COMPLETE REAL ESTATE PREP

Government Survey 1.6

(Geodetic or Rectangular System) was developed in 1785 to *facilitate government sale of land during Westward expansion* Used in more than 30 states. Uses imaginary lines running North and South (meridians) and East and West (parallels). *Lines are 6 miles apart and form a checkerboard as they intersect, forming a township*. Works well for *large parcels*, but not for small lots

Section 2.2: Government Limitations on Title

*Allodial system* of free property ownership is *free and full ownership rights in land and is the basis of real property law* in the US. Opposite of feudal system where government controls all the land.

Fructus Industriales (Emblements) 1.3

*Growing crops* that are produced yearly. Emblements are personal property even before harvest. Landlord cannot terminate a lease before harvest

Condemnation

*Legal proceedings* by which the government obtains ownership of private property

There are three types of personal property 1.3

1. Chattel 2. Trade Fixtures 3. Fructus Industriales

3 private limitations on Title that Affect Physical Property 2.3

1. Deed Restrictions (Covenants or Conditions) 2. Encroachments 3. Easements

US has 4 powers that *limit the right of real property ownership*: 2.2

1. Eminent Domain 2. Police Power 3. Taxation 4. Escheat

There are two types of estates 2.4

1. Freehold estates 2. Lease Hold Estates

Land has 3 physical characteristics 1.2

1. Immobility - Land is physically immobile. Consequently, the real estate market is local in nature. Also, value of a piece of real estate is directly affected by its surroundings 2. Indestructibility - Aside from accretion (water causing land to build up on one parcel subtracting from the other parcel) or erosion, land cannot be destroyed 3. Uniqueness/Heterogeneity - Land and improvements are not standardized

6 methods of description real estate practitioners should know: 1.6

1. Monuments method 2. Metes and bounds 3. Government survey 4. Lot, block and subdivision (recorded plat) 5. Vertical Land description 6. Reference to other documents

3 components of real estate from the viewpoints of the sales and broker licensee 1.4e

1. Real estate professionals 2. State regulatory boards 3. The real estate Market

Land has 5 economic characteristics 1.2

1. Scarcity 2. Situs 3. Permanence of Improvements 4. Production 5. Assemblage

Real Property 1.1

1. The land itself (surface rights) 2. Airspace above the land (air rights) 3. Mineral rights (subsurface rights) 4. Improvements of and to the land 5. Fixtures 6. Fructus Naturales 7. Water rights 8. Appurtenances 9. Easements 10. Interests, benefits, and ownership rights

Three components for the distribution of products and services: 1.2

1. The market - The sphere in which real property is bought and sold 2. The price - The amount paid for a particular parcel of land 3. Supply and Demand - The mechanism that largely determines that price of land in a free enterprise system

Section 1.1: The Nature of Real Property

1. What is the nature of real property? 2. What are the physical and economic characteristics of land? 3. What is the nature of personal property? 4. What are the basic elements and principles that govern the real estate market? 5. What are the main types of real estate in the marketplace? 6. What methods are used to describe land?

Township 1.6

36 Square Miles Located by their distance North or South of the Baseline and East and West of the Prime Meridian

1 Acre =

43,560 SqFt

1 Mile =

5280 Ft.

1 Section =

640 Acres

Check 1.6

A 24 mile square formed by intersecting meridians and base lines

Encumbrance 2.1

A legal right or interest held by another that reduces the value of one's property

Plat 1.6

A map or survey of a subdivision

Adverse Possession 2.1

A means by which a *title may be acquired*, through the actual, hostile, open and notorious, exclusive, and continuous occupancy by one who does not have title

Assessments 2.1

A special tax levied to pay for specific improvements, such as sidewalks, sewers, etc.

Salesperson and Associate Broker 1.4

Act as the broker's agents in conducting real estate transactions. May not be employed by the public. May accept compensation from only their employing broker

Improvements 1.1

Additions made to property are intended to enhance its value 1. Relationship must exist between a particular parcel of real estate and the character of the improvement placed on it

Appurtenances 1.1

All of the *rights, privileges, and improvements that belong to, and pass with, the transfer of property* but are not necessarily a physical part of the property. Deed states "Together with all appurtenances"

Section 1.3: The nature of Real Property

All property that is not real property is personal property. Title of personal property is transferred by bill of sale.

Leasing

An agreement whereby one gives up possession of real property, but not title, for a stipulated period of time

Freehold Estates 2.4

An estate in land that is of *undeterminable duration*. Can be set up so that it exists forever, or based on person's lifetime.

Life Estate 2.4

An estate that is *conveyed to a person for the duration of someones life.* Duration of estate can be relied to the life of the tenant or to the life of a third party (pur autre vie). *Holder of the estate has full rights including right to mortgage, sell and use the property.* Following a basic principle of property law that no one may transfer more than the interest that they possess, a life estate owner may not obligate the property beyond his ownership period

Plottage Value 1.2

Any increase in value resulting from assemblage

Industrial Park 1.5

Area zoned that contains many separate industries and is managed as a unit

Trade Fixtures 1.3

Articles of *personal property that are necessary parts of a tenant's trade or business*. Even though they are firmly affixed to the real estate, they remain personal property to the tenant

Fixtures 1.1

Articles that were once personal property but have been affixed to real estate so as to become real property Intention is key to classification of fixtures: 1. Method of attachment - Tree planted or fridge 2. Adaptation (Constructive Annexation) - If object was specifically built for property than it is a fixture 3. Agreement - Written agreement between two parties always the best route

Recreational Property 1.5

Campgrounds, Rec. vehicle Parks, etc.

Special Purpose Property 1.5

Churched, hospitals, colleges, etc.

Section 1.5: Types of Real Estate

Commercial and Investment Property Agricultural Property Public Property Residential Property Industrial Property Specific Purpose Property Recreational Property

Riparian Rights 1.1

Common law doctrine that gives real property owners whose land borders a body of moving water a right of reasonable use held in common with other riparian owners, provided that use does not block the flow of water or cause contamination. *Ownership of land bordering body of navigable water extends to high water mark* Land under waterway is owned by the public

Real Estate Professionals 1.4

Consists of the licensed real estate brokerage firms and the licensed brokers and salespeople

Section 1.6: Land Descriptions

Description of a particular piece of property. Essential to every real estate transaction. In the case of a deed, assignment of lease, mortgage, or raw land, the *description of the property should be the complete legal description* For sales contract, only need description to identify the property.

Prior Appropriation 1.1

Doctrine that *allows an owner who first diverted water for his own use to continue to do so* even if this is not equitable to the other land owners. Primarily in states where water is scarce. Usually accomplished by state permits that may be sold

Section 1.6

Each *square mile within a township* (640 acres). There are 3*6 sections within a township*. A section is the smallest subdivision surveyed by government surveyors

Township Lines 1.6

East-West lines in a township

Assemblage 1.2

Economic term refers to the *concept of combining two or more contiguous parcels into a single parcel* under one ownership. Done when combined value is greater than individual parcels

Brokerage Firm 1.4

Employed by the public to perform acts of brokerage; referred to as a broker

Section 2.3: Private limitations on title

Encumbrances are the limitations to rights to the use and conveyance of property by individual as opposed to government. Any interest held by any person other than the owner creates an encumbrance. Encumbrances restricts the use of property, lowers its value, or both. *Encumbrances should be noted on the deed following the description. Two types of encumbrances are those affecting title and those affecting the property physically*

Section 2.4: Estates in property

Estate refers to the *degree, quantity, nature, and extent of ownership that a person has in real property.* Person who holds title to real property has an estate, which is his interest in the property.

Agricultural Property 1.5

Farms, orchards, ranches, etc

Qualified Fee Estate 2.4

Fee simple estate that *has certain qualifications or limits*. Defeasible means capable of being voided, cancelled, or defeated

The Real Estate Market 1.4

Free enterprise system operates to produce and distribute goods and services by the free application of 4 factors of production: 1. Land 2. Labor 3. Capital Investment 4. Entrepreneurial Activities

Remainder Estate 2.4

Future interest in real estate created at the same time and by the same instrument as another estate. Remainder estate arises automatically upon the termination of the prior estate. A remainderman is the person designated to take title upon the termination of the prior property A remainder in property law is a *future interest given to a person (who is referred to as the transferee or remainderman) that is capable of becoming possessory upon the natural end of a prior estate created by the same instrument*

Water Rights 1.1

Governed by: 1. Riparian Rights 2. Littoral Rights 3. Prior Appropriation

Taxation 2.2

Government's right to tax property to raise general revenue. State government also have right to seize property if taxes are not paid. If taxes are not paid, the lien gives the government the right to force sale of the property in order to collect the unpaid taxes.

Fee Simple estate 2.4

Highest and most complete type of ownership that is possible. *It exists for an indefinite duration of time and can be sold, given, and posted to heirs*. Still subject to government and private limitations on title. Persons holding freehold estates are said to be seized of the land

Replacement Fixtures 1.3

Improvements that are installed by a tenant to replace worn-out ones that were already in place before the start of the lease term. Improvements would remain the property of the landlord and tenant would not be entitled to remove them Note difference between trade fixtures and real property fixtures

Principle Broker or employing broker 1.4

In charge of and responsible for all real estate operations conducted by a brokerage firm

Reference to Other Documents 1.6

Land can be publicly described by referring to another publicly recorded document such as a deed or mortgage, *if* that document contains a full legal description Street addresses may be used in lease agreements, but are inadequate for document recorded in land refernces

Easements 2.3

Legal right to enter upon another's property. An actual interest in land rather than just a contractual agreement. *Because it is an interest in land, an express grant of easement must be in writing, usually in the form of a separate deed or reservation in a deed*

Surface Rights 1.1

Legal rights to control, occupy, and use the surface area of a parcel of real estate (the land)

The Torrens System 2.1

Legal system that provides for the *registration of land in order to verify ownership*. Process of owner petitioning to the state to register ones property is similar to that of a quiet title suit. Once property is Torrens registered, *title cannot be passed*, and encumbrances cannot be enforced against the property unless the conveyance or lien document is registered and is noted on the registered certificate of title The Torrens title system operates on the principle of *title by registration* (granting the high defeasibility of a registered ownership) rather than "registration of title." The system *does away with the need for a chain of title* (i.e. tracing title through a series of documents)

Public Property 1.5

Libraries, schools, parks, etc.

Title 2.3

Liens are the most *common form of private limitations on title*. Liens always arise from a debt. Liens always constitute an impediment to clear title

Ways to establish POB 1.6

May be obvious physical feature but usually necessary to begin a metes and bounds survey at a known point then provide directions from that point to the POB

Monuments Method 1.6

Method *uses naturally occurring physical features of the land to determine the boundaries* of a parcel of real property in order to legally describe it. Considered of the *least accurate*. Sometimes used in combination with metes and bounds method

Vertical Land Description 1.6

Necessary when air rights or subsurface rights need to be described Air lots are used to describe units in multistory condominium projects. Parcel of land beneath air lots, and elevation of air lots are described.

Range Lines 1.6

North-South lines in a township

Client 1.4

Party who employs the broker to conduct one or more services for compensation. Client is usually responsible for payments

Prospect, customer, and 3rd party 1.4

People with whom the broker hopes to be successful in accomplishing the object of his employment

Permanence of improvements 1.2

Permanence of improvements, combined with the immobility of land, makes the *real estate market less flexible than other markets*. Investments in and improvements to land tend to be long term so the real estate market is slow to respond to changes in supply

Color of Title 2.1

Person may obtain good title under condition where title appears to be good, but a defect renders it invalid

Datum 1.6

Point, line, or surface from which a vertical heigh or depth is measured

Residential Property 1.5

Primarily *comprised of single family homes, but can include smaller multi-family units, trailers, co-ops, condominiums, etc.* Classification includes vacant lots and land suitable for the construction of homes

State Regulatory Boards 1.4

Primary duties include *licensing and regulating real estate professionals* for the protections of the general public. They do this through regulatory powers and rule making functions granted to them by state legislature

Deed Restrictions (Covenants or conditions) 2.3

Private agreements contained in a deed, lease, or will restricting the use and occupying of real property. *Most common deed restrictions involve the size, price, design, and setback lines of improvements*. Enforcements of deed restrictions is the responsibility of all owners of property affected by the restrictive covenants. Affected property owners may seek an injunction to correct violations

There are 6 types of Freehold estates 2.4

Qualified fee estate Remainder estate Reversion estate Life estate Fee simple estates Statutory state

Section 1.4: The Real Estate Business

Real estate business consists of people whose activities and interactions involve buying, selling, exchanging, leasing, and using real property

Section 1.2: Physical and economic characteristics of land

Real estate market is not a centrally organized market exchange due to the unique nature and characteristics of its commodity

Commercial and Investment Property 1.5

Real estate that includes *income producing property such as large apartment buildings, office buildings, restaurants, etc, as well as vacant lots and tracts of land suitable and available for construction of commercial and investment improvements.* These types of property must be zoned for business purposes. Held by owner-users for business purpose or owner-investor for the production of income

Production 1.2

Refers to the development of land and construction of improvements. This is a relatively slow process and the real estate market is therefore slow to respond to changes in demand Example: Demand of high rise between planning and construction

Real Estate 1.1

Refers to the physical land and permanent, man-made improvements on the land

Eminent Domain 2.2

Right of the government to *assume ownership of private property for a necessary public use*, with just compensation paid. Quasi-public organizations (railroads) are permitted by state law to take land needed. No private property is exempt from exercise of government control

Subsurface Rights 1.1

Right to drill, explore, or dig for minerals or water Rights may be sold or leased

Littoral Rights 1.1

Right to reasonable use and enjoyment for property owners who *border a body of water that is not flowing* Ownership of land bordering a non-navigable body of water extends to the middle of the water course

Easements 1.1

Right to use someone else's land for a specific purpose

Bundle of Rights 1.1

Term for legal rights that accompany real property 1. Right to possess the property 2. Right to control the property within legal limits 3. Right to enjoy the property and use it in any legal manner 4. Right to exclude others from entering or using the property 5. Right to encumber the property, as with a mortgage 6. Right to dispose of the property by sale, will, or other transfer

Reversion Estate 2.4

The estate that is left, or that reverts to the grantor after a grantor has conveyed a lesser estate (less than a fee interest) to someone else (grantee). No express words of creation because a revision estate is created by operation of law A reversion is a future interest that is retained by the grantor after the conveyance of an estate of a lesser quantum that he has (such as the owner of a fee simple granting a life estate or a leasehold estate)

Air Rights 1.1

The legal right to control, occupy, and use the airspace above a parcel of real estate 1. May be sold or leased 2. Laws prohibit the owner from polluting the air 3. Aircraft that have the right to fly over as long as they don't interfere with owner's rights to use and occupy the land

Seisen

The ownership of real property *under a claim of freehold estate*

Escheat 2.2

The power that the state government *retains over the title of property owners to obtain title to property when an individual dies intestate* (leaving no will) and leaves no known heirs, or when property is abandoned. Here, the property escheats (reverts) to the state. Solves problem of property becoming ownerless.

Police Power 2.2

The right of government to adopt and enforce laws, codes, regulations, and ordinances to support to general welfare of the public. Exercise of police power must be uniform in operation, nondiscriminatory or advantages to any one person. Different from eminent domain in that police power is *uncompensated regulation or property* Examples of police power that affect title or rights or the property owner include *right to tax, right to regulate and use land through planning and zoning, right to establish building codes, and the right to require real estate licenses* Also derived from police power is the governments right to destroy private property without compensation, when such act is necessary to protect public interest

Scarcity 1.2

There is a limited supply of land

Chattel 1.3

Three types of Chattel: 1. Chattels Personal - Cars, boats, furniture 2. Chattels Real - Interests in real property other than ownership (such as leases) 3. Chattel Mortgage - Mortgage secured by personal property, Personal property may be tangible or intangible and is movable "Chattel" came from the word cattle (Used to differentiate ownership of land from ownership of cattle)

Title Insurance 2.1

Title company will create policy to insure a property. General exclusions include rights of parties in possession (including unrecorded easements), any facts that an accurate survey would reveal, taxes and assessments not yet due or payable, zoning, and government restrictions

Fructus Naturales 1.1

Tress, bushes, etc. classified as real property

Encroachments 2.3

Unauthorized *infringement on property owner's rights as a result of physical intrusion*. An encroachment is a trespass if it encroaches on the land and a nuisance if it violates airspace. *Because only an up-to-date survey will record an encroachment, lenders and buyers usually require a current land prior to closing*

Lot, Block and Subdivision (Recorded Plat) 1.6

Used in states that don't use government survey method. A lot is an individual parcel of land intended to be conveyed in its entirety. A *block is a group of contiguous lots* Each recorded plat is *given a book and page reference number*. Legal description includes lot and block number, tract name, map book reference, county and state.

Metes and Bounds Method 1.6

Used to describe property by *specifying its shape and dimensions*. Can be used for un-subdivided, unimproved real estate, as well as irregularly shapes parcels. Starts as a well marked Point Of Beginning (POB) and establishes the boundaries of the parcel by courses and metes (length in inch, ft, meter) and bounds (directions based on land marks) and returns to the true point of beginning. A legal description that does not return to POB is defective.

Industrial Property 1.5

Warehouses, plants, factories, etc, as well as vacant land suitable for construction

Tacking 2.1

When an adverse occupant adds his period of possession to the period of possession of the prior occupant