what the owner is allowed to do.

Geneal warranty deed

• A general warranty deed is a deed in which the grantor guarantees that they hold clear title to the property and will defend the grantee against title claims arising at any time, including before the grantor owned the property

• the warranties are written in the deed

Special warranty deed

• A special warranty deed is a deed in which the grantor guarantees that the title was not defective due to anything that occurred during their period of ownership.

• The grantor does not guarantee against title defects that existed before they acquired the property.

• If someone discovers a lien before the ownership of the grantor, they are not responsible

Bargain and sale deed

• contains no express warranties against encumbrances, but it does imply that the grantor holds title and possession of the property

Quitclaim deed

• A deed that transfers whatever interest the grantor may have in real property without providing any warranties of title.

• the least protection of any deed

• this is used when the grantor has inherited property and is not certain the decendents title was valid

Clear Title

Clear title means that ownership of a property is free from liens, legal claims, or other title defects that could interfere with the owner's right to sell or transfer the property.

Deed of Trust

• When a deed is conveyed from a trustor to a trustee for the benefit of the beneficiary

• The deed is held by the trustee

Reconveyance deed 

Used by the trustee to retun the title to the trustor

Transfer Tax Stamp

• A tax imposed by a government on the transfer of ownership of real property, generally collected when the transfer documents are executed or registered

• the payment is divided by the seller and the buyer

Involuntary Alienation of Title

• The transfer or loss of property ownership without the owner's voluntary consent

• may be due to natural causes such as an earthquake, mudslides

• can also happen through: Can happen through foreclosure, eminent domain, adverse possession

Adverse Possession

• A method of acquiring ownership of another person's property through possession that satisfies legal requirements for a prescribed period.

• (OCEAN) Open, Notorius, Continuous, Hostile, Adverse

Constructive Notice

• a legal presumption that information has been obtained by an individual through due diligence

• eg they get their information through the public records which is for everyone to see

Actual Notice

Due Diligence

• The reasonable investigation performed before entering into or completing a real estate transaction.

• May include title searches, property inspections, surveys, and financial checks.

• Helps identify risks or defects before purchasing.

• Buyers should investigate issues rather than rely solely on the seller's statements

Suit to Quiet Title

A legal action brought to establish or confirm ownership and resolve competing claims or defects affecting title.

• Used when ownership is disputed.

• May eliminate certain claims or clouds on title.

• A court determines the validity of competing interests.

Abstract of Title

A condensed history of recorded documents and legal proceedings affecting title to a property.

• Summarizes recorded conveyances, liens, mortgages, and other relevant matters.

• Helps examine the history of title.

• An abstract is not a guarantee of clear title.

Marketable Title

Title that is reasonably free from significant defects or reasonable doubt, allowing the property to be sold without exposing a purchaser to substantial risk of ownership litigation

• Does not necessarily mean the property has absolutely no encumbrances.

• Certain accepted easements or restrictions may remain.

• A cloud on title may prevent title from being marketable.

Purchaser's Quiet Enjoyment

The right to possess and enjoy property without lawful interference from another person asserting superior title

• In a warranty deed, the covenant of quiet enjoyment protects against valid claims of superior title.

• In leases, quiet enjoyment generally protects the tenant's lawful possession and use.

Title Insurance

Insurance that protects the insured against certain financial losses caused by defects in property title, subject to policy exclusions.

procvided by the title nsurance company

Owner's Policy

A title insurance policy protecting the property owner's financial interest against covered title defects.

• Protects the owner, not the lender.

• The lender's policy protects the mortgage lender's interest.

• Coverage is subject to the policy's limits, exclusions, and conditions.

Title Search

An examination of public records and other relevant documents to determine the history and condition of title.

• Identifies recorded owners, mortgages, liens, easements, and other potential defects.

• Helps determine whether title is marketable.

• Usually takes place before closing.

Real Estate Broker

A licensed real estate professional authorized to conduct brokerage activities, including representing buyers, sellers, landlords, and tenants.

• May operate a brokerage and supervise sales associates.

• Responsible for ensuring that brokerage activities comply with applicable licensing laws.

• Can negotiate real estate transactions on behalf of clients.

• Licensing and supervision requirements vary by jurisdiction.

Real Estate Brokerage

The business of bringing parties together and providing professional services in real estate sales, purchases, rentals, and other transactions

Sales Associate

A licensed real estate professional who performs brokerage activities under the supervision of a licensed broker.

• Generally cannot operate independently as a broker.

• Must comply with licensing laws and brokerage policies.

• May help market properties, show homes, and negotiate transactions within the scope of their authority.

Employment Agreement

An agreement establishing the working relationship between a broker and a sales associate or employee

• May specify compensation, responsibilities, termination, and working arrangements.

• Can establish whether the individual is treated as an employee or independent contractor.

• Tax classification and employment obligations depend on applicable law.

Broker's Compensation

Payment received by a brokerage for professional services provided in a real estate transaction.

• Commonly takes the form of a commission, flat fee, or another agreed compensation arrangement.

• Compensation terms are negotiable.

• The agreement usually specifies when compensation is earned and payable.

• Competing brokerages must not engage in unlawful commission price-fixing.

Agency

A relationship in which one person, the agent, is authorised to act on behalf of another person, the principal, in dealings with third party

• Establishes duties owed by the agent to the principal.

• Agents generally owe fiduciary duties, including loyalty, obedience to lawful instructions, disclosure, confidentiality, accounting, and reasonable care.

• An agency relationship can be created expressly or, in certain circumstances, by conduct.

Principal

The person to authorizes the agenct to act on their behlalf

• In a listing agreement, the seller is generally the principal.

• In a buyer representation agreement, the buyer is the principal.

• The principal is also called the client.

Customer

A person involved in a transaction who is not represented as a client by the real estate agent

• A customer is not owed the same fiduciary duties as a client.

• Agents still owe customers applicable duties such as honesty and fair dealing.

Subagent

An agent appointed by another agent to assist in representing the original principal

• the subagent owes fiduciary duties to the original principal

• common in coorporative brokerage arrangements

Nonagent

aka facilitator

A real estate professional who facilitates a transaction without establishing an agency relationship with either party.

• Sometimes called a transaction broker or facilitator, depending on jurisdiction.

• May perform transaction-related services without representing either party as a fiduciary.

Express Agency

An agency relationship created when the principal and agent clearly state their agreement to establish agency.

• May be created through a written or oral agreement, where legally permitted.

• A written listing agreement is a common example.

Implied Agency

Implied agency is an agency relationship created through the actions or conduct of the parties rather than through a written or verbal agreement.

HAVE NOT ENTERED A FORMAL AGENCY AGREEMENT YET

• Showing the property to potential buyers.

• Negotiating offers for individual

• Advising homeowner about the sale.