University Real Estate Notes - Private Estates, Descriptions, and Encumbrances
Class Logistics and Attendance
Students in town, or even those not in town, are welcome to attend the physical class in person.
This invitation applies regardless of whether the student is officially enrolled in the distance section or the in-person section.
Students are encouraged to stop in on any random day if they are around.
Statutory Estates: Dower and Courtesy
Statutory Estates Overview: These estates are established by state law rather than private contract. In many modern jurisdictions, they have been abolished or are considered less significant than they once were.
Dower:
Definition: Dower refers to a widow's legal interest in her deceased husband's property.
Historical Purpose: Dower rights were designed to protect women during a historical period when women were legally unable to own property in their own name. These rights ensured a widow had a place to live and a say in the disposition of the marital home after her husband's death.
Legal Strength: Dower rights were historically very difficult to defeat or circumvent once they attached to a property.
Modern Status: Since women can now own property independently, many states have eliminated dower rights. Only a handful of states still recognize or utilize them.
Courtesy:
Definition: Courtesy was the male equivalent of dower rights (a husband's interest in his deceased wife's property).
Historical Context: This was generally less important than dower because men were always legally permitted to own property. It had historical roots in the inheritance of titles (e.g., in medieval times) when a male heir might inherit a title from the mother's side of the family.
Business Entities and Property Ownership
Legal Capacity: Business entities are considered legal "persons" and can own property in much the same way an individual can.
Real Estate Investment Considerations:
C-Corporations (C-Corps): These are rarely used for real estate investment due to the issue of "double taxation." Additionally, tax benefits associated with real estate ownership often get trapped within the corporate structure and cannot be passed through to shareholders.
Joint Ventures: Defined as a "one-off" business arrangement between two parties for a single project or deal. If the relationship continues beyond a single deal, it typically transforms into a partnership. A joint venture generally does not own property in the long term outside of the specific project.
Trusts and Asset Management
Definition of a Trust: A legal arrangement where property is held by one party for the benefit of another.
Real Estate Investment Trusts (REITs): These are large, often publicly traded funds where numerous investors pool money to purchase real estate. They function similarly to a mutual fund but focus on property rather than stocks.
Primary Trust Types:
Inter Vivos Trust: Also known as a "living trust," this is established while the individual is still alive.
Testamentary Trust: Created via a will and takes effect only after the individual's death (hence the connection to the "last will and testament").
Trust Structure:
The Trust: Legally owns the property once it is transferred.
The Trustee: The manager appointed to oversee the property and trust assets.
The Beneficiaries: Individuals named to receive the benefits (income, rent, etc.) according to the trust's instructions.
Asset Protection Strategy: An owner may transfer real property into a trust and name themselves the beneficiary.
Reasoning: This converts the interest from "real property" into "personal property" (the beneficial interest in the trust).
Benefit: It makes it significantly harder for a court to seize the asset in a legal judgment against the individual.
Legal Descriptions of Real Property
The Necessity of Uniqueness: Every piece of property is legally unique; therefore, precise descriptions are required to identify specific parcels.
Metes and Bounds:
Methodology: Begins at a "Point of Beginning" (POB) and describes the perimeter of the property by walking the boundary lines until returning to the POB.
Definitions: "Bounds" refers to the directions followed; "Metes" refers to the distances measured.
History: This system has been used for hundreds of years ($800$ to $900$ years) and is common in the eastern United States, including Alabama.
Monuments: Historically, descriptions used physical landmarks (monuments) like trees, fences, or iron stakes.
Weaknesses: Physical monuments can change over time (e.g., a barn may burn down, a tree may be struck by lightning/die, a road may become overgrown). Modern descriptions strive for more precision in distances and directions to minimize these issues.
The Rectangular Survey System (Government Survey)
Basis: Uses the global grid of latitude and longitude as a foundation.
Key Lines:
Principal Meridian: A specific North-South longitude line used for measurements.
Baseline: A specific East-West latitude line used for measurements.
Grid System:
Range Lines: Imaginary lines running North-South, parallel to the principal meridian, spaced every miles.
Township Lines: Imaginary lines running East-West, parallel to the baseline, spaced every miles.
Township: A square area created by the intersection of range and township lines, measuring miles by miles (totaling square miles).
Geography and Implementation:
Original 13 Colonies: Do not use this system (they use Metes and Bounds) as they were already settled before the rectangular survey was developed.
Western States: Use this system extensively; meridians and baselines are spaced much further apart due to the flatter terrain.
Alabama: Contains two baselines and two principal meridians. The "Huntsville Baseline" is in the North. A southern baseline runs along the bottom border of Alabama, Mississippi, and into Louisiana.
Exceptions: Texas uses its own unique system because it was briefly its own country.
Subdividing the Township:
Sections: A township is divided into sections. Each section is a mile by mile square.
Numbering: Sections are numbered in a "boustrophedon" (snaking) pattern starting in the upper right (Northeast) corner (Section ), moving West to Section , then dropping down and moving East.
Fractional Descriptions: Large parcels are described by their position within a section (e.g., "the Southwest quarter of the Northeast quarter of Section "). This provides extreme specificity compared to informal descriptions.
Recorded Plats and Other Description Methods
Recorded Plat:
Definition: A "plat" is a fancy term for a map.
Usage: Most common in modern subdivisions. The developer records a detailed architectural map at the courthouse showing lot lines and roads.
Legal Reference: Property is then described by referring to the map and a specific lot number (e.g., "Lot of the recorded plat of the Oakwood Subdivision").
Incomplete/Informal Descriptions:
Street Address: Useful for finding a front door but fails to describe size, shape, or legal boundaries.
Assessor's Parcel Number (APN): High precision for current county records, but the numbers can change over time as counties renumber parcels. They are not reliable as permanent legal descriptions in deeds.
Vertical Descriptions: Used for condominiums where ownership is not of the land but of a specific air space. These use "datums" (standardized points of elevation, usually mean sea level) to measure height.
Introduction to Encumbrances: Private vs. Public Restrictions
Encumbrance: Anything that prevents "clear title" or stands in the way of an owner possessing the full "bundle of sticks" (rights) associated with property ownership.
Private Restrictions (Chapter 3): Restrictions placed on the property by private individuals or entities (e.g., you and your neighbor).
Public Restrictions (Chapter 4): Restrictions placed on the property by the government (e.g., zoning, taxes).
Deed Restrictions and HOA Enforcement
Deed Restrictions/Covenants: Clauses within a deed that limit how the property can be used.
Common Examples: Prohibitions against basketball goals in driveways, height requirements for grass, prohibitions on work vehicles or non-functioning vehicles being parked overnight, or bans on mobile homes in backyards.
Homeowners Associations (HOAs): Entities typically responsible for enforcing these covenants to maintain property values.
Enforcement Process:
A "nasty gram" (letter) is sent notifying the owner of a violation.
If uncorrected, fines are issued according to the contract.
If fines go unpaid, the HOA may file a lawsuit.
A court judgment can lead to a lien and eventual foreclosure.
Anecdote (The Cardboard Box): The lecturer shared a story from Charleston, SC, where his HOA fined him for a "cardboard box at the top of the driveway." The box was actually the packaging for a new air conditioning unit being installed by a company called "Frigid Air" (white van with blue ice letters). The box was only there while workers were on-site during the day.
Liens: Financial Claims Against Property
Definition: A financial claim against property to secure an obligation. If unpaid, the lienholder can often foreclose to force a sale.
Mortgage Liens:
Function: Secures the repayment of a mortgage loan.
Classification: Private, specific (one property), and voluntary.
Parties: The Mortgagor is the borrower (who "gives" the mortgage interest); the Mortgagee is the lender (who "receives" the interest).
Mechanic’s Liens:
Function: Filed by someone who provides labor or materials to improve a property.
Perfecting the Lien: The lien exists as soon as work begins or materials are delivered, but a specific document must be filed to "perfect" it (officially record it).
Payment: Usually paid out of the proceeds when the property is eventually sold.
Judgment Liens:
Function: Result from losing a court case.
Classification: General (applies to all property owned in that court's jurisdiction) and involuntary.
Property Tax Liens:
Classification: Public/Governmental, involuntary, and specific.
Occurrence: Every property in the US has a property tax lien filed against it annually. The lien is removed once taxes are paid. This is why the government can seize a house for non-payment of taxes.
Easements: Rights of Use
Definition: The right to use someone else's property for a specific, defined purpose.
Types of Easements:
Easement Appurtenant: "Runs with the land." It involves a Dominant Tenement (the parcel that benefits) and a Servient Tenement (the parcel that is burdened). If either parcel is sold, the easement stays in place.
Easement in Gross: Burdened parcels exist (Servient Tenements), but there is no specific "Dominant Tenement" parcel. This is common for Utility Easements (power lines, sewer pipes, cable lines).
Party Wall Easement: Shared walls between two buildings (common in downtown areas like Charleston or Tuscaloosa). Each owner owns their half of the wall and has an easement in the other half to ensure structural integrity. Neither owner can tear down their half without coordinating with the other.
Conservation Easement: A "negative easement" that prevents development on environmentally sensitive or beautiful land. These are often held by nonprofits (e.g., Ducks Unlimited, Sierra Club) and can provide tax benefits by reducing the property's market value.
Creation of Easements:
Grant/Reservation: Explicitly giving or keeping an easement during a sale.
Necessity: Created when a parcel is landlocked and must have access to a road to be usable.
Prescription: Gained by using the land for a long period (+ years) without permission in a way that is open, actual, continuous, hostile, exclusive, and notorious.
Termination: Easements can end through Merger (one person buys both parcels), Abandonment (non-use over time), or Agreement (contractual release).
Encroachments and Adverse Possession
Encroachment: When a physical improvement "ouzes" onto a neighbor's property (e.g., a driveway corner crossing a lot line or a fence built inaccurately due to builders drinking Beer while working). Boundaries surveys are required to detect these.
License vs. Profit:
License: A personal privilege to enter land (e.g., a hunting license). It is revocable at any time and is not a real property interest.
Profit (Profit a Prendre): The right to enter land and take something away (e.g., timber, topsoil, pecans, or game).
Adverse Possession:
Definition: Gaining actual Title (ownership) of land by using it according to the همان criteria for prescription (hostile, open, notorious, continuous, exclusive) for a statutory period.
Timeframes: Between years (shortest) and years (NJ). Most states require to years.
Color of Title: The timeframe can be significantly shortened (to as little as years in some states) if the person has a document that looks like title or pays the property taxes on the land.
Societal Goal: To ensure land is put to productive use rather than being abandoned or ignored by its legal owner.
Questions & Discussion
Q: Regarding the public road and lake in Alaska: what happens when someone builds on a public easement?
A: Normally, you would be forced to tear the building down. In the cited case, a state senator in Alaska built over a public easement to the lake. Rather than tearing the house down, the public easement was simply removed. It shows that sometimes powerful people get away with things.
Q: How do you stop someone from gaining an easement by prescription?
A: The easiest way is to give them permission. Once they have permission, the use is no longer "hostile" (without permission), and the legal requirements for prescription cannot be met.
Q: Can you use adverse possession on federal land?
A: No. Do not try to move into a national park and claim it.
Q: If I build a shack on an acre ranch, do I get the whole ranch?
A: No. You only gain ownership of the specific portion you are putting to productive use.
Q: When is the first test?
A: Test is on Chapters through . It is scheduled for Friday of next week. Monday is a holiday, so Chapters and will be covered Tuesday through Thursday.