Real Estate Principles CHAPTER 2

Fee Simple

The highest and most complete form of real property ownership. It is perpetual, transferable, and inheritable. A fee simple is classified either as a fee simple absolute or as a fee simple defeasible.

Fee Simple Absolute

Fee title without conditions or qualifications by the grantor. 

Fee Simple Defeasible

An estate with all the same rights of ownership as a fee simple absolute, but where the estate may terminate if a condition or event specified in the deed occurs. 

Freehold Estate

Estates including fee simple estates and life estates, where the estate holder with has title to the property.

Life Estate

An ownership interest that lasts only as long as a specified person, the measuring life, lives (when that person dies, the property reverts to the reversioners or passes to the remainderman). 

Pur Autre Vie

A life estate where the measuring life is someone other than the life tenant. 

Chattel Real

Personal property that is closely associated with real property. The primary example is a lease.

Demise

A conveyance of an interest in real property through the terms of a lease.

Holdover Tenant

A tenant who came into possession of the property lawfully, under a valid lease, but stayed on without the landlord’s consent after the tenancy has terminated.

Leasehold Estate

A possessory interest in real property that has a limited duration; also called a less-than-freehold estate.

Lessor

One who leases property to another; a landlord.

Periodic Tenancy

A leasehold estate that, under common law, continues for successive periods of equal length (from week to week or month to month, for example), until terminated by notice from either party.

Tenancy at Sufferance

When a tenant who came into possession of the property lawfully, under a valid lease, stays on without the landlord’s consent after the tenancy has terminated; not a true estate. Also called a holdover tenancy.

Tenancy at Will

A leasehold estate that results when a tenant is in possession with the owner’s permission, but there’s no definite lease term.

Tenant

Someone in lawful possession of real property; especially, someone who has leased property from the owner; also called a lessee.

Term Tenancy

A leasehold estate that lasts for a definite period (one week, three years, etc.), after which, under common law, it terminates automatically. Also called an estate for years or a tenancy for years.

Community Property

Property owned jointly by a married couple, as distinguished from each spouse’s separate property; generally, any property acquired through the labor or skill of either spouse during marriage.

Concurrent Ownership

Shared ownership of one piece of property by two or more individuals, each owning an undivided interest in the property; also called co-ownership or co-tenancy.

Joint Tenancy

A form of concurrent ownership in which the co-owners have equal undivided interests and the right of survivorship.

Ownership in Severalty

Sole ownership by one individual.

Partition

The division of a property among its co-owners, so that each owns part of it in severalty; may occur by agreement of all the co-owners (voluntary partition), or by court order (judicial partition).

Right of Survivorship

The right by which, upon the death of a co-owner, the surviving co-owner(s) acquire their interest in the property.

Separate Property

Property owned by a married person that is not community property; includes property acquired before marriage or by gift or inheritance during a marriage.

Tenancy in Common

A form of concurrent ownership in which two or more persons each have equal or unequal undivided interests in the entire property, but no right of survivorship.

Undivided Interest

A co-owner’s interest, giving them the right to shared possession of the whole property, as opposed to separate or exclusive possession of a portion of the property.

Beneficiary 

One for whom a trust is created and on whose behalf the trustee administers the trust.

Board of Directors

The body responsible for governing a corporation on behalf of the shareholders, which oversees the corporate management.

Corporation

A form of business entity that is owned by its shareholders; the shareholders have limited liability.

General Partner

A partner who has the authority to manage and contract for a general or limited partnership and who is personally liable for the partnership’s debts.

General Partnership

A partnership in which each member has an equal right to manage the business and share in the profits, as well as an equal responsibility for the partnership’s debts.

Joint Venture

Two or more individuals or companies joining together for one project or a related series of projects but not as an ongoing business.

Limited Liability

When a business investor is not personally liable for all the debts of the business, as in the case of a limited partner, LLC member, or a corporate shareholder.

Limited Liability Company

A form of business entity that offers both limited liability for its owners and certain tax benefits.

Limited Partner

In a limited partnership, an investor who isn’t personally liable for the partnership’s debts.

Limited Partnership

A partnership made up of one or more general partners and one or more limited partners, organized in compliance with the Limited Partnership Act.

Partnership

An association of two or more persons to carry on a business for profit.

Real Estate Investment Trust (REIT)

A real estate investment business that qualifies for tax advantages if certain requirements are met.

Securities

Shares in an enterprise that represent an ownership interest but not managerial control.

Shareholder

An individual who holds an ownership share in a corporation and has limited . Also known as a stockholder.

Trust

A legal arrangement in which title to property (or funds) is vested in one or more trustees, who manage the property on behalf of the trust’s beneficiaries, in accordance with instructions set forth in the document establishing the trust.

Trustee

A person appointed to manage a trust on behalf of the beneficiaries.

Common Elements

The land and improvements in a condominium, planned development, or other housing development that are owned and used collectively by all the residents, such as parking lots, hallways, and recreational facilities available for common use.

Condominium

Property developed for concurrent ownership, where each co-owner has a separate interest in an individual unit, combined with an undivided interest in the common elements.

Conversion

The process of changing an apartment complex into a condominium or cooperative.

Cooperative

A building owned by a corporation, where the residents are shareholders in the corporation; each shareholder receives a proprietary lease on an individual unit and the right to use the common areas.

Limited Common Elements

In a condominium or other development, features outside of the dwelling units that are reserved for the use of the owners of particular units, such as an assigned parking space.