Real Estate Pre-licensing

Estates and Interests

Overview: What Is Real Estate?

• Land: Surface of the earth with natural features, extending to the earth's center and infinity.
• Real Estate: Land plus improvements (permanently attached structures).
• Real Property: Real estate plus the bundle of rights associated with ownership.
• Appurtenances: Rights like subsurface, air, and water rights that transfer with the property.
• Surface Rights: Rights to surface elements, including trees, crops, and structures.
• Subsurface Rights: Rights to minerals, oil, and gas below the property.
• Air Rights: Rights to use airspace above the property.
• Water Rights:
  • Riparian: Use of flowing water (rivers, streams).
  • Littoral: Use of lakefront or oceanfront water.
• Accession: Right to property produces or additions.
• Accretion: Gradual increase in land area by soil deposits.
• Erosion: Gradual loss of land.
• Reliction: Increase in land area as water withdraws.
• Avulsion: Sudden loss of land by flood or change in river course.
• Indestructible
• Immobile
• Non-homogenous
• Scarcity: Finite land supply.
• Situs: Preference for land location.
• Modification: Human-made improvements affecting land value.
• Fixity: Land as a long-term investment.
• Illiquidity: Difficulty quickly converting land to cash.
• Personal Property: Moveable, unattached assets not considered real estate.
• Conveyance:
  • Personal property conveyed by bill of sale or bequest.
  • Real property conveyed by deed.
• Chattel: Term for personal property.
• Fructus Naturales: Trees and perennial plants, considered real property.
• Fructus Industriales (Emblements): Annually cultivated crops, considered personal property.
• Attachments: Personal property becoming real property when permanently attached.
• Fixtures: Objects once personal property, now real property.
• Trade Fixtures: Tenant's business-related personal property.
• Annexation: Process of creating a fixture.
• Severance: Converting real property into personal property.

Uses of Real Property

• Residential: Properties for living.
• Commercial: Properties for business and revenue.
• Industrial: Properties for manufacturing, distribution, or warehousing.
• Agricultural: Properties for cultivation of food, feed, and fiber.
• Special Purpose: Properties with a limited, specific use (e.g., churches, schools).

Freehold Estates

• Possessory Interest: Right to occupy a property.
• Non-Possessory Interest: Right to control a property without possession.
• Freehold Estates: Ownership interests.
• Leasehold Estates: Rental interests.
• Fee Simple Estate: Absolute, indefinite ownership with full bundle of rights.
• Qualified Fee Estate: Ownership that can be annulled if conditions occur.
• Fee Simple Determinable: Automatically reverts to previous owner if a condition occurs.
• Fee on Condition: Grantor must prove condition violation in court.
• Life Estate: Limited to the duration of a measuring life.
• Ordinary Life Estate: Measuring life is that of the life tenant.
• Pur Autre Vie: Measuring life is someone other than the tenant.
• Estate in Reversion: Property reverts to the grantor after life estate ends.
• Estate in Remainder: Life estate passes to a remainderman after measuring life ends.
• Act of Waste: Diminishing property value, leading to liability.
• Legal Life Estates:
  • Dower/Curtesy: Spousal inheritance rights (not recognized in New York).
  • Homestead: Protection from losing primary residence in bankruptcy ($75,000$ to $150,000$ per spouse).

Leasehold Estates

• Leasehold Estate: Right to use property without ownership.
• Landlord (Lessor): Grants the lease.
• Tenant (Lessee): Receives the lease.
• Estate for Years: Lease with specific start and end dates.

Forms of Ownership

• Deed: Transfers property interest.
• Devise: Transfers property by will.
• Descent: Transfers property by succession.
• Ownership in Severalty: Sole ownership by one entity.
  *Corporations are viewed as single, legal entities.
• Co-ownership: Multiple owners.
• Undivided Interest: Right of possession of the whole property.
• Right of Survivorship: Ownership interest reverts to surviving co-owners.
• Right of Inheritance: Interest goes to heirs upon death.
• Tenancy in Common:
  • Undivided interest.
  • Right of inheritance.
  • Ability to own unequal shares.
• Joint Tenancy:
  • Undivided interest.
  • Right of survivorship (usually).
  • Equal shares.
  • Purchase together, at the same time.
• Married Couples:
  • Tenancy by the Entirety: Each spouse holds equal interest. A form of co-ownership where legal spouses each hold an equal and undivided interest in the property which cannot be conveyed or encumbered without the consent of the other.
• Partition: Dividing co-ownership into separate interests.

Trusts

• Trustor: Creates the trust.
• Trustee: Manages trust assets.
• Beneficiary: Receives trust benefits.
• Living Trusts: Established while trustor is alive.
• Testamentary Trusts: Set up in a will, effective upon death.

Ownership of Real Estate by Business Organizations

• Sole Proprietorship: Business operates as an extension of the owner as the business is incapable of owning real estate on its own.
• Partnerships:
  * General: Unlimited liability.
  * Limited: Limited liability for limited partners but has at least one general partner.
• Corporations: Legal entities, treated as single persons, ownership in severalty.
  * C Corporations: Subject to double taxation.
  * Subchapter S Corporations (S Corps): Income/losses pass through to shareholders' tax returns.
• Limited Liability Companies (LLC) & Partnerships (LLP): Shield from personal liability.
• Syndicates & Joint Ventures: Joint ventures are one-and-done deals, while syndicates involve multiple projects.
• Real Estate Investment Trusts (REITs): Companies owning income-producing real estate or assets.
• Cooperatives (Co-ops): Corporation owns the building, members own shares.
  *Corporation is membership- based, with membership granted by way of a share purchase (stock) in the corporation that owns the building(s)
• Condominiums: Owners own the interior of their unit but do not own the land on which their unit stands, nor do they own the exterior of the building.
• Townhomes: Owners own their home and the land it sits on.
• Timeshares: Multiple owners have the right to use a property for a specified period each year.

Liens and Easements

• Encumbrance: Non-possessory interest that burdens the title.

• Easement: Right to use another's land for a specific purpose.

• Lien: Claim against property as security for debt.

• Deed Restrictions: Limitations controlling land use.

• Cloud on Title: Dispute on an otherwise clear title.

• Licenses: Revocable, temporary permission to use property.

• Encroachment: Physical intrusion onto adjacent property.

• Constructive Notice: Legal presumption of obtaining information through due diligence.

• Actual Notice: Direct awareness of information.
  *Appurtenances rights that run with real property ownership; most often transferred with the property, but possible to sell separately

• Easement Appurtenant: Benefits an adjacent parcel (dominant tenement) at the expense of another (servient tenement).

• Easement in Gross: Benefits a person or entity, not the land.

• Floating Easement: No exact, fixed location.

• Easement by Necessity: Essential for dominant tenement use.

• Easement by Prescription: Granted after continuous, open use for a prescribed period (e.g., 10 years).

• Adverse Possession (Title by Prescription): Loss of title due to non-use and another's possession for 10 years.

• Negative Easement: Prevents blocking light and air.
  *An easement for light and air is a negative appurtenant easement that prevents the owner of adjoining land from doing anything that could block light and air from the dominant tenement.

• Easement by Condemnation: Private property taken for public use.

• Party Walls: Shared by two properties, granting right of use.
  *Encroachment physical property that crosses the boundary into a neighboring landowner's property

• Easement an interest in, or a right to use, another individual’s land or property, generally for a specific, limited purpose

• Abandonment

• Release

• Prescription

• Merger

• Expiration of purpose

• Court action

• A lien is a claim against property as security of a debt and it's an encumbrance.

• Can be voluntary or involuntary, general (attaching to real estate AND personal property) or specific (attaching to real estate only).

• General Liens

• Judgment liens (lis pendens)

• Estate and inheritance tax liens

• Deceased persons' debt

• Corporation franchise tax liens

• IRS tax liens

• Attachment Liens
  *Plaintiffs in a lawsuit may seek a writ of attachment, in which the court seizes property until it reaches a judgment. A writ of attachment
  is also called an attachment lien.

• Exempt Property
  *Certain kinds of property are exempt from attachments, meaning an attachment lien can't
  be put on them, and they can't be seized while awaiting a judgment.

• Corporation Franchise Tax All New York corporations have to pay yearly state taxes that are based on the
  company's net profit. A lien comes into the picture if the corporation doesn't pay the
  franchise tax when they're supposed to. This type of tax lien is involuntary and general.

• Specific Liens

• Mortgage liens

• Mechanic's liens

• Vendor's lien

• Vendee's lien

• Bail bond lien

• Municipal utility lien

• Vendor's Liens
  A vendor’s lien is a specific, involuntary lien on a property as security for the purchase
  price that arises when a seller has not yet received full payment for the property.

• Vendee's Liens A vendee's lien is a document declaring a claim from a buyer that the seller has not
  transferred title to the buyer according to the agreement.

• Bail Bond Liens Bail bonds can be put up in the form of real estate in lieu of cash when a property owner
  is accused of a crime.

• Priority of Liens - commonly prioritized in the same order in which they were recorded; taxing entities take priority over any other kinds of liens in the public records.

Deeds and the Transfer of Property

• Conveyance: An instrument transferring a grantor's interest.
• Deed: Legal document transferring real estate title.
  *Grantor should be a mentally capable adult.
  *Grantee, aka