Real Estate Principles: Estates, Ownership, and Appurtenances
Real Property and Appurtenances
Real property is defined in a strict legal sense as encompassing land, appurtenances, and any objects affixed to the land that possess a permanent and immovable nature. Appurtenances are specific rights or items that are legally said to "run with the land." This designation means they are attached to the property and require no separate conveyance for transfer. Appurtenances are classified as real property and include features such as easements, stock in a mutual water company, covenants, and minerals.
Rights to minerals located beneath the surface of a plot of land are considered part of the real property interest. Unless a contract specifically states otherwise, these mineral rights are automatically transferred to the buyer during the sale of the real property.
Life Estates and Reversionary Interests
A life estate is a category of freehold estate where the duration is determined by the length of a specific person's life. Upon the conclusion of that life, the estate ownership passes to either a remainder interest-holder or a reversionary interest-holder. A holder of a life estate that is based on their own life possesses the legal authority to lease the property, sell their interest, or borrow money against it. However, they are restricted from devising the property (passing it via a will), because their interest expires at the moment of their death. If such a property is sold, the purchaser's rights are temporary; they will lose all rights to the property once the original life-estate holder dies and the property reverts to the secondary interest-holder.
A reversionary interest refers to a grantor's right to regain possession of a property after a set period or upon a specific condition. For example, if a property owner conveys ownership of a house to his mother with a stipulation that ownership returns to him upon her death, the son maintains a reversionary interest throughout the mother's life. Upon the mother's death, the son returns to holding a fee simple absolute estate. Similar interest is seen in deeds that state "to Stephen for life." In this instance, the grantor (Douglas) holds a reversionary interest; upon Stephen's death, the estate reverts to Douglas or his estate. If the deed had instead specified "to Stephen for life, then to Mary," Mary would be the remainderman holding a remainder interest.
Fee Simple and Defeasible Estates
A fee simple estate represents the most comprehensive form of ownership, granting an individual complete control over a parcel of real estate. This is the highest level of interest possible, as other estate types involve restrictive conditions. For instance, a leasehold estate involves property that is merely rented, while a life estate is limited by a person's lifespan.
Defeasible estates are interests that grant control to a person or entity only so long as certain conditions are either met or avoided. A common example is a qualified fee estate, which remains valid as long as the owner adheres to conditions set in the deed. If, for instance, a community receives a property deeded on the condition it be used only for building a school, and the community attempts to build a recreation complex instead, the control of the property automatically reverts to another party and the original deed is rendered void.
Co-Ownership and Tenancy with Survivorship
Tenancy in common is a method of holding title where there is no right of survivorship between owners. If an owner, such as Keith, dies while owning a house as a tenant in common with Ralph, his share of the property is not transferred to Ralph. Instead, Keith's interest passes directly to his legal heirs, while Ralph retains his original percentage of interest in the property.
Joint tenancy is defined by the right of survivorship, meaning the entire ownership of the property remains with the surviving joint tenant or tenants upon the death of one co-tenant. This form of ownership does not require a new deed when an owner dies. In a scenario where two friends own a building as joint tenants and individual dies, the surviving individual then owns the store in severalty. Severalty refers to sole ownership by a single person. To create a joint tenancy, four legal unities must be present: Time, Title, Interest, and Possession, frequently abbreviated as "TTIP."
Leasehold Interests and Tenancy Types
Under a lease agreement, the leasehold interest is held by the lessee, also known as the tenant. A leasehold interest is the right to exclusive use and possession of real property for a fixed duration.
A holdover tenancy occurs when a lessee remains in physical possession of a leased property after the lease term has expired. If the landlord continues to accept rent payments, they are agreeing to the tenant's continued occupancy as governed by state laws. For example, if a tenant signs a -month lease and, upon expiration, pays for additional month and receives a receipt, they have established a holdover tenancy.
A graduated rental lease is a specific agreement where the landlord and tenant agree to periodic adjustments of the monthly rent. These adjustments usually involve rent increases at set intervals as the lease matures, typically triggered by market conditions or appreciation in property value.
Easements and Access Rights
An easement is a permanent right that allows a property owner to use a portion of another owner's land (typically a neighbor) for a specific purpose. An appurtenant easement is an interest that specifically "runs with the land" and always transfers with the property when it is sold. For instance, if Pedro sells a property called Happyland that holds an appurtenant easement across Jethro's property (Pleasantville), the new owner Josh automatically gains the right to use that easement. Jethro cannot legally prevent Josh from using it because the easement is attached to the land itself, regardless of ownership changes.
The concepts of ingress and egress are synonymous with access. Ingress is the right to go upon or enter land, while egress is the right to exit or leave the land. These terms apply to both the dominant tenement, which may require an easement by necessity to enter and exit, and the servient tenement, which is the land being crossed by the easement-holder.
Liens and Encumbrances
A lien is a legal claim against property used to secure a debt. The primary distinction in liens is between general and specific types. A general lien is an encumbrance that affects all of a debtor's property, including both real and personal assets. A specific lien, by contrast, restricts only a particular designated piece of personal or real property. Both specific and general liens can be enforced through court proceedings if the debt is not satisfied.
Zoning and Land Use Controls
Zoning ordinances are written laws and regulations used to control the use of privately owned land within specific geographic areas. These ordinances define whether specific zones are for residential or commercial use. They also regulate physical details of construction and land use, including structure height, placement on the lot, lot size, and the bulk or density of buildings. While zoning is a powerful tool for land control, it is important to note that rent control (the regulation of rental prices) is not a function of zoning laws.
Financial Concepts and Property Classifications
Equity is a financial metric representing the portion of a home's value that exceeds the owner's mortgage debt. It is calculated as the difference between the current market value of the property and the amount owed to the lender. In the event of a sale, equity is the cash the owner receives after the mortgage is settled.
Personal property, also called "personalty" or "chattels," is defined as any movable property owned by an individual, partnership, or corporation. This includes any owned item that does not meet the definition of real estate, as well as the legal rights associated with the ownership of those movable items.
A homestead status provides protection for a primary property against the claims of certain types of creditors, serving as a safeguard for the homeowner's principal residence.