{Chapter 12

Property: Real Property, Leases & Mortgages

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Real Property Property that is immovable or attached to

immovable land or buildings

Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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Types of Real Property1. Land and buildings2. Subsurface rights

Rights to the earth located beneath the surface of the land3. Plant life and vegetation

Plant life and vegetation growing on the surface of land are considered real property

4. Fixtures Goods that are affixed to real estate so as to become part thereof

5. Air rights The owners of land may sell or lease air space parcels above

their landCopyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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Estates in Land Ownership rights in real property; bundle

of legal rights that the owner has to possess, use, and enjoy the property

Type of estate: Determined from the deed, will, lease, or other document that transferred the ownership rights

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Freehold Estate Freehold estate: An estate in which the

owner has a present possessory interest in the real property

In short – you own & control all rights completely

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Freehold Estate Types1. Fee simple absolute: A type of ownership of

real property that grants the owner the fullest bundle of legal rights that a person can hold in real property

2. Fee simple defeasible: A type of ownership of real property that grants the owner all the incidents of a fee simple absolute except that it may be taken away if a specified condition occurs or does not occur

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Freehold Estate Types3. Life estate: An interest in real property

for a person’s lifetime; upon that person’s death, the interest is transferred to another party

4. Estate pour autre vie: A life estate that is measured by the life of a third party

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Concurrent Ownership A situation in which two or more persons

own a piece of real property

Also called co-ownership

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Concurrent Ownership Types1. Joint tenancy: A form of co-ownership

that includes the right of survivorship Right of survivorship: A legal rule that provides

upon the death of one joint tenant the deceased person’s interest in the real property automatically passes to the surviving joint tenant or joint tenants

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Concurrent Ownership Types2. Tenancy in common: A form of co-

ownership in which the interest of a surviving tenant in common passes to the deceased tenant’s estate and not to the co-tenants

3. Tenancy by the entirety: A form of co-ownership of real property that can be used only by married couples

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Concurrent Ownership Types4. Community property: A form of ownership in

which each spouse owns an equal one-half share of the income of both spouses and the assets acquired during the marriage

5. Condominium: A common form of ownership in a multiple-dwelling building in which the purchaser has title to the individual unit and owns the common areas as a tenant in common with the other condominium owners

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Concurrent Ownership Types6. Cooperative: A form of co-ownership of a

multiple-dwelling building in which a corporation owns the building and the residents own shares in the corporation

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Future Interests The interest that a grantor retains for

himself or herself or a third party Reversion: Right of possession returns to the

grantor after the expiration of a limited or contingent estate

Remainder: Right of possession that goes to a third party upon the expiration of a limited or contingent estate Remainder beneficiary

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Transfer of Ownership Title to real property can be transferred

by:1. Sale (conveyance): The passing of title from a

seller to a buyer for a price2. Deed: An instrument that describes a person’s

ownership interest in a piece of real property Grantor: The party who transfers an ownership

interest in real property Grantee: The party to whom an interest in real

property is transferred

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Types of Deeds General warranty deed:

A deed that protects a grantee of real property from defects in title caused by the grantor and prior owners of the property

Special warranty deed: A deed that protects a grantee of real property from

defects in title caused by the grantor Quitclaim deed:

A deed in which the grantor of real property transfers whatever interest he has in the property to the grantee

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Recording statutes A state statute that requires a mortgage

or deed of trust to be recorded in the county recorder’s office of the county in which the real property is located

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Quiet Title Action An action brought by a party, seeking an

order of the court declaring who has title to disputed property

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Titles Marketable title: Title to real property that is

free from any encumbrances or other defects that are not disclosed but would affect the value of the property Attorney’s opinion Torrens system Title insurance: A form of insurance obtained from

a title insurer who agrees to reimburse the insured for losses caused by undiscovered defects in title

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Adverse Possession A person who wrongfully possesses someone

else’s real property obtains title to that property if certain statutory requirements are met

Certain statutory requirements: Statutorily prescribed time period Open, visible, and notorious Actual and exclusive Continuous and peaceful Hostile and adverse

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Nonpossessory Interests A situation in which a person holds an

interest in another person’s property without actually owning any part of the property

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Easements Easement: A given or required right to

make limited use of someone else’s land without owning or leasing it

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Easements 1. Easement appurtenant: Owner of one piece of land

is given an easement over an adjacent piece of land2. Easement in gross: Authorizes a person who does

not own adjacent land the right to use another’s land3. License: A document that grants a person the right

to enter upon another’s property for a specified and usually short period of time

4. Profit-à-Prendre: A document that grants a person the right to remove something from another’s real property

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Zoning Zoning ordinances: Local laws that are adopted by

municipalities and local governments to regulate land use within their boundaries

Variance: An exception that permits a type of building or use in an area that would not otherwise be allowed by a zoning ordinance

Nonconforming uses: For real estate and buildings that already exist in a zoned area that are permitted to continue even though they do not fit within a new zoning use established for the area