Ownership, Estates, Rights, and Interests

Tenancy in Severalty/Sole Ownership). This can be ownership by one individual or one business entity such as a corporation or a partnership. Corporations or Partnerships often hold title this way. If only one signature is required to sell a piece of property, then there is only one owner.

Estate in Severalty

Ownership by two or more without rights of survivorship is called

It is an estate of inheritance. A condominium is multi-unit housing with individual ownership of apartments and tenancy in common ownership of the common areas. Upon your death, your share goes to your heirs, at probate. Unequal shares are permitted. You may sell your share without the permission of the other owners. In the absence of any other instructions, the title company will always assume tenancy in common with equal shares

Tenancy in Common

Ownership by two or more WITH rights of survivorship

Upon your death, your share goes to surviving co-owners immediately. This is sometimes called a “Poor Man’s Will” as it eliminates the need for a will. Joint tenancy overrides a will. This is NOT an estate of inheritance. To prevent any accidental cases of joint tenancy, there are four unities required for this type of ownership – time, title, interest, and possession. All owners acquire their interest at the same time, from the same legal document. Their shares are equal and undivided - each owns a percentage of the whole rather than a piece of the whole.

Joint Tenancy

is a procedure to divide the co-tenants’ interests in real property.  It can be done by court action or by agreement of the parties. Partition would divide the property into pieces and end the joint tenancy. If the land can't be physically divided, the court will order the property sold, and the proceeds will be divided among the joint tenants.

Partition

s a specific type of joint tenancy where the co-owners are married to one another: husband/wife, spouse/spouse. One advantage of this type of ownership is that it avoids probate. (This is also true of Joint Tenancy.)

Tenancy by Entirety

If a property is held by one party, a trustee, for the benefit of another, then that property is held

Trusts

When two or more parties join together to create and operate a real estate investment,

may operate in the form of a corporation, an LLC, a partnership, a REIT, or even a tenancy in common. It is a combination of money and management to make and operate an investment. 

Syndicates

an interest in real property

Estate

ownership.

 Freehold Estate

All the legal rights that attach to the ownership of real property are commonly

Disposition

The right to sell, will to heirs, encumber or lease 

Exclusion

The right to exclude others 

Possession

The right to use, enjoy, occupy 

Quiet enjoyment

The right to use uninterrupted by former owners 

Bundle of Rights

• Ownership with the greatest bundle of rights - the BEST type of ownership - The owner has all the available rights to the property and can always pass it to his or her heirs.

Fee Simple, or Fee Simple Absolute

is ownership with conditions or terms, which, if violated, could cause the ownership interest to be defeated or terminated. When the ownership is defeated, it reverts or goes back to the original grantor or the grantor’s heirs

can be determinable or condition subsequent. If it is determinable, violation of the condition or termination of the conditional use results in reversion to the grantor automatically. In condition subsequent, the grantor must take steps to reclaim the property within a reasonable period of time if the condition is violated or the conditional use is terminated.

Fee Simple Defeasible

is ownership for the duration of someone’s life. The owner is called the Life Tenant. The life tenant has all the rights and duties of an owner, EXCEPT the right to choose who will get the property upon his or her death.

Life Estate

The person who gets the property after the life estate is ended

when the life estate is created. The remainderman gets fee simple. 

remainderman.

is personal property, but the right to possession that the lease gives is REAL property. There are four leasehold estates, and each gives possession without ownership:

Lease agreements

Leasehold Estate

is a lease with a specific starting and ending date. This lease survives death and/or the sale of the property. No notice is required to terminate.

Estate for Years

is a lease with a fixed period that is automatically renewed unless the tenant or landlord acts to terminate it. A month to-month lease is this type. Notice to terminate is usually required, typically 30 days’ notice.

Periodic Tenancy

is a lease that can be terminated by either party at will WITHOUT notice. There is no written agreement.

Estate at Will

occurs when a lease expires, and the tenant refuses to move out. The landlord is NOT receiving rent. This Holdover Tenant has no right to be there. If the holdover tenant pays rent and the landlord accepts that rent, a Holdover Tenancy is created.

Tenancy at Sufferance

• The landlord pays all the expenses of the property.

• The tenant pays only rent.

Gross lease

• The tenant pays rent plus some of the expenses of the property.

Net lease

• Lease in which all or part of the rent amount is based on the receipts of the tenant’s business (typical shopping center lease).

• This lease allows the landlord to participate in the tenant’s success.

Percentage lease

• A lease with scheduled rent increases often based on expected business growth.

graduated lease

• Gives a tenant the right to purchase at a future date.

• The price is set when the agreement is negotiated.

• It is advantageous to the tenant-buyer.

• This is a unilateral agreement.

• NO Promulgated Form for this lease, attorney recommended.

Lease with option to buy

• An agreement in which part of the rent payment is applicable toward a set purchase price.

• Title is transferred from lessor to lessee when the lessor receives the prearranged total price.

• It is a bilateral agreement. 

• NO Promulgated Form for this lease, attorney recommended.

Lease purchased agreement

• The tenant is usually making a long-term commitment (up to 99 years).

• This lease is more often for industrial or commercial land use. The tenant will build on the leased property.

Ground lease

• This lease gives the tenant the right to extract oil and gas from a specific property.

• Note - In Texas, the Texas Railroad Commission regulates oil and gas leases, but on a Federal level, for the National portion of the exam, the EPA will be the best answer for any questions regarding what department of the government regulates oil and gas leases.

Oil & gas lease

A landlord is usually prohibited from entering leased property unless there is a need for maintenance, inspections, or emergency response.

Covenant of Quiet Enjoyment

The tenant has the right to match or better any offer before the property is sold to someone else.

Right of First Refusal

The transfer of ALL rights and liabilities to a new tenant under an existing lease.

Assignment

The transfer of some or all of the rights and/or leased space under a lease to another, with liability remaining with the original tenant.

Subletting

When a lease is terminated by agreement of the parties. In the eyes of the law there is no default, no breach and no injured party. In other words, there is no lawsuit.

Mutual Rescission

A property owner sells property to an investor or lender and then leases it back. Therefore, the seller occupies the property after closing.

Sale & Leaseback

 is a charge against property as security for a debt.

Lien

a limit on your rights

lien is an encumbrance 

This means title cannot be conveyed or transferred to another UNTIL the lien is removed. The legal method of removing an encumbrance is to release it or get a release.

Cloud on the Title.

attaches to one or more specific or named properties (Ex: a mortgage).

Specific Lien

• attaches to ALL the property of the debtor, not exempt from forced sale (Ex: a judgment, or IRS lien).

• Recording is required for a judgment to become a lien.

General Lien attaches

is created by the lienee’s or borrower’s actions, like taking out a mortgage or home improvement loan. Filing or recording the mortgage creates a lien. A mortgage is NOT effective or enforceable until it is recorded. When the mortgage is recorded, if it is the first recorded claim, it will be the first priority lien.

Voluntary Lien

lien is created by law. We have both statutory law (by legislation) or common law (from the courts) in the U.S. Statutory liens include federal tax liens, ad valorem (according to value) tax liens, judgment liens, HOA liens, and mechanics and materialman’s (M&M) liens.

• An M&M Lien is a lien to secure payment for work or materials used to improve real property.

• An M&M lien can be placed on a property by the CONTRACTOR when materials have been delivered or work has begun. 

involuntary lien

come from common law and include seller (vendor) or buyer (vendee) liens. An example of a vendor’s lien would be seller financing. A vendee’s lien would be used when a buyer has paid but not yet received a deed. (i.e., at a foreclosure sale or in contract for deed)

Equitable Liens

If a party wins a judgment and is unable to collect, that party can secure

from the courts to enforce payment of the lien.

Writ of Execution

lien priority is determined by the date of recording, with the first recorded lien having first priority. Recorded liens are only paid AFTER the property tax lien, which is an automatic unrecorded lien, has been paid.

At foreclosure