RE Lesson 2: Estates in Land and Methods of Holding Title. Terms

Interest

Broadly defined, an interest in real property is a right concerning the property or a claim against it.

Certain interests are called possessory interests. This is because they include the right to exclusive use and possession of the property.

Possessory interests are also called estates.

Estate

An estate (a possessory interest) is the right to possess and have exclusive use of real property, either now or in the future.

If someone's interest in a piece of real property doesn't allow exclusive use and possession of the property, it's not an estate.

For example, a lien (such as a mortgage) is an interest in property, but it's not an estate.

The lender who holds the lien doesn't have the right to take possession of the property.

Privity

It's possible for more than one estate to exist in a property at one time. For instance, the owner of a property has an estate. If he leases the property to another person, the tenant has an estate in the property as well.

When a contract such as a lease or mortgage is used to create multiple interests in one property, that mutual relationship is known as privity.

Fee Simple Estate

Absolute ownership with all the rights associated with ownership of real property

Fee Simple Absolute

Fee simple estates are usually conveyed without qualifications or conditions.

The current owner transfers title to the new owner with no special limitations, and the new owner is free to do whatever he wishes with the property.

This type of estate is called a fee simple absolute.

Fee Simple Defeasible

A type of ownership of real property that grants the owner all the incidents of a fee simple absolute except that it may be taken away if a specified condition occurs or does not occur

Fee Simple Conditional

ownership that is subject to a condition or trigger event.

The only type of fee simple defeasible now recognized in California is the fee simple subject to a condition subsequent, usually referred to as a fee simple conditional.

A fee simple conditional will not revert to the grantor automatically when a condition is breached.

Instead, the grantor must file a lawsuit to get the property back.

Life Estate

Unlike a fee simple estate, a life estate is limited in time. A life estate lasts only as long as a particular person is alive.

The holder of a life estate is called the life tenant.

Measuring Life

The life upon which a life estate depends is called the measuring life.

It's usually the life of the person who has the life estate (the life tenant), although it doesn't have to be.

In our example, James's life is the measuring life for his life estate.

The life estate will end when James dies.

Life Estate Pur Autre Vie

In the previous example, James's life was the measuring life for his life estate. But sometimes the measuring life is that of another person. This is known as a life estate pur autre vie (which is French for "for another life").

Future Interest

A person's present right to an interest in real property that will not result in possession or enjoyment until sometime in the future, such as a reversion or right of reentry.

Estate in Reversion

A life estate whereby the property reverts back to the grantor or heirs (reversioners) when the grantee (life tenant) dies

Estate in Remainder

Grantor gives a life estate to a grantee. Upon the death of the grantee the property goes to a third party.

Leasehold Estate

A tenant's right to occupy real estate during the term of a lease, generally considered to be a personal property interest.

Lease

a contract granting use or occupation of property during a specified time for a specified payment

If you have a leasehold estate, you don't own or have title to the property. The landlord does.

However, for a limited period you have a right to the exclusive possession and use of the property. The landlord retains only a reversionary interest.

This limited, temporary kind of estate is created by a contract called a lease. The parties to a lease contract are the landlord, the lessor, and the tenant, the lessee.

Chatter Real

While leasehold estates are generally regarded as interests in real property, you may occasionally hear a lease called a chattel real.

A chattel real is personal property that is closely tied to real estate.

Demise

Any conveyance of a leasehold estate is called a demise. A lease sometimes makes reference to the "demised premises."Most leasehold estates can be inherited by the tenant's heirs.

Term Tenancy (estate for years)

a leasehold estate that lasts for any fixed term. The term may be a specified number of years, months, weeks, or days.

A term tenancy is sometimes called an estate for years. This name is misleading, because the term doesn't need to be a year or several years; the term only needs to be a fixed period of time.

For example, suppose you agree to lease some warehouse space to Leon from April 1 through September 30. Even though the term of the lease is only six months, Leon has a term tenancy, since the lease is for a fixed period.

Surrender

Termination of a lease by mutual consent.

Periodic Tenancy

When a tenancy is not limited to a specific term, it is called a periodic tenancy (or periodic estate).

A periodic tenancy continues from rent period to rent period until one of the parties gives the other party notice of termination.

Tenancy at Will

An occupation of space for an indefinite period which can be terminated by either the lessor or lessee at any time. Unlike a term tenancy or a periodic tenancy, a tenancy at will cannot be assigned to someone else.

Tenancies at Sufferance

Although a tenancy at sufferance is sometimes called an estate at sufferance, this is inaccurate. Techically, it's not a true estate at all.

It arises when a tenant comes into possession of the property under a valid lease, but holds over after the tenancy has expired, staying on against the landlord's wishes.

In Severalty

Ownership of real property by one person only, also called sole ownership.

Property can be owned in severalty either by a natural person (a human being) or by an artificial person—a legal entity such as a business, a city, or a state government.

Tenancy in Common

Co-ownership of property in which each party owns an undivided interest that passes to his or her heirs at death.

Undivided Interests

Each owner has a certain equitable interest in the property (1/2, 1/4, etc) but right to use the whole property

Suit for Partition

Legal action used to terminate a tenancy in common or joint tenancy

Joint Tenancy

A form of concurrent ownership, which occurs when two or more persons own a single estate in land, with right of survivorship. Must have equal shares, right to partition. The most important characteristic of joint tenancy is the right of survivorship: when a joint tenant dies, her interest in the property automatically passes to the surviving joint tenant(s).

For unity of title, the joint tenants must receive their interests in the property through the same deed.

Community Property

property acquired during marriage and owned equally by both spouses

Syndicate

general term that can refer to any group of individuals who pool their resources to carry on a business enterprise.

A syndicate may be organized in any of the ways listed here. We'll look at general partnerships first.

Partnership

A partnership is an association of two or more persons to carry on a business as co-owners and divide the profits.

There are two types of partnerships: general and limited.

General Partnership

In a general partnership, each partner has an ownership interest in the partnership, as well as a voice in the management of the business. Each partner also has a right to share in its profits, and an obligation to share in its losses.

The partners' ownership interests may be equal or unequal, depending on the terms of their contractual agreement.

A partnership agreement isn't required to be in writing, but putting it in writing is a good idea.

Limited Partnership

more structured and regulated than general partnerships.

A limited partnership must comply with the requirements of California's Uniform Limited Partnership Act.

The act requires, for example, that the limited partnership agreement be in writing.

A limited partnership has at least one general partner, plus one or more limited partners.

The limited partners have limited liability, which means that they are not personally liable for the partnership's debts.

Only the general partners are personally liable.

Corporation

A corporation is made up of stockholders, a board of directors, and corporate officers.

Stockholders

The stockholders (also called shareholders) are investors who own shares in the corporation.

Securities

Shares in a corporation are securities, because they represent a financial investment in an enterprise without managerial involvement.Limited partnership interests are also securities. Securities are regulated by the Securities and Exchange Commission, a federal agency.

Limited Liability Company (LLC)

The limited liability company (LLC) combines the flexible structure of a partnership with the limited liability of a corporation.

Depending on the terms of their agreement, all of an LLC's owners (referred to as members) may manage the company, or certain members may be appointed to manage it.

Either way, the LLC members have limited liability, like corporate stockholders or limited partners.

Joint Venture

In a joint venture, two or more individuals or organizations join together for one specific project.

There are no formal requirements for the creation of a joint venture.

The parties simply agree that they're going to work together on a particular project, and then they share their profits or losses.

Trust

A trust is an arrangement in which one or more trustees manage assets for the benefit of one or more beneficiaries.

Title to the trust property is vested in the trustees, who must manage the property according to the terms of the trust.

Real Estate Investment Trust (REIT)

A trust may be used as a form of business ownership. For example, a real estate investment trust (REIT) is a business association that invests primarily in real estate.

A REIT can avoid double taxation. As long as at least 90% of its income is distributed to the investors, the trust pays taxes only on the earnings it retains.

Common Elements (Areas)

The common elements are parts of the condominium property that may be used by all of the residents. Common elements are also called common areas. Common elements include the grounds, lobby, elevator, main hallways, roof, and any shared recreational elements such as a pool.

Condominium Declaration

the master deed creating or establishing the condominium corporation/The percentages are set forth in the condominium declaration, a document prepared by the developer that provides detailed information about every aspect of the condominium property. Note that the seller must give the condominium buyer a copy of the declaration, any private restrictions (CC&Rs), and the bylaws and financial statements of the condominium association.

Limited Common Elements

common elements whose use is limited to certain owners

Conversion

Sometimes the owner of an apartment building decides to change the complex into a condominium. This process is called conversion. Conversions are subject to state regulations that protect the rights of the tenants of the apartment building. For instance, they must be given 180 days' advance written notice before termination of their tenancies.

Cooperative

Another special type of property that involves co-ownership is the cooperative.

A residential co-op might look exactly like a condominium, but the ownership structure is very different.