Unit 8: Key Points >

These are the most important points for you to remember in this unit.

Land, Real Estate, and Real Property

• Real property or real estate means any interest or estate in land and any interest in business enterprises or business opportunities, including any assignment, leasehold, subleasehold, or mineral right; however, the term does NOT include cemetery lots nor the renting of a mobile home lot.
• Land is all the earth and everything attached to it by nature.
• Real estate is land, including airspace above and subsurface space below, and improvements.
• Real property (“realty”) includes the real estate plus the “bundle of rights,” which is ownership.
• There are three physical components of real property—surface, subsurface, and air.
  • Surface rights include land rights and water rights. There are two types of water rights:
    • Riparian rights are those on a moving course of water like a river or a stream.
    • Littoral rights are those of an owner whose land abuts a lake, ocean, or sea.
  • Erosion and Accretion related to water rights:
    • Erosion is the gradual loss of land due to natural forces.
    • Accretion is the gradual increase in land from natural causes.
    • Alluvion is the soil which has been added by accretion.
    • Reliction is the permanent increase in the land resulting from water levels becoming lower.
• Subsurface rights are often called “mineral” rights. These rights allow an owner of land to extract petroleum, natural gas, and underground minerals.
• Air rights are those above the earth’s surface, and extend as high as a property owner can reasonably use those rights.

Real vs. Personal Property

• Real property is land and improvements on the land. If an item is not real property, it is personal property.
• Personal property usually consists of items having a limited life, and which are easily movable from one place to another.
• Personal property (also called chattel, or personalty) includes any property that is not real property.
• Real property may become personal property by severance, such as cutting trees.
• Personal property can become real property by attachment (fixtures).
  • A fixture is an item that was once personal property, but is now legally considered to be real property.
  • Trade fixtures are fixtures that are used in a business and remain personal property that can be removed before the end of the lease.
• Courts apply four tests (IRMA) to determine whether an item is a fixture:
  • Intent of the parties
  • Relationship of the Parties
  • Method of attachment
  • Adaptability of the item.

Estates

• A freehold estate is ownership of the land, often called fee, fee simple, and fee simple absolute title.
• A life estate conveys ownership only for the life of the owner. At the owner’s death, the property goes either to a remainderman or reverts to the grantor (who would have a “reversion estate.”)
• Under homestead law, if the sole owner of a homestead dies without a will (Intestate), the spouse is not on the deed and there are children:
  • the spouse gets a legal life estate, and
  • the children are remaindermen.
• The constitutional homestead right protects the family home from forced sale (execution) of the homestead by creditors for all debts, including credit card debt.
• The amount of homestead property exempt from forced sale is limited to 160 acres outside a city, or ½ acre inside the city.
• A nonfreehold estate is also called a leasehold estate.
• There are several categories of leasehold estates:
  • A tenancy for years has a definite date for starting and ending.
  • A tenancy at will has a starting date but not a specific end date.
  • A tenancy at sufferance is a holdover tenant, usually at the end of a lease.

Types of Ownership

• If only one person owns property, it is called ownership in severalty.
• If more than one person owns property, it is co-owned, and is also called concurrent ownership. There are three different ways to hold concurrent ownership:
  • Tenancy in common
    • Property can be held in equal or unequal undivided interests. Each concurrent owner may will his or her share.
    Joint Tenancy
    • Two or more persons have an undivided interest in real property.
• • • When one “partner” dies, his/her share automatically passes to the other parties on the deed, because “right of survivorship” is present.if a joint tenant wills the property to his or her heirs, it will have no effect.
  • A tenancy by the entireties is property ownership by a marriage. Neither owns the property.
    • The death of one party makes the spouse the immediate owner of the property through survivorship.
    • if the deceased party has willed the property, the bequest will have no effect, since the property is not included in the estate.

Condominiums

• Condominium buyers receive a deed as evidence of ownership.
• The owner of the condominium gets a fee simple title to the condominium apartment, and an undivided share of the common elements.
• Common areasare undivided fractional shares of the structure and land owned by each unit owner, such as the lobby or the swimming pool.
• Owners pay common area expenses based on the percentage that the square footage of their unit bears to the total square footage of all units.
• Buyers of newly constructed condominiums may cancel within 15 calendar days after receiving all documents. If it’s a resale condominium, the buyer has 3 business days to cancel.
• A private party seller (resale) must give the buyer
  • the most recent year-end financial reports,
  • rules of the condominium owner’s association, and
  • a governance form that describes the duties of the board of directors and the owners’ rights.

Cooperatives

• Cooperatives are organized as corporations.
• Buyers receive stock of the corporation as evidence of ownership.
• The buyer gets a proprietary lease that allows the buyer to occupy the property.

Time-Sharing

• A time-share is organized as a condominium.
• Buyers receive ownership for a fixed period, typically one week each year.
• Three Types of Time-Share Ownership:
  • Time share estate (interval ownership): The buyer gets a deed.
  • Time share license: the buyer gets a lease, a license or a membership.
  • Club membership: gives the owner rights to make reservations in more than one timeshare site.
• Salespersons must have a current, valid license if they are paid by commission.