Property Ownership and Transfer Flashcards
Real Property vs. Personal Property
Real Property (Real Estate)
Definition: Real property is defined by its characteristic of being immovable.
Composition: It consists of the land plus any improvements made to it, such as buildings, fences, and fixtures.
The Bundle of Rights: Ownership of real property includes a specific set of legal rights:
Possession: The right to occupy the property.
Control: The right to determine how the property is used.
Enjoyment: The right to use the property in any legal manner without interference.
Exclusion: The right to keep others from entering or using the property.
Disposition: The right to sell, will, transfer, or otherwise dispose of the property.
Personal Property (Chattel)
Definition: These are items that are movable and not permanently attached to the land.
Examples: Furniture, vehicles, and crops.
Transfer Mechanism: Personal property is transferred via a bill of sale, rather than a deed used for real property.
Trade Fixtures
Definition: Items installed by a commercial tenant specifically for business use.
Ownership Status: Trade fixtures are always considered the personal property of the tenant unless they are abandoned by the tenant.
Fixtures and the MARIA Test
General Rule: An item that is installed or attached to the land is generally considered real property unless there is an agreement stating otherwise.
Determining Fixture Status (The MARIA Test): To determine if an item has become a fixture (real property), the following five criteria are applied:
M - Method of attachment: How is the item affixed? (e.g., bolted, nailed, glued).
A - Adaptability: Is the item custom-fitted to the property (e.g., custom blinds)?
R - Relationship of parties: Courts often favor tenants over landlords or buyers over sellers.
I - Intention: What was the original intent of the person who installed the item?
A - Agreement: This is the most important factor. What did the parties agree to in the contract regarding the item?
Characteristics of Land
Physical Characteristics
Permanence (Immobility): Land cannot be moved from one location to another.
Indestructibility: Land cannot be destroyed; its geographical location remains constant.
Uniqueness (Non-homogeneity): No two parcels of land are identical; each has its own unique geographic coordinates.
Economic Characteristics
Scarcity: There is a limited supply of land.
Location (Situs): This is the most important economic characteristic and is the primary driver of property value.
Improvements: Additions made to the land that increase its overall value.
Permanence of Investment: Land is considered a long-term and stable investment.
Types of Ownership: Freehold Estates
Freehold Estates: These represent ownership for an indefinite period of time.
Fee Simple Absolute
The highest form of ownership interest recognized by law.
Features: It has unlimited duration and is both transferable and inheritable.
Fee Simple Defeasible
Ownership that comes with specific conditions or strings attached. If the condition is violated, ownership may be lost.
Fee Simple Determinable: Uses language such as "so long as…" If the condition is met, there is an automatic reversion of the property to the original owner.
Fee Simple Subject to Condition Subsequent: Uses language such as "on the condition that…" Ownership does not end automatically; the original owner must go to court to exercise their right of reentry and enforce the condition.
Life Estate
Ownership that is based on the duration of someone's lifetime.
Restrictions: The life tenant cannot will the property to heirs.
Future Interests: Upon the death of the measuring life, the interest becomes either a reversion interest (goes back to the grantor) or a remainder interest (goes to a named third party).
Types of Ownership: Leasehold Estates
Leasehold Estates: This refers to a tenant's right to possess the property; it does not constitute ownership.
Estate for Years: A lease for a fixed, definite period. No notice is required to terminate because the end date is already established.
Periodic Tenancy: A lease that renews automatically for successive equal periods (e.g., month-to-month). Notice is required to terminate.
Estate at Will: A tenancy that can be terminated at any time by either the landlord or the tenant.
Estate at Sufferance: Occurs when a tenant remains in the property after their legal lease has expired without the landlord's consent.
Forms of Concurrent Ownership
Tenancy in Common
The most popular/common form of concurrent ownership.
Owners hold separate, undivided interests.
Right of Survivorship: None. Owners can sell or will their specific share to others.
Joint Tenancy
Features the Right of Survivorship (ROS): If one owner dies, their interest passes automatically to the surviving joint tenants.
Requires the four unities (TTIP):
T - Time: All interests must be acquired at the same time.
T - Title: All interests must be acquired on the same document.
I - Interest: All owners must hold equal shares.
P - Possession: All owners have an undivided right to possess the entire property.
Note: If a joint tenant sells their share, the new owner becomes a Tenant in Common (TIC) with the remaining joint tenants.
Tenancy by the Entirety
Reserved exclusively for married couples.
Includes the Right of Survivorship.
Provides protection from the creditors of an individual spouse.
Ownership in Severalty, Trusts, and Business Entities
Severalty: Ownership of property by exactly one person or one legal entity (e.g., a corporation).
Trusts: A fiduciary arrangement where a trustor conveys property to a trustee to hold and manage for the benefit of a beneficiary.
Business Ownership
LLC (Limited Liability Company): Limits the personal liability of owners and provides pass-through taxation.
Partnerships: Can be structured as General Partnerships (shared liability/management) or Limited Partnerships (silent partners with limited liability).
Corporations: Entities owned by shareholders which have a perpetual existence.
Legal Descriptions of Property
Metes and Bounds
The oldest method of property description.
Used primarily for irregular shapes.
It always begins and ends at a Point of Beginning (POB).
Rectangular (Government) Survey
A system using townships and ranges based on principal meridians and base lines.
Township Dimensions:
Section Dimensions:
Lot and Block
The method used for subdivisions.
It is based on a plat map that is filed with the county.
Encumbrances
Definition: Claims or liabilities attached to a property that may affect its value or use.
Liens: A financial claim against property.
Voluntary: A lien placed with the owner's consent (e.g., a mortgage).
Involuntary: A lien placed without owner consent (e.g., tax lien, judgment).
Specific: Affects only a particular property (e.g., property tax lien).
General: Affects all property of the debtor (e.g., IRS tax lien).
Easements: The legal right to use another person's land for a specific purpose.
Appurtenant: "Runs with the land" and benefits a neighboring parcel.
In Gross: Benefits a person or company rather than a piece of land (e.g., utility company easement).
By Necessity: Granted by a court for a landlocked parcel to provide access.
By Prescription: Acquired through the open, notorious, and continuous use of another's land without permission for a statutory period.
Deed Restrictions: Private rules or covenants on property use, often enforced by Homeowners Associations (HOA) or courts.
Encroachments: A physical intrusion where an object (e.g., a fence, tree branch, or garage) crosses the property line. A survey is often required to confirm an encroachment.
Water Rights
Riparian Rights: Pertains to land bordering moving water such as a river.
Navigable: Ownership extends to the water's edge.
Non-navigable: Ownership extends to the center of the stream.
Littoral Rights: Pertains to land bordering stationary bodies of water like lakes or oceans. Ownership extends to the average high-water mark.
Appropriation: A doctrine (common in Western states) where the state controls water usage rights.
Land-Use Controls and Property Transfer
Public & Private Land-Use Controls:
Zoning: Government regulation of land use.
Building Codes: Regulations for construction standards and safety.
Environmental Laws: Regulations to protect the environment.
Private Restrictions: Includes HOAs and CC&Rs (Covenants, Conditions, and Restrictions).
Transfer of Property Rights: Rights can be transferred through various means:
Property can be Sold.
Property can be Gifted.
Property can be Inherited.
Property can be Leased (transfer of possession).
Property can be Mortgaged (transfer of a security interest).