Real Estate Course

Which type of an estate doesn't end automatically when the stated event or condition occurs?

Fee simple subject to a condition subsequent

Unit 3 Section 3 Lesson 7

Forms of Real Property Ownership for Businesses

Right of Survivorship

No

Periodic Estate

This leasehold estate (aka periodic tenancy) automatically renews itself for a given period (e.g., six months) in successive tenancy unless one party terminates. This may also be referred to as an inheritable leasehold estate. The period involved may be any negotiated length of time.

Taking Title to Real Property

What does the new homeowner need to consider when deciding how to take title to property? For many home buyers, the options for taking title open a whole new world of confusing terms and concepts. Here are some of the basics they should think about.

Fee Simple Subject to a Condition Subsequent

*An estate given on the condition that the owner does or doesn't take a specific action, using phrases such as, "on condition that" or "provided that." *The grantor has a right of reentry if the condition is violated. Right of reentry may be granted or willed to another. *Should the stated condition be violated, the estate doesn't automatically revert to the original owner or holder of that right. The holder of the right of reentry must take legal action to claim ownership

Fee Simple Absolute

*Highest possible interest in property *Grants the owner all legal rights with no limitations other than public or private restrictions (e.g., zoning laws)

Fee Simple Defeasible

*The property holder owns the property with all -*legal rights, but subject to a condition. If the condition is breached, the property may go back to the original owner.

Conventional Life Estates

A conventional life estate may be one of the following: *Ordinary with reversion or remainder *Pur autre vie with reversion or remainder Reversion means the property reverts to the original owner (the one who granted the life estate) when the life estate ends. Remainder means the original owner named another individual as the remainderman, who will receive the property when the life estate ends. At the end of a life estate, the reversionary owner or remainderman hold a fee simple estate.

Dower and Curtesy

A different form of legal life estate is dower or curtesy, sometimes called marital life estates. Dower gives the widow life estate rights upon the death of her husband, and curtesy gives the widower life estate rights upon the death of his wife.

Homestead

A homestead is a life estate in the property as long as it is held by the family. Although state laws differ, typically this allows a family home to be protected from most judgments for debt.

Legal Life Estates

A legal life estate is an involuntary life estate created automatically by law when certain events occur. There are three types of legal life estates, though not every state recognizes all of these.

What Is Undivided Interest in Co-Ownership?

An undivided interest in property means that each co-owner is allowed full use and enjoyment of the entire property, even though there are multiple owners. While each owner has a fractional interest in the property's value, they each have undivided interest in the physical property. Example Betty, Billy, and Bobby are co-owners who share an undivided interest in a property. Though each one owns a share of the property, that share is only separated in terms of percentage of total ownership. The property itself isn't divided; each co-owner has the right to use the entire property.

Unit 2 Lesson 3

Conventional and Legal Life Estates

Legal life estate:

Created by law, rather than by the owner, such as a marital life estate or a homestead life estate

Conventional life estate:

Created by the property owner, who grants the property for the duration of an individual's lifetime

Do you want a divided or undivided interest in the property?

Dont ask

What type of leasehold is characterized by possession of a property without the express permission of the property owner, such as a situation in which a tenant continues to occupy an apartment after the lease has terminated?

Estate at sufferance

Here's What Does Happen

Even though our three co-owners are still getting along, change happens. They graduate from college, and Connor decides to get married. He moves out. Which of these things could happen now, and which would not?

Estate and inheritance tax lien

General and involuntary lien Mortimer Snidely died, leaving behind his $3 million penthouse and other assets totaling $23.8 million. Before his family can inherit, however, federal estate taxes and state inheritance taxes must be paid. In order to ensure payment of these taxes, a general lien is placed on Mortimer's property at the time of his death. The taxes are a lien on all of the property Mortimer's heirs inherit. To satisfy the tax bill, the estate is allowed to sell sufficient property.

Colleen gets in an accident and dies, so her share automatically transfers to Christy as the only remaining co-owner

No

Colleen, as the original owner, can boot the others out and remove them from the deed.

Not an option

In what type of life estate does property ownership return to the original owner when the life estate holder dies?

Ordinary with reversion

Which term means "for another's life"?

Pur autre vie

Section 3 Unit 3 lesson 2

Real Property Ownership: Severalty

Section 3 Unit 3 lesson 3

Real Property Ownership: Tenancy in Common

Section 3 unit 4

Restrictions and Encumbrances

Section 3 Unit 3 Lesson 1

Taking Title to Real Property

Types of Fee Simple Estates

There are two types of fee simple estates: fee simple, also known as fee simple absolute, and fee simple defeasible. A fee simple defeasible estate is further divided into either a fee simple determinable or a fee simple subject to a condition subsequent.

If Joe decides he wants money instead of a share in the juke joint, he can sell his one-third interest to his friend Connor, and John and Joan will continue to be joint tenants with each other.

True

Characteristics of Tenancy in Common

Which of these items describe tenancy in common, and which do not? Select yes if it's part of ownership as tenants in common, and no if it's not

Individual owner allowed to sell the entire property

no

All three co-owners can agree to sell the property

option

Each co-owner could sell his or hers individual interest to another party

option

Partnership

A partnership doesn't necessarily mean two people. It's a business organization owned by two or more partners, which could include thousands of people (though such a large number would likely require a more structured format). There's no requirement for all partners to have an equal interest in the business. Partnerships can be structured as general partnerships or limited partnerships. This doesn't make a difference in how any real estate the partnership owns is held, but it does make a difference in regard to who's responsible for managing the property and who's liable in case of legal or financial issues. We'll leave those details for another time. Partnerships see the members of the business organization (the partners) as individuals. For that reason, real property owned by the partnership is typically held under a tenancy in common agreement. Each partner may sell his or her own interest without the other co-owners' permission, and may also pass that interest down to their heirs. Joint tenancy is also a possibility for a partnership, though the right of survivorship should be carefully considered (meaning, consult an attorney before deciding). It's typical in most partnerships to have an agreement allowing the remaining partners to buy out a departing partner, which is one reason why tenancy in common is typical.

Estate in Severalty

Although the name sounds like "several," don't let that fool you; "sever" is the root word. Estate in severalty means one person owns the property, and all other interests are severed. This is sole ownership of a property. A major draw of an estate in severalty is the flexibility it provides. One owner means one signature on documents, one person making the decisions, one person deciding when to sell and when to buy. However, there are some definite drawbacks. For example: Do you have $100,000 lying around or enough individual credit by yourself to finance that much? As sole owner, you're solely responsible for coming up with the funds to buy and maintain (or hire someone to maintain) the property. Estate in severalty comes with the right of inheritance, meaning that when the sole owner dies, the property will transfer to the owner's heirs according to a will or, in the absence of a will, state law.

If Things Don't Work Out

If co-owners Colleen, Connor, and Christy have a falling out and can't stand to live together anymore, what options do they have for terminating their tenancy in common? Select option or not an option for each action.

Rights to Transfer Interest in Property

Most forms of co-ownership allow an individual to transfer his or her interest to another party. Doing so may change the way title is held, but for most forms of co-ownership, it doesn't require the other co-owners' permission. In other words, it's possible for co-owners to end up owning property with someone who is unknown to them.

Mortgage lien

Specific and voluntary lien Marion Forks is a new homebuyer who has just purchased her first home, a single-level ranch in an established neighborhood. Because Marion financed the purchase, she voluntarily agreed to take out a mortgage, pledging her property as collateral for repayment of the loan. This is lien against her property. If Marion doesn't repay the loan, her lender can foreclose by having the property sold at public auction. If that happens, proceeds from the sale would satisfy the liens in the order of priority.

Meet Colleen, Connor, and Christy Colleen, Connor, and Christy met in college and became fast friends, then roommates in the home Colleen owns, near the college campus. Then Colleen has a bit of financial trouble, and Connor and Christy agree to help her out by buying a share of her home. All three will be co-owners. How do Connor, Colleen, and Christy hold title to the property?

Tenancy in common

Types of Leasehold Estates

This is a leasehold of definite duration that terminates automatically and is inheritable, meaning that if either party to the lease (usually the owner or the tenant) dies, the lease isn't automatically terminated. "Estate for years" is a bit of a misnomer—it simply means a definite duration, with a specific start and stop date and can be for any length of time, even days or weeks.

Estate at Sufferance

This type of estate (aka tenancy at sufferance) is one in which a tenant continues to occupy property after lawful authority has expired. The tenant is known as a holdover tenant. If a tenant under a lease stays beyond the lease's terms, and the landlord continues to accept rent from that tenant, that tenant becomes a month-to-month tenant. Alternatively, the landlord may remove the tenant by initiating a holdover proceeding, which is used to evict a tenant on any grounds other than the non-payment of rent, such as staying beyond the term of the lease or violating terms of a lease or rent laws.

Forms of Real Property Ownership

Title to real property can be held in the following ways: Estate in severalty Tenancy in common Joint tenancy Tenancy by the entirety

Connor can sell his interest in the property to his brother, Colin, without asking Colleen or Christy.

Yes

Leasehold Estates: An Overview

An estate in land defines the amount, type, and extent of an owner's interest in real property. Estates in land can be divided into two categories: freehold estates and leasehold estates. A freehold estate conveys possession, control, and title (ownership), and has no ending date. A nonfreehold (leasehold) estate conveys possession and control only and lasts for a definite period. Possession is the right to use the property: to live or work there. Control is the right to determine how the property is used, and who may enter the property. Leasehold estates are created by a contract between the owner of the real estate (the lessor) and a tenant (the lessee). The terms of the contract transfer the right to possession and use of the owner's property to the tenant, usually for a specified period of time. The period of time the lease covers, the amount the tenant will pay for the right to use the property, and the rights and obligations of both parties are also established in the lease contract.

Do you want to be co-owners, or will one or the other of you be a sole owner of the property?

Ask

If one of you dies, do you want the property to automatically transfer to your spouse?

Ask

Partitioning the Property

Co-owners may also bring legal action to have the property partitioned. This means a judge will determine how the property may be split so that each co-owner can be sole owner of a part of the property proportional to the fractional interest that individual owns. If it's not possible for the property to be physically divided that way (and it's often not), the court may order the property to be sold, and the appropriate shares of the proceeds be distributed to each co-owner. Tenants by the entirety don't have a right to partition, since the form of ownership assumes the married couple are one legal entity, but joint tenants and tenants in common can go this route.

A Little Story About Two Friends

Derrick and Sully, friends since high school, both own their homes in fee simple, but their ownership differs. Derrick's fee simple defeasible ownership is complete but conditional. If he violates the conditions of ownership, his ownership rights are terminated, and ownership of the property reverts to his uncle, who's the original owner and holds the possibility of reverter. Sully, on the other hand, can do pretty much whatever he wants with his property, without condition, because he holds his property in fee simple absolute.

Transferring Interest

Each tenant in common has the right to transfer his or her interest in the property to another, without requiring permission from the other co-owners. However, transferring the entire property does require agreement from all co-owners.

Ordinary Life Estate

Example: Ordinary Life Estate with Reversion Jean granted a life estate to Phillipe. When Phillipe died, the property reverted to Jean, who owns it as a fee simple estate. Example: Ordinary Life Estate with Remainder Jean granted a life estate to Phillipe and named Raoul as remainderman. When Phillipe died, the property was transferred to Raoul as a fee simple estate.

If Joan gets married and wants her husband to become another co-owner, she can grant part of her interest to him, and he'll be a fourth joint tenant.

False

Marion gave her granddaughter Sheila the deed to a brand new home, on the condition that Sheila complete her PhD in astronautics. When Sheila dropped out of school and got a job as a greeter at a big box store instead, Marion ______ to regain ownership of the property.

Had to take legal action

Tenancy by the Entirety

In some states, married couples can use a form of co-ownership called tenancy by the entirety. In this case a fifth unity—unity of person—is added to the four required by joint tenancy, based on the idea that the spouses are an integrated legal unit. This form of ownership gives each spouse an equal, undivided interest in the property. Since tenancy by the entirety is inherently based on the owners being married, in the event of a divorce, both parties automatically become tenants in common. If the ex-spouses don't want to co-own the property, they're free to sell their individual interests.

What If?

John, Joe, and Joan Johnson selected joint tenancy as their form of ownership for the land where they'll build their fun little juke joint. Have they considered all the possibilities? Which of these "what if" statements are true, and which are false?

Individual owner allowed to sell entire property

No

One way or another, Christy and Colleen are the only remaining co-owners, which means they've become joint tenants

No

Right of inheritance

No

Sole owner

No

Sole ownership

No

Sole Ownership, Co-Ownership, or Living Trust

Property can be owned as a sole owner or with multiple owners (called co-ownership or concurrent ownership). There are a few different ways to hold title as co-owners, each with its own associated rights. Real property can also be held in a revocable living trust. Property can be moved into a trust at any time, so it's an option clients should know about and discuss with an attorney.

Unit 3 Section 3 Lesson 4

Real Property Ownership: joint Tenancy

Upon a life estate holder's death, the estate either reverts to the original owner or to another person the original owner has named, known as a ______.

Remainderman

Right of Survivorship

Tenancy by the entirety carries the right of survivorship. When one spouse dies, the other automatically becomes the sole owner of the property.

Types of Co-Ownership

Tenancy in common, joint tenancy, and tenancy by the entirety are all forms of co-ownership.

Transferring Interest

Tenants by the entirety are not allowed to convey a fractional interest in the property. Transferring the property requires both parties' consent.

Right of Inheritance

Tenants in common have a right of inheritance, but not a right of survivorship. The fractional interest of a tenant in common who dies will pass to that individual's heir as named in a will or according to the state's laws of descent. The heir(s) will become tenants in common with the other co-owners.

Estate at Will

This type of leasehold estate (aka tenancy at will) may be an oral agreement or a written agreement that has no specific ending date. Either party may terminate it at will, and it's not inheritable. At the death of either party to the lease, the leasehold automatically terminates.

Creating Joint Tenancy Siblings John, Joe, and Joan Johnson all love to relax by going out, having a drink, and dancing with friends. They decide to buy a piece of land and build a juke joint together. They will take title as joint tenants. When co-owners want to take title as joint tenants, several unities are required. Select the unities that must be in place for the Johnson siblings to hold title to their property as joint tenants.

Time Title Possession Interest

If one of the siblings dies, that sibling's interest will transfer automatically to the other two.

True

If they get in an argument and no longer want to be co-owners, they can have the property partitioned and each be sole owners of their own third.

True

Tenants in Common

Two or more people may take title to property as tenants in common. Each co-owner has an undivided interest in the whole property, regardless of how many co-owners there are and the amount of each co-owner's fractional interest in the property's value. If two or more people buy a property and don't specify how they'd like to take ownership, it defaults to tenancy in common. Any income made from the property would be divided according to each owner's interest share. Similarly, each co-owner is proportionally responsible for property taxes, upkeep, and other costs.

Section 3 unit 4 lesson 1

Voluntary and Involuntary Lien Types

Questions to ask the Wilson

Which of these questions should you ask to help the Wilsons better understand the factors they need to evaluate when taking title to property?

Christy and Colleen cant stand Collin, so they ask to buy Connor out instead

Yes

Co-ownership

Yes

Individual owner allowed to sell interest without co-owners permission

Yes

Right of Survivorship

Yes

Right of inheritance

Yes

individual owner allowed to sell interest without co-owners permission

Yes

They can take legal action to partition the property

option

Fee Simple Determinable

*An estate granted using a phrase such as, "so long as," "while," or "during" a stated condition. *The original owner retains a possibility of reverter (an interest that may be granted or willed to another). *The granted ownership will end when the stated *condition terminates (or is breached). The property then automatically transfers to the holder of the possibility of reverter.

Corporation

A corporation is an independent legal entity. Although it's owned by shareholders, resulting in potentially thousands of owners for the corporation, the corporation itself is one legal entity. For that reason, a corporation can own property in severalty. It can also participate as a co-owner in property owned as a tenancy in common or a joint tenancy. However, people often use the corporation to allow multiple people (the shareholders of the corporation) to hold property in severalty, which creates tax and legal advantages for the shareholders.

Conventional and Legal Life Estates

A life estate is an estate that lasts for the lifetime of the estate holder. It may be either of the following

Right of Survivorship and Right of Inheritance

Another factor to consider is what happens to the owner's interest when the owner dies. For a sole owner, there may be issues related to probate (which is why some people use a revocable living trust to hold real estate), but essentially the property goes to whomever the owner wills it to. If there's no will, inheritance follows the state law. But when it's a co-owner who dies, the way title is held will affect transfer of ownership. It may transfer automatically to other co-owners (called right of survivorship), or the co-owner may have the right to will the fractional interest to another individual (called right of inheritance). If there's a right of survivorship, the co-owner doesn't have the right to will interest in the property to an heir.

Which type of estate gives the owner condition-free interest in a property? This type of estate conveys the highest possible interest.

Fee simple absolute

Income tax lien

General and involuntary lien Lee Harrod is an illegal contractor. His shaddy work can be seen in kitchen cabinets that fall off of walls, unfinished projects for which he had taken advance payments, and several complaints filed against him with the licensing board for the few times he actually made the effort to work with a license. Lee's sloppy habits extended to payment of his income taxes. He just didn't feel like paying them, so he didn't. The IRS and the state taxing authorities have filed a general lien against all of Lee's properties for taxes due and unpaid. The lien was for various taxes owed: personal income tax, employee withholding tax, federal unemployment tax, FICA for employees, self-employment tax, sales and use tax, and other taxes relating to income. The lien was created by filing a certificate of lien against Lee in the county where his property was located. If Lee's customers filed liens against Lee as well, it's possible the state and federal taxing authorities would have to wait to get their money. They do not automatically receive priority status for payment purposes. Priority could be determined by the date the lien is placed against Lee or his real estate.

Deceased person's debt:

General and involuntary lien Shortly after Mortimer, age 96, passed away, a 23-year-old woman, Nina Luscious, showed up at the reading of the will, claiming to be Mortimer's wife. As it turns out, she was. Although the federal estate tax creates a lien that attaches to all property in an estate, both federal and state laws allow property to pass to surviving spouses without taxation. Because he had named her as co-owner, Nina inherits Mortimer's $3 million penthouse estate tax-free. Taxes that other heirs owe will have to be paid out of the remaining estate proceeds before the rest of the property can pass to them.

Stanford bought a condo. He owns it as a fee simple absolute estate, so he holds all rights of ownership. Which of the following can Stanford NOT do?

Have three dogs, which violates the condo association covenants.

Termination of Co-Ownership

If co-owners wish to change the way they hold title, there are a few ways to do this: Joint tenants may terminate the joint tenancy and become tenants in common by agreement. The deed must reflect the change. Tenants in common may not become joint tenants, since the four unities required of joint tenancy won't exist. One or more of the joint tenants or tenants in common can buy out the others. This would create ownership in severalty if only one owner is left. In a joint tenancy, if there are multiple co-owners remaining, the buy-out creates a tenancy in common.

Forms of Real Property Ownership for Businesses

In case you didn't know, businesses are legal entities that can also hold title to real property, just like a regular person. In fact, it's common for real estate investors to form joint ventures or syndicates to develop a real estate project. The reasons for owning the property can dictate the legal structure the investors select, since that will affect each individual's liability, ease of transferring ownership, taxes, and other issues. The business's legal structure will also determine how title may be held. Let's take a look at the common legal structures of sole proprietorship, partnership, and corporation in terms of owning real estate.

Joint Tenancy

Joint tenancy creates an equal, undivided interest between the co-owners. It can only be created if these conditions—called the four unities—are present: Possession: Each owner will enjoy undivided possession of the property. Interest: Ownership is divided equally among the owners. Time: Ownership interest is acquired at the same moment. New owners cannot be added at a later time unless a new joint tenancy is created. Title: Each of the joint tenants acquires title to the property from the same source (i.e. a deed).

Right of Survivorship

Joint tenancy is sometimes known as the "poor man's will," because it allows for a property to convey to a surviving joint tenant without going through the usual expensive process associated with executing a will. The downfall of this is that if you fall out of favor with a joint tenant, you can't will your ownership interest to someone else (which you could do with other types of co-ownership). Joint tenancy ownership can also result in additional estate taxes.

Transferring Interest

Joint tenants may each sell their ownership interest without the other tenants' permission; however, the buyer of that share doesn't become a joint tenant, because the new buyer didn't receive title at the same time as the other tenants, breaking the four unities. The new owner is a tenant in common. The remaining tenants (if there are more than one) continue as joint tenants, with the right of survivorship shared between them. If there's only one previous owner, the two co-owners are now tenants in common.

Lien Types

Liens may be voluntary or involuntary, general or specific. The definitions of each are as follows: A voluntary lien is when an individual agrees to have a security placed against himself or his property. An involuntary lien is when a creditor places a claim on real or personal property through legal means without the owner's consent in order to collect an unpaid debt. A general lien is a claim against an individual and all of their property. A specific lien is a lien against a single property. Following is a summary of the most common lien types by category: Voluntary—specific Mortgage lien Involuntary—general Estate and inheritance tax lien Deceased person's debt Income tax lien Judgment lien Involuntary—specific Mechanic's lien Real property tax lien

Ordinary Life Estate Terminology

Owen gives Verdun Manor to Kathy for the length of Bernie's life. This means that Kathy has a life estate pur autre vie, which is measured by Bernie's life. Her interest in the land lasts as long as Bernie lives, and ends when Bernie dies. When Chloe, who had a life estate in Mason's property, died, the property reverted to Mason, the original owner. Mason had thought about naming Chloe's sister Olivia as remainderman, so that ownership rights would have been transferred to her upon Chloe's death, but he never got around to making the change. Thanks to reversion, the pro

Pur Autre Vie

Pur autre vie means "for another's life." Unlike an ordinary life estate, which lasts for the lifetime of the life tenant, the life estate pur autre vie lasts for the lifetime of someone other than the life tenant, who was named when the life estate was established.

Sole Proprietorship

To most of us, the sole proprietor is a familiar business model. In fact, there's a pretty solid chance you'll be a sole proprietor in your new career. Most real estate licensees are independent contractors—a business of one. When sole proprietors want to conduct business, they can use their own name, or their own name in combination with a business name. And when they own property and title in their own name as a sole owner, even if it's for business purposes, it's an estate in severalty. If the sole proprietor wants to own property with another individual or business, that can be done, too, as a tenancy in common or even a joint tenancy.