Chapter 1: Real Estate Ownership & Land-Use Vocabulary

Introduction to Real Estate

• Real estate = land + bundle of rights (use, enjoy, lease, share, sell, devise, seize by law, etc.)

• Title = intangible rights (the bundle)

• Deed = paper instrument that conveys those rights at closing

• Three basic ways to transfer title

  • Sale (most common)

  • Will (after death)

  • Adverse possession ("legal theft")

Parties That May Hold Rights in the Same Parcel

• Government: taxation, eminent domain, police power, escheat

• Lenders: mortgage lien gives foreclosure right on default

• Easement holders: railroads, utilities, neighbors, etc.

Land: Definitions & Physical / Economic Characteristics

• Land = spot on earth from center of earth to infinity above

• Physical

  • Immovable

  • Indestructible

  • Unique (non-homogeneous)

• Economic (value-oriented)

  • Location ("location, location, location")

  • Scarcity

  • Improvability

Real Estate vs Personal Property

• Real estate = land + appurtenances (rights/privileges/improvements that run with the land)

  • Natural appurtenances: trees, streams

  • Man-made appurtenances: houses, sheds, barns

  • Mineral rights (transfer unless reserved)

  • Air rights

  • Water rights

• Personal property (chattel) = movable items

  • Transfer instrument: bill of sale

  • "Chattel mortgage" = loan secured by personal property

Transformations Between Real & Personal Property

• Severance: real → personal (tree becomes lumber)

• Fixture: personal → real (was personal, now attached; presumed to stay)

  • Test for courts: MIA

  • Method of attachment

  • Intention of installer

  • Adaptation to the realty

• Trade fixture (commercial tenant)

  • Personal property of tenant; must be removed before lease ends or it becomes landlord’s property; tenant must repair damage

• Emblements: annual crops; belong to the farmer who planted them—even after sale (one harvest only)

Government Rights (Public Limitations)

1. Taxation (real estate ad valorem taxes; foreclosure if unpaid)

2. Police Power (zoning, building codes, flood maps)

3. Eminent Domain (right) / Condemnation (process)

   • Must be for public good, pay fair market value, covers owners & tenants

4. Escheat: owner dies intestate & without heirs → state takes

Private Rights – Estates in Land

• Estate = possessory interest

• Two broad categories

  1. Freehold (ownership; indeterminable duration)

  2. Leasehold (less-than-freehold; definite duration)

Freehold Estates (Ownership)

1. Fee Estates (inheritable)

   • Fee Simple (absolute): maximum rights

   • Conditional/Defeasible Fee: ownership subject to condition ("must be used as a school"); violation triggers reverter

2. Life Estates (non-inheritable unless pur autre vie)

   • Life Estate in Reversion: goes back to grantor/heirs when life tenant dies

   • Life Estate in Remainder: goes to third-party remainderman (receives fee simple)

   • Reservation: seller conveys but retains life estate

   • Pur autre vie: based on life of another; can pass to life tenant’s heirs until measuring life dies

   • Legal life estates: Dower (widow), Curtesy (widower), Homestead exemption (protects family home from some judgments)

   • Limitations: may sell, lease, mortgage but not waste or will (unless pur autre vie)

Ways to Take Title (Concurrent Ownership)

• Severalty: one person/entity (e.g.
  corporation)

• Tenancy in Common (T C → "to children")

  • Individual, undivided interests (may be unequal)

  • Inheritable; default form

  • Separate deeds; suit to partition available

• Joint Tenancy (TTIP)

  • Four unities: Time, Title, Interest, Possession

  • Right of survivorship (not inheritable)

  • Voluntary wording in deed required; destroyed if any unity broken (sale, partition)

• Tenancy by Entireties

  • Joint tenancy for married spouses; survivorship; neither can sue to partition

• Community Property (in some states)

  • Separate property (before marriage) vs community (acquired during; equal interests)

Leasehold (Less-Than-Freehold) Estates

• Lessor = landlord (giver); Lessee = tenant (receiver)

• Reversion: property returns to landlord on lease end

• Types

  1. Estate for Years: definite start & end (could be a week)

  2. Periodic Tenancy: month-to-month, etc.; requires notice to terminate

  3. Tenancy at Will: no written lease but with permission

  4. Tenancy at Sufferance: holdover without permission; landlord "suffers" → eviction; lowest estate

Encumbrances

Liens (money)

• Specific Liens (attach to one parcel)

  • Property Tax (priority #1 always)

  • Mortgage (voluntary)

  • Mechanic’s (effective date = date work began; subcontractors/materialmen; expires if not enforced)

• General Liens (attach to all property)

  • IRS Income Tax

  • Judgments (court-ordered debt) → lis pendens filed to warn buyers; writ of execution orders sheriff sale

Deed Restrictions (Private Use Controls)

• Aka restrictive covenants; recorded by developers; bind future owners (run with land)

• Enforced only by courts upon action by interested parties (neighbors/HOA)

• Illegal if based on race, religion, etc.

Easements & Encroachments

• Easement = right of ingress/egress; non-possessory "servitude"

  • Appurtenant (dominant vs servient tenement; runs with land; e.g.
    shared driveway, landlocked necessity)

  • In Gross (commercial—utility, railroad, billboard; assignable)

  • Creation: easement deed; prescription (continuous, open, notorious, hostile use for statutory period); necessity (landlocked)

  • Termination: release by dominant (quit-claim), merger, abandonment, purpose ends

• License = permission; personal, revocable

• Encroachment = unauthorized intrusion (fence, tree limbs); may ripen into prescriptive easement; detected via stake survey

Water Rights & Natural Processes

• Riparian: along flowing water; reasonable use; if non-navigable owners to mid-stream

• Reliction: land exposed by permanent receding water → owner gains

• Water table: surface to groundwater distance; perc test for septic

• Erosion (gradual loss) vs Accretion (gradual gain) vs Avulsion (sudden; boundaries stay)

Environmental Issues (Federal)

• CERCLA / Superfund: cleanup & liability; enforced by EPA (strict liability → current & previous owners)

• Lead-Based Paint (pre-1978 residences)

  • Disclose known lead; give EPA booklet; 10-day inspection option; keep records 3 yrs

• Asbestos: cancer causing; best treatment = encapsulation

• FEMA flood maps → flood insurance requirement for financed sales

• Radon: naturally occurring radioactive gas; mitigation systems vent soil gases

• Mold: moisture control & remediation

• Brownfield: abandoned industrial site with suspected contamination

• Clean Water Act: regulates discharges to waters; enforced by EPA

Multiple-Owner Properties

Cooperatives (Co-ops)

• Corporation holds title in severalty

• Members own stock & receive proprietary lease (personal property, leasehold)

• Monthly fees pay mortgage, taxes; entire building at risk of foreclosure

Condominiums

• Individual units: fee simple title (owner pays own mortgage/taxes/HO-6 interior insurance)

• Common areas: owned tenants in common; HOA dues; master deed + bylaws/charter

Timeshares

• Fee simple ownership of usage period (e.g.
  1 week/yr) in resort property

Transfer of Title – Voluntary Alienation (Deeds)

• Grantor (seller) → Grantee (buyer)

• Deed Types & Seller Promises

  1. General Warranty (5 covenants)

  • Seisin (ownership & right to convey)

  • Quiet Enjoyment (no 3rd-party claims)

  • Against Encumbrances (none undisclosed)

  • Further Assurance (will correct defects)

  • Warranty Forever (money-back guarantee)

  1. Special Warranty: defend only against defects during grantor’s ownership

  2. Bargain & Sale: covenant of seisin only

  3. Quitclaim: no covenants; used to cure clouds, boundary disputes, name misspellings

  4. Court deeds (sheriff’s, executor’s, administrator’s) require court action

Requirements for a Valid Deed (8-point list)

1. Grantor – legal age, sound mind & signs

2. Grantee – clearly named; need not be competent

3. Consideration ("$10 & other good/valuable consideration")

4. Granting clause + Habendum ("to have & to hold")

5. Legal description

6. Exceptions & reservations (liens, easements, CCRs)

7. Grantor’s signature (grantee does not sign)

8. Delivery & acceptance (title passes at closing)

Recording

• Not required for validity, but necessary for constructive notice & establishing priority

• Most interested party: grantee

• Must be acknowledged (notarized) before recording

• Priority: Real estate taxes → then date of recording (or effective date for mechanics liens)

Transfer by Will (Testate)

• Testator = deceased who made will

• Devise = gift of real property; Devisee = recipient

• Bequest/Legacy = gift of personal property; Legatee = recipient

• Executor (male) / Executrix (female) named in will executes; uses executor’s deed

Involuntary Alienation

• Descent: intestate succession (probate judge; administrator appointed)

• Adverse Possession (squatters’ rights) – C O N E: Continuous, Open, Notorious/hostile, Exclusive for statutory period → owner loses title

• Tax or Sheriff’s deed: foreclosure sale for unpaid taxes or mortgage

• Natural forces: erosion, accretion, avulsion

• Quiet Title Suit: court action to resolve clouds if quitclaim insufficient

Evidence of Title

• Abstract of Title: historical summary; lawyer issues attorney’s opinion; no guarantee

• Title Insurance

  • Standard policy (owner) covers recorded defects, forgery, undisclosed heirs

  • Extended policy (lender) adds unrecorded matters, survey issues, mechanics liens

  • One-time premium at closing; includes Schedule of Exceptions (zoning, govt.
    rights)

Real Estate Taxes & Special Assessments

• Ad valorem (general) tax = \text{Assessed Value} \times \text{Tax Rate}

  • Assessed value = \text{Market Value} \times \text{Assessment Rate}

  • Mill rate: 1 mill = \$0.001 (1/1000); 50 mills = 5\%

• Special assessment: pays for improvements benefiting specific parcels (sewers, sidewalks)

• Priority: real estate taxes (general or special) always paid first; if two, older prevails

"Power" Math Triangle (Part–Whole–Rate)

• \text{Part} = \text{Whole} \times \text{Rate}

• \text{Rate} = \dfrac{\text{Part}}{\text{Whole}}

• \text{Whole} = \dfrac{\text{Part}}{\text{Rate}}

Zoning & Planning

• Master plan guides growth; police power enforces zoning, building codes, flood maps

• Buffer zone: separates incompatible uses; also separates wetlands & development

• Zoning classifications: residential, commercial, industrial, agricultural, etc.

• PUD / Overlay / Cluster / Density zoning: mixes uses within planned development

• Down-zoning: from more to less intensive (e.g.
  multi-family → single-family)

• Exceptions

  • Non-conforming use (grandfathered; pre-existing)

  • Variance (permission after zoning for small deviation)

  • Spot zoning: single parcel rezoned for different use (must benefit public)

Subdivision Development

• Government regulations: streets, sewers, lot size, easements before plat approval

• Subdivider: splits land into salable lots

• Developer: installs improvements & builds

  • First task = market analysis

• Private deed restrictions (CC&Rs) by developer; if conflict with zoning, stricter rule prevails

• Dedication: developer voluntarily conveys land to govt.
  (parks, schools)

These bullet-point notes capture every major and supporting detail from the video transcript, integrate examples, acronyms, statutory references, mathematical formulas, and highlight exam-worthy distinctions and connections to broader principles.