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Owning real estate has always been every Americans dream. Real estate investment is probably one of the most important investments in a homeowners life. No other investment, even buying a car or investing in stocks, is as important as buying a home. Homeowners enjoy many benefits by owning real estate property. Some of these are: Right to use, right to encumber, right to dispose of, etc. Future appreciation. Tax advantages with deductibility of mortgage interest payments and tax benefit of depreciation of the property. In this chapter, the following will be discussed: Differences between personal and real property. Real estate components. Various types of estates. Various forms of real estate ownership.
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In a real estate sale, the seller removes all personal property unless otherwise negotiated.
Surface Rights
Surface is defined as the living space on the surface of the earth. This includes lateral and subjacent support (support from adjoining land and underlying strata). Land bordering a stream is owned to the middle of the stream. Tidal waters are owned to the mean high tide line.
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Subsurface Rights
Solid minerals contained in the land such as coal, iron or gold are real property, until they are taken from the ground, at which time they become personal property. A landowner that deals the land to another conveys the minerals contained in the land, unless otherwise stated. Oil and gas are a special class of minerals, and because of their fugitive (fluid) nature, they cannot be isolated and are incapable of absolute ownership until reduced to possession. The right to drill for oil and gas rests with the surface landowner or the owner on the mineral rights. It is important to note that surface rights and subsurface rights are distinct; an owner may transfer his or her surface rights without transferring the subsurface rights.
Water Rights
Water rights include: Riparian water rights. Littoral rights. Underground water rights. Right of appropriation. Surface water rights.
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Real Property)
The status of property can change between real property and personal property.
Example: Kitchen cabinets before being attached to a wall are personal property, and after they are affixed to a wall become real property.
Immobility
It is true that some of the substances of land are removable and the topography can be changed, but the geographic location of any given parcel can never be changed. It is fixed.
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Uniqueness
No two parcels of land are ever exactly the same. Although they may be substantially similar, all parcels differ geographically because each parcel has its own location. The uniqueness of land is also referred to as its heterogeneity or nonhomogeneity.
ESTATES
Freehold Less-Than-Freehold Estates
FREEHOLD ESTATES
Fee Estate Life Estate
LESS-THAN-FREEHOLD ESTATES
Estate For Years Estate From Period Estate At to Period Will Estate At Sufferance
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LIFE ESTATES
Estate in Reversion Estate in Remainder
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Example: A grant of land on the condition that there be no consumption of alcohol on the premises is a fee simple subject to a condition subsequent. If alcohol is consumed on the property, the former owner has the right to reacquire full ownership. It will be necessary for the grantor to go to court to assert that right, however.
A fee simple estate may also be qualified by a special limitation. The estate ends automatically upon the current owners failure to comply with the limitation. If the limitation is violated, the former owner reacquires full ownership, with no need to reenter the land or go to court. It is also called a fee simple determinable, because it ends automatically.
Example: A grant of land from an owner to a church so long as the land is used only for religious purposes is a fee simple with a special limitation. If the church decides to use the land for a nonreligious purpose, the title will revert to the previous owner.
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A person holding a life estate cannot grant more rights than he or she holds.
Example: Robert deeds a life estate to Susan for Susans life, with the provision that when Susan dies, the title reverts back to Robert. Susan holds a life estate. Robert holds the estate in reversion. Example: Tim deeds a life estate to Lisa for Marks life. Lisa holds a life estate (life tenant), but the measuring life is Marks. When Mark dies, the life estate ends, and the title reverts to Tim. When Lisa dies, while Mark is still alive, Lisas heirs may inherit the life estate. When Tim dies, and Lisa and Mark are still alive, Lisa still holds life estate. It is until Mark dies that the title reverts back to Tims heirs.
Example: Mary deeds a life estate to Rodney for the life of Rodney. When Rodney dies, the property passes to Matt. Rodney holds a life estate. Matt holds the estate in remainder.
The holder of an estate in remainder or estate in reversion has no right to the use and enjoyment of the property until the current life tenant dies.
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A Single Man/Woman
A man or woman who is not legally married.
An Unmarried Man/Woman
A man or woman who has been married and is legally divorced.
Example: Frances Bryant, a married woman, as her sole and separate property.
Property held by corporations is owned in severalty, as if by a single individual. A corporation is a body of persons treated by law as a single legal person, having a personality and existence distinct from that of its shareholders. A corporation can go on forever; it does not die.
A Widower/Widow
When ones spouse passes away, one becomes a widower or widow.
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How a person holds title has a significant impact upon his or her income tax and estate planning. A buyer should consult with a CPA or attorney on how to hold title. The seller or agent should not offer such advice.
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Example: John Walters and Camille Walters, brother and sister, as joint tenants.
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Example: Christopher Stephens and Valerie Stephens, husband and wife, as community property.
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Parties
Any number of persons (can be husband and wife) Any time Each coowner has a separate legal title to his or her undivided interest Ownership can be divided into any number of interests, equal or unequal Equal right for each owner
Any number of persons. (can be husband and wife) Same time Only one title to the whole property
Any number
Time Title
Same time Only one title in the community each interest is separate
Same time Only one title in the community each interest is separate
Interest/Division
Equal right for each owner Only if both spouses join in the conveyance separate interest cannot be conveyed
Equal right for each owner Only if both spouses join in the conveyance separate interest cannot be conveyed
Equal right except for personal property Only if all partners join in the conveyance
Conveyance
Conveyance Each coby one owner owners share may be without the other breaks conveyed the joint separately by tenancy and its owner creates tenancy in common
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On coowners death, his or her interest passes by will or intestacy - no right of survivorship
On coowners death, his or her interests end and cannot be disposed of by will. Survivor owns the property by rights of survivorship. Passes to surviving joint tenant(s).
On spouses death, half goes to surviving spouse and half goes by will to descendants devisees or by success to survivor
Tenant in Tenant in Purchaser Purchaser common; no common; no becomes a becomes a community community tenant in tenant in interest. interest. common with common with the other co- the other co- Purchaser can Purchaser can only acquire only acquire owners owners whole title of whole title of community; community; cannot cannot acquire a part acquire a part of it. of it.
Tenancy in common
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Creditor Sale
Co-owners interest may be sold on execution sale to satisfy creditor creditor becomes a tenant in common
Co-owners interest may be sold on execution sale to satisfy creditor joint tenancy is broken, creditor becomes tenant in common
Entire property available to satisfy debt co-owners interest cannot be seized and sold separately
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Personal property is easily distinguished from real property by its: A. B. C. D. lower unit value; multiplicity of use; mobility; greater variety.
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When two or more parties own property together as tenants in common: A. B. C. D. each owners interest must be equal; each owners interest may not be transferred by will or intestate distribution; the last surviving owner would hold title to the property in severalty; each owners interest may be conveyed separately.
4.
Mr. Taylor, who owned a farm, deeded the property to his sons, A, B and C as joint tenants. Shortly thereafter, B sold his interest to W. A died and willed his interest to his heir S. Ownership of the property would be: A. B. C. D. W and C as joint tenants; C and W as tenants in common: C holding 2/3 interest, W a 1/3 interest; undecided until the probate of As estate is concluded; S, W and C as tenants in common, each with 1/3 interest.
5.
Another word for personal property is: A. B. C. D. tenancy; freehold; chattel; fee.
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Which of the following is not real property as between a buyer and seller of land: A. B. C. D. trade fixtures; growing crops; detached garage; all of the above.
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The words time, title, interest and possession are most closely related to which of the following concepts: A. B. C. D. sole ownership; dividend interest; survivorship; prescriptive use.
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Paul and Angela Shore are selling property to Fred and Felicia Grey. They want to create a valid estate for the Shores and reserve a life estate for the Greys. Which of the following clauses should be used in the deed: A. B. C. D. do hereby grant to Paul Shore and Angela Shore a life estate with reversion to Fred Grey and Felicia Grey upon their deaths; Paul Shore and Angela Shore do hereby grant Fred Grey and Felicia Grey a life estate; Paul Shore and Angela Shore a life estate for the life of the grantors; do hereby grant to Fred Grey and Felicia Grey for their lives with reservation to Paul Shore and Angela Shore.
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Adam gives a life estate to Kay for the life of Watson. Which of the following would best describe the interest now held by Adam: A. B. C. D. a less-then-freehold estate; a reversionary interest; an estate in remainder; a fee simple estate.
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