Aceable principles 1
The Four Unities of Joint Tenancy
1. Unity of interest: All of the joint tenants' ownership interests and rights must be equal in their extent, nature, and duration. 2. Unity of time: Joint tenants are required to acquire their property ownership or ownership interests at the same time. Thus no additional joint tenants can be added to an established joint tenancy unless a contract is created defining a new joint tenancy arrangement. 3. Unity of title: Joint tenants are required to acquire their property from the same transaction, and they must hold title under the same document, such as a deed or a will. 4. Unity of possession: Each joint tenant has an equal right to enjoy the use of each part of the property as well as the whole of the property. No joint tenant has a right to possess any part of the property exclusively. Unity of possession is the only unity required for tenants in common.
Licenses
A license (not to be confused with a real estate license), is a right to use the land of another that can be granted as well as terminated by the property owner. These rights typically do not run with the land or transfer with the transfer of deed or title. The license is temporary and can be withdrawn at any time, upon the sale of the property to someone else, or when one of the parties dies. EXAMPLE A landowner decides to give someone permission to hunt on their property. This would be a license. Licenses vs. Easements A property owner could give someone permission to cross or use the property. This would be considered a license. The difference between a license and an easement is that the one whose land is being used by a non-owner can withdraw the license at any time.
Liens Are Encumbrances
A lien is a form of encumbrance that is a claim against a property as security of a debt, such as in a mortgage. Because liens are creditors' claims that impact title, they are all considered encumbrances. Liens are legal claims or rights to a debtor's property that serve as a security interest for obligations or debt. A key element of liens is that they usually provide an almost immediate right for lienholders to liquidate property upon default of a debtor. Unlike lenders that obtain liens, lenders of unsecured loans must file a lawsuit to gain access to a borrower's property. In some cases, liens can still be enforced in the event of bankruptcy. However, not all liens provide for the immediate right to liquidate. A mechanic's lien (more on these in a moment) would put an encumbrance on the property but would not cause a foreclosure.
Priority of Liens
A lien on a specific parcel of property evidences an owner's debt and obligation to pay the debt. If a person fails to make payments or otherwise defaults on a loan, the property may be foreclosed on. At that point, the property will be sold at a public auction, and proceeds from the sale will be used to satisfy the owner's debt. This money is used to pay any outstanding liens, in order of their priority. Multiple liens on a single property can be prioritized. If a foreclosure should take place, there is a way to decide which entity should receive their funds from the proceeds of the sale first. In large part, priority is established through the use of the filing date at the courthouse. Whoever got their document to the courthouse first is the first in line. Tax Liens Are First in Line Taxing entities take priority over those that are in the public records. The IRS gets their money first, then real estate tax liens are settled, then any Texas Workforce Commission wage liens, and then (if any) the mechanic's lien. After that is settled, the priority of any other liens is generally determined by the date when the lien was recorded in the county clerk's office. Just remember that special assessments and state property taxes have the highest priority over other liens, regardless of when they were recorded. Tax liens take priority over non-tax liens. In the event of a default or a foreclosure, taxes will be paid first if they are due.
Remainderman and Reversion
A life estate is a more limited interest in real property than a fee simple absolute estate because ownership is limited to the lifetime of the life estate owner or some other designated party. The life estate owner does NOT have the right to dispose of the property or allow the property to descend to heirs. Instead, the grantor of the life estate will either: Designate a third-party as a remainderman (recipient of the remainder, with a remainder interest). The remainderman receives the estate when the grantor's own life estate ends.OR Set themselves up for repossession of the property via a reversion or reversionary interest. Two key points regarding life estates, remainderman, and reversion: Life estates may be created by agreement of the parties or by operation of the law (state statute). Upon the death of the life tenant, the holder of either the reversionary or remainder interest will own a fee simple absolute estate.
Life Estates
A life estate is yet another type of freehold estate. A life estate is so named because it is owned for the duration of an individual's life. The life estate documents identify the party to whom the estate will pass at the time of the death of the individual upon whom the life estate is based. Sometimes it passes to a new owner, and sometimes it reverts back to the original owner. Life Estate Terms There are certain terms that apply to a life estate that you'll want to learn. They are remainder, reversion, and remainderman. Remainder refers to the estate that will pass to another party at the death of the person upon whom the life estate is based. Reversion is the concept that the property will revert back to the person who granted the life estate in the first place. Remainderman refers to the recipient of the remainder — either the grantor who set up the life estate or a designated third party.
Mechanic's Liens
A mechanic's lien is created when a worker has not been paid for work done on a property. Mechanic's liens protect suppliers, contractors, architects, engineers, surveyors, and other parties whose labor or materials has improved the value of real property. Mechanic's liens are based on the enhancement of value theory: The parties who performed the labor or supplied the materials used have increased the value of the real estate, and thus have an interest in the property. The property itself becomes security for money owed. Mechanic's liens are specific, involuntary, statutory liens. Mechanic's liens are a crucial means for people to ensure payment for the work they perform. Obtaining a Mechanic's Lien To obtain a mechanic's lien, parties must work under contract (including implied contracts) with the owner of a property or the owner's representative. Parties usually have a limited period of time to file a lien after work has been performed, or they may not receive compensation. This time period varies from state to state, as does the point in time when a lien attaches to the property. (This may have an effect on lien priority.) What Time? States might establish one of the following points in time for lien attachment: The time a contract is signed The time an individual's or contractor's work ends The time construction begins The time a lien is recorded Mechanic's liens only attach to the property on which the work was done.
Lis Pendens Notice
A notice called a lis pendens is used to inform the public when a lawsuit is filed that affects a specific piece of real estate. This informs the public and any interested parties of the potential claim on the property. A lis pendens notice is often useful because a considerable time period may elapse between the time a lawsuit is filed and the time a judgment is rendered. This type of notice filed at the courthouse would be extremely important to the person who is about to purchase a property. The buyer would find out about the potential lawsuit when the title company creates the abstract of title. At that point, the buyer can question whether it is appropriate to go through with the purchase or not. In most cases, the buyer will back out of the transaction.
Periodic Estate
A periodic estate (also known as a periodic tenancy) has a fixed lease period wherein the lease is automatically renewed at the end of each lease period until the landlord or tenant act to terminate it. A prime example of a periodic estate would be a month-to-month lease. In a month-to-month lease, the tenant and landlord have the option of terminating the lease agreement at the end of the month. However, if neither expressly terminates the lease, then it is understood that the lease is renewed. Although a periodic estate lasts for a pre-determined length of time, the periodic estate does not have to have an ending date. It goes for as long as both the landlord and the tenant want it to last. Notice is required.
Special Assessments
A property could have a special assessment put on it if the local government did anything in the way of improving the area through fixes like the installation of curbs, sidewalks, or even paving the street. To cover the costs of completing such projects, a tax would be placed on each property owner that would benefit from the work. Most of the time, this tax bill can be spread out over a 10-year period. Of course, the government will charge interest on the unpaid balance. (We'll talk more about this a little later.)
Vendee's Liens
A vendee's lien is a document declaring a claim from a buyer that the seller has not transferred title to the buyer according to the agreement. When a seller fails to deliver title to a parcel of real estate when all terms of the contract for a sale have been satisfied by the buyer, a vendee's lien applies to the property to ensure the repayment of what the buyer paid. It is a specific, involuntary lien that protects buyers. If the seller carries the full amount of the loan and the closing takes place at a title company, the buyer would receive the deed on that day. In that way, the seller's obligations under the contract are complete and a vendee's lien could not take place. If the owner sells the property using a contract for deed, the buyer will make payments to the seller. The contract will state that the seller will give a deed to the buyer someday. The "someday" is specifically stated in the contract for deed and is usually when the last payment is made. The vendee's lien would come into play if the seller failed to deliver the deed as promised in the contract.
Vendor's Liens
A vendor's lien is a specific, involuntary lien on a property as security for the purchase price that arises when a seller has not yet received full payment for the property. When a seller does not finance a loan, the lender holds the vendor's lien. Vendor's liens are enforced by filing suit to have the property sold. The lender is normally the vendor, but there are times when the seller will carry a portion of the sales price as a note or provide a loan for the entire loan amount. If this takes place, the vendor would be the seller. It is possible that the buyer will get a large loan from a mortgage company and a smaller loan from the seller. 80-10-10 Loans In the past, some of the creative loans that took place were called 80-10-10 loans. This name meant that the buyer would make a 10% down payment, borrow 80% of the sales price from a mortgage company, and then finance the last 10% with the seller. Why might a buyer do this? One advantage is that they would not have to pay for private mortgage insurance. For the seller, the advantage is that 90% of the sales price is received on closing day, and a monthly amount comes in until the other 10% is paid off. This is a good example of using creative financing to achieve higher leverage on a purchase. Leveraging an asset means using borrowed money to help purchase it. However, a disadvantage to the seller is that they could not force the property into foreclosure if the buyer stopped making payments on the 10%. Only the mortgage company could cause a foreclosure because the lender was in first place on the lending priority.
Execution Liens
A writ of execution can be issued by a court to force payment of monies owed from a judgment when a debtor does not pay. It gives court officers the right to confiscate and sell the debtor's property to satisfy the debt. The writ of execution is itself an involuntary lien, called an execution lien. It attaches to the property until it is sold.
Doctrine of Prior Appropriation
According to the United States Bureau of Land Management, each state has different laws regarding how people can use the state's water. All western states, including Texas, have enacted laws that require water users to obtain a permit from the state. In general, those laws provide the highest priority to the earliest water users. This is known as the Doctrine of Prior Appropriation and is sometimes called "first in time, first in right."
Accretion
Accretion is the process that results in the gradual increase in land area through deposits of soil by action of water. This often takes the form of soil that is deposited over time on the shore banks or deltas. The soil itself that gets deposited is referred to as alluvion.
Ad Valorem Taxes
Ad valorem taxes are general property taxes calculated according to the assessed value of real estate. The term ad valorem is Latin for "according to value." Many governmental bodies have the authority to levy and use ad valorem taxes, including the following: Counties Cities Towns Districts containing parks or preserved forests Hospital districts Water districts School districts Governmental bodies impose ad valorem taxes to support state and local agencies. Ad valorem taxes are specific, involuntary, statutory (created by law) liens.
Easement by Necessity
An easement allowed by law as necessary for the full enjoyment of a parcel of real estate; for example, a right of ingress and egress over a grantor's land.
Easement Appurtenant
An easement appurtenant exists when two tracts of adjacent land are owned by two different people. Because property cannot be landlocked in Texas, one of the owners has the easement, or right to cross the other's land. If they didn't have this right, they would never be able to leave their land. This type of easement transfers with the land and cannot be discontinued by a new property owner. When an easement appurtenant exists, there is one parcel of land which benefits at the (relative) expense of another. These are known as the dominant tenement and servient tenement respectively. The easement appurtenant is more common in rural land ownership. Of course, properties in the city have easements as well. The utility company usually has an easement to cross a property to cut limbs away from power lines or to repair pipes that are broken. Easements are also a consideration in commercial ownership of property.
Easements
An easement is an interest in, or a right to use, another individual's land or property, generally for a specific, limited purpose. It requires a property owner to grant another party the right to access their property while still retaining full legal title. This is typically a specific area of the land and for a specific purpose, such as the use of a shared driveway or to "ingress or egress" (come and go) to an otherwise landlocked parcel of land. These types of easements or rights run with the land, meaning these rights of use by another will convey in the transfer of that deed or title. Easement Appurtenant An easement appurtenant exists when two tracts of adjacent land are owned by two different people. Because property cannot be landlocked in Texas, one of the owners has the easement, or right to cross the other's land. If they didn't have this right, they would never be able to leave their land. This type of easement transfers with the land and cannot be discontinued by a new property owner. When an easement appurtenant exists, there is one parcel of land which benefits at the (relative) expense of another. These are known as the dominant tenement and servient tenement respectively. The easement appurtenant is more common in rural land ownership. Of course, properties in the city have easements as well. The utility company usually has an easement to cross a property to cut limbs away from power lines or to repair pipes that are broken. Easements are also a consideration in commercial ownership of property. Easement in Gross There is also such a thing as an easement in gross, in which an individual or company is allowed to be on the owner's property for specific purposes. Example: An electric company would have the right to be on someone's land to clear limbs from power lines thanks to an easement in gross. The difference between an easement in gross and an easement appurtenant is that easements in gross are granted to a person, not a property. Unless renewed, an easement in gross will expire* when: The person granted the easement in gross dies (if granted to an individual). The property ownership changes. Easement by Prescription Here in Texas, to establish an easement by prescription, the area in question would have to have been used by the non-owner of the property for at least ten years. That person would have had to use the easement continuously, exclusively, and without the owner's permission. The use of the easement would also have to be open, visible, and notorious (which, in this context, means a well known bad deed). The user of the easement will most likely never own the land, but after ten years, the easement Easement by Necessity There is also something called easement by necessity. When an owner cuts up a larger piece of property into two or more pieces to sell them off, it is possible that the owners of the properties in the back will not have a road or way to get in or out of the property unless they drive across someone else's land. Since there is no other choice but to use someone else's land, the people who need a way in and out will be granted an easement by necessity. In other words, it is necessary for them to have the easement.
Encroachment
An encroachment is an illegal use of another land owner's property. It occurs when one owner's property (such as a fence, tree, driveway) crosses the property boundaries of an adjacent property. An encroachment is a physical intrusion on someone else's property without direct permission. It is important to identify if any part of an adjacent property extends beyond its boundaries to ensure all of the rights of the property owner are conveyed in the sale. This can easily be identified on a survey, which is typically required in the conveyance of real estate. An encroachment uncontested over 10 years could result in the legal right to use the land of that adjacent property owner by creating a prescribed easement. Hey! You just learned that term a few screens ago. Go you! Common Encroachments The most common type of encroachment is a fence that was not placed on the property line. It either extends into the neighbor's property or does not include some of the land of the subject property. The second-most-common encroachment is a driveway that crosses the edge of someone else's property. Roofs of storage buildings could hang over the property line as well.
Equitable Liens
An equitable lien is a right that exists only in equity, with one party charging their property as security for a debt or loan. Equitable liens are created by courts and derived from common law. A vendor's lien is an example of an equitable lien. When a buyer does not pay in full, for example, a seller might obtain a vendor's lien on the property. Equitable liens also occur when a tenant for life, joint owner, or occupant makes alterations to the land that increase its value.
Avulsion
Avulsion is the sudden loss of land by flood or when a stream or river changes course. Because it's a sudden change, no title is lost.
Bail Bond Liens
Bail bonds can be put up in the form of real estate in lieu of cash when a property owner is accused of a crime. This creates a bail bond lien: a specific, statutory, involuntary lien enforceable by a court officer or the sheriff if the accused property owner does not appear in court.
Specify Your Tenancy
Because joint tenancy involves the right of survivorship, many states require co-owners who wish to own property in this way to create a written contract that specifies their intent to create a joint tenancy and identifies the co-owners as joint tenants. Without a contract or conveyance that clearly identifies their relationship as a joint tenancy, it may be presumed to be a tenancy in common.
Community Property
Community property is property owned by a married couple, in which each spouse has ½ ownership of any property obtained during the marriage, plus a right of survivorship ownership after the death of either spouse. This arrangement is generally created by community property laws, under which the ownership interests in any property that is acquired during the course of a marriage are automatically divided equally between the two spouses. The idea is that both spouses contribute equally to a marriage, and thus both have equal ownership rights to all property acquired during the marriage.
Transferring Community Property
Community property laws recognize ownership based on the spouses' marriage agreement, rather than the actual holding of title. This means that all property acquired during a marriage belongs equally to both individuals and will be equally divided if their marriage is dissolved. If one spouse dies, their half of the community property will transfer to the surviving spouse.
Creating and Terminating Easements
Creation of Easements Easements are usually created by an agreement between two parties or out of necessity that someone has a need to cross someone else's property to get to their own property. It is also possible for someone to obtain an easement by prescription (more on that in a moment) after using a portion of someone's property for some time without the owner's permission. Ending Easements An easement can end if there is not a need for it to exist any longer, and it is abandoned due to non-usage. It can also be terminated if the one who has the right to use the easement decides to release that right.
Tax Due Dates
Due dates for real estate taxes vary from state to state and are regulated by statute. Some states require payment the same year the tax is levied, and others require payment the following year. In some cases, payments can be made in installments, and only a portion of the tax bill is due during the year the tax is levied. Knowledge of local due dates, also called penalty dates, is especially important for the proration of taxes when a property is sold. Texas Dates In Texas, ad valorem tax bills are usually received in the month of October each year. That invoice represents taxes from January 1 of the current year to December 31. Real estate taxes are paid in arrears. This means they're paid after the time period for which the owner is being taxed. When someone pays their taxes in December, it is for the year that is about to be over. Pay Taxes or Lose Property If tax payments are not made on time, penalties will be added. Someone may even lose ownership of a property if they do not pay their taxes. The real estate could be taken by the county and sold at a tax sale. Texas has a statutory redemption period for property tax liens. If a person loses their property for nonpayment of their property taxes, they could potentially get their property back as many as two years later if the property was their homestead. For all other properties, the time frame is six months. Redeeming a Property In Texas, a person who is too far behind on their tax bill may lose their home. In this case, the highest bidder on the property will have a lien on it, and the former homeowner, if the property was their homestead, has two years to redeem the property. (In this case, the word homestead means a person's primary residence.) 🏠 If the former homeowner is behind on taxes and can come up with the funds during the first year, they will have to pay the tax bill plus 25%. If redeemed during the second year, the interest jumps to 50%. The redemption right is canceled after the second year ends, and at that time, the person has completely lost any claim to the property.
Appraisal
Each year, the assessor's office will send out statements to each property owner on the decision from the assessor's office on the value of the property. There is a protest period in which the owner could dispute the amount that the office came up with. Homeowners may object to the appraised assessment of their property to the county appraisal district, but they may need to take their appeals to court. Since the annual taxes are going to be evaluated based upon the appraised value of the property, it's in the owner's interest to get the appraisal district to lower the amount they came up with. In this case, the owner would save money on the amount that would have to be paid that year for taxes.
Types of Leasehold Estates
Estate for Years Periodic Estate Estate at Will Tenancy at Sufferance
The Four Main Types of Estates
Freehold Estates Leasehold Estates Equitable Estates Concurrent Estates
Rule of Capture
Groundwater in Texas follows the rule of capture, meaning the landowner does not actually own the water under the property, but they have the right to drill for the water and use it.
Easement by Prescription
Here in Texas, to establish an easement by prescription, the area in question would have to have been used by the non-owner of the property for at least ten years. That person would have had to use the easement continuously, exclusively, and without the owner's permission. The use of the easement would also have to be open, visible, and notorious (which, in this context, means a well known bad deed). The user of the easement will most likely never own the land, but after ten years, the easement would be established.
Special Assessments
Homeowners whose property is near or adjacent to the improvement bear the expense of these improvements, but only if the owner benefits from the improvement. Common Improvements Special assessments are levied for common improvements, such as: Gutters Street lights Curb improvements Street paving Sidewalks Voluntary vs. Involuntary Special assessments can be voluntary or involuntary. An involuntary special assessment, as the name would suggest, is a tax lien that is placed on the affected homeowners' property whether or not the homeowners wanted the improvement. Sometimes, however, members of a neighborhood might petition the city for a public improvement, like a sidewalk. The city would have to agree to pay for the improvement, so the special assessment is voluntary. All special assessments are statutory and specific, and are held against the affected homeowners' properties until paid. If the assessment is not paid, a lien may be placed on the defaulting owner's property. Equal or Prorated Depending on the type of improvement, property owners can share the cost of improvements on an equal or prorated basis. Several homeowners might equally share the cost of a street lamp, but the cost of a new sidewalk might be prorated according to the length of the sidewalk built on each individual property. Pay or Defer Special assessments become liens on affected homeowners' properties after the warrant and bills are issued. Special assessments may be prepaid in full to avoid interest charges, or taxpayers may pay the special assessments in installments. Some taxpayers may be eligible for special assessment deferral. Types of special assessment deferrals may be used by senior citizens and persons with disabilities who have hardship status, and for assessments levied on unimproved land.
Municipal Utility Liens
If a property owner refuses to pay bills for municipal utilities, the municipality can obtain a municipal utility lien on the property. It is a specific, involuntary lien.
Protesting an Appraisal
If a property owner wants to protest the appraised value, they would take their opinion and objections (and any evidence of why the number is wrong) to the appraisal district office for the county. It is quite possible the owner will call the real estate agent who sold the property to the owner and ask for a market analysis to assist in proving to the district the true value of the property. Any pictures of the damage done by lack of maintenance may also help. Usually, the employee at the appraisal district will look at the evidence and give a slight adjustment to the value. If the owner is still not happy, they will need to ask for a hearing before the appraisal review board (made up of citizens) who will attempt to resolve the dispute. If the property owner is still not happy after meeting with the review board, then they may take their complaints to the court system.
No Right of Survivorship in tenancy in common
If one owner dies, the distribution of their interest in a tenants-in-common property is done according to the will or by the laws of descent and distribution, if there is no will. In short, the property of the deceased is transferred to their estate. It is important to note that there is no right of survivorship here. That is, when one co-owner dies, their ownership interest does NOT revert to the surviving co-owners.
Percentage of Ownership
If the various ownership interests are not equal — that is, if each owner is not assigned the same percentage of ownership rights in the property — then the co-owners' fractions of ownership interest are stated in the deed that created the tenancy in common. In the absence of any deed stating an unequal division, it is often assumed that all rights and obligations regarding the property are divided evenly.
Homestead Rights
In Texas, a homeowner has automatic state constitutional homestead rights on their owner-occupied primary residence. This right is automatic (like I just said) and protects homeowners from claims by creditors being made against their homes, preventing any eviction by these creditors. This protection does not encompass all creditors. There are, of course, some exemptions, such as in a mortgage where the homestead is used as security for the debt or when there is a federal tax lien. Size Limits There are some limits to the amount of real estate that can be homesteaded. In an urban environment, the maximum amount of land cannot exceed 10 acres. They can be multiple lots, but they must be contiguous or adjoining. If it is a rural property, the maximum homestead size is 200 acres for a family and 100 acres for a single person.
Texas Commission on Environmental Quality
In Texas, the agency responsible for governing water rights is the Texas Commission on Environmental Quality (TCEQ). They are also responsible for applying federal and state laws under the Texas Water Code. This commission is made up of just three members who are appointed by the governor and confirmed by the state senate. They function to hold hearings to authorize permits involving water.
Tenancy in Common Rights
In a tenancy in common, each co-owner of the property holds their individual portion of the ownership interest in severalty. This means that each individual co-owner can sell, transfer, mortgage, or lease their interest in the property without the authorization of the other owners of the property, as long as that owner's actions do not endanger or abridge the rights of the other owners. And, of course, their choices must conform to state and federal laws. Each of the tenants in common has an equal right to enjoy the use of each part and the whole of the property, but none of them has a right to possess any part of the property exclusively.
Individual Ownership
Individual ownership occurs when one person is the owner of a property. They have absolute control over the distribution and use of the land as well as final say over any other decisions affecting the property (within the confines of the law). Individual ownership is also called sole ownership.
Joint Tenancy
Joint tenancy is co-ownership in which the parties have an equal and undivided interest in the property. Under this form of co-ownership, there is a right of survivorship. This means that when a joint tenant dies, the surviving joint tenants inherit the deceased co-owner's ownership interest in the property. Different forms of ownership have different inherent rights. Joint tenancy has the right of survivorship where tenancy in common does not.
Judgment Liens
Judgments are decrees given by courts. When judgments specify the amount of money owed, they are called money judgments. Judgment liens are general, involuntary liens, so they apply to both real and personal property. The written court decree is called an abstract of judgment. It takes effect only after it has been recorded in the county clerk's office. The lien applies to property currently owned or acquired in that county.
Encumbrances to Title
Lastly, I want to talk about title issues. Divorce presents a common example of a situation in which title issues could arise. A husband and wife may purchase a property together, and then after some time, decide to go their separate ways. Although the attorneys handling the divorce should transfer the ownership to the proper person, it does not always happen that way. This is why an agent on a listing appointment with an owner may ask if the two of them bought certain property together. If a sales agent fails to ask that question, it is possible that just before the closing, a title company employee may call and say that the names on the official documents at the courthouse do not match with the names on the contract. The buyer would not be happy. Resolving a Title Issue It is at this point that most agents would find out about the title problem. This would mean that the agent would have to go to the owners and explain to them that the ex-spouse is going to have to be located to sign a legal document stating that they have no claim to the property. This is not always easy to accomplish. Love, after all, is a battlefield. The document the ex would have to sign to clear up the title is called a quitclaim deed, which "quits" or terminates their rights or claim to the property. Alas, it is much better to ask the right questions before the property is marketed, not after. Cloud on the Title Another problem with the title may be created if there was a death and the property was inherited. This would be referred to as a cloud on the title. By "cloud," we mean a dispute on an otherwise clear title. Probate is the legal process in which a court decides who will inherit property. If the estate was not probated, the agent may have to assist the current owner in locating others who should have been a part of an inheritance. The relatives and friends may have to "sign off" on the property indicating that they did not expect anything from the estate and then the sale can move forward. Once again, asking the right questions at the time of listing the property will put the license holder on notice that a problem could arise. Fraud A cloud on the title could also be created by some type of fraud. A land developer could sell the same tract of property to more than one person, even though they know that the originator of the subdivision will be long gone when the parties find out that they all think they are rightful owners of the subject lot. This issue can be resolved, but usually to only one person's satisfaction.
Estate for Years
Lease for a definite period of time An estate for years has a definite ending period, there is no automatic renewal, AND no notice is required to terminate the lease.
Homestead
Legally, a homestead is a residence that is occupied by the individual or family who owns it. Homestead laws protect families from losing their home to general creditors that are owed money. However, this type of protection does not cover the money that is owed for a mortgage, because in that type of loan, the property is collateral for the loan itself. According to the Texas Property Code, a homestead in a rural area is limited to 200 acres for a family and 100 acres for a single person. A homestead in the city cannot be larger than 10 acres, and those acres must be on contiguous (touching) lots. This law will not protect three acres on one side of town and seven on the other side of town.
Littoral Rights
Littoral rights govern lakefront or oceanfront property and usually allow the property owner to use the water bordering their property. Littoral use prohibits the property owner from artificially changing the water's location
Real Estate Transfer Taxes
Many states and municipalities have passed laws that impose a tax on the conveyance of real estate from one party to another. A real estate transfer tax must be paid when the property is sold, and the seller usually bears this expense. The amount of transfer tax is set by the state. (A common transfer tax rate is $0.55 per $500 of the final sales price.) The money collected from this tax may be divided between the county and state. Real estate transfer taxes are usually paid by purchasing tax stamps, which are affixed to a deed at the time of recording at the county clerk's office. Some states also require that both buyers and sellers sign a declaration form, which indicates the type of transfer being affected, the address and legal description of the property, and the type of deed being used to transfer title. Exempt from Transfer Taxes Some property transfers are exempt from transfer taxes. Common examples include: Transfers between governmental bodies Transfers by educational or religious institutions Transfers of real estate as security for a loan Real estate gifts Not in Texas Texas has never had a transfer tax. The political action committee at the Texas Association of REALTORS® works to keep people aware of legislation being considered so that they can voice an opinion to the Texas legislature. In 2015, with the full backing of TAR, the state legislature passed legislation that said there would never be a transfer tax on real estate. (This legislation later became a part of Texas' state constitution.) So far, Texas has no state income tax and no transfer tax.
Attachment Liens
Plaintiffs in a lawsuit may seek a writ of attachment, in which the court seizes property until it reaches a judgment. This protects creditors from a conveyance of title before a judgment is rendered. A writ of attachment is also called an attachment lien. (So don't get too attached to the writ part!) Creditors must post a surety bond or a deposit large enough to cover any potential losses the defendant might suffer in order to obtain a writ of attachment. This protects debtors if the court decides in their favor. An attachment lien is a general, involuntary lien and may attach to all of the owner's property except their homestead property. Exempt Property Certain kinds of property are exempt from attachments and executions. Exemptions are often limited to a certain value. They vary from state to state but might include items such as: Tools used for a trade or business 🔨 Social Security 🔒 Basic household appliances and furniture 🚽 School books 📚 Money owed to debtors for child support or injury 💰 Prescription health supports 💊 Basic wages 💵 Cemetery lots 🕯
In Severalty
Property that is owned by a single individual is also sometimes referred to as being held in severalty. This means there is an undivided ownership of an estate, with an interest that is exclusive from other owners. This can be super confusing at first because the word severalty sounds like several, a.k.a. more than one. The term severalty is derived from the word "sever," which means to make separate or individual. When a property is held in severalty, it usually belongs to a single individual or a married couple (who are kind of like one, whether we're talkin' homeownership or party invitations).
Federal Income Tax Liens
Putting off paying your property taxes isn't the only way to get stuck with a tax lien. When a person does not pay Internal Revenue Service (IRS) taxes, such as the federal income tax, the IRS may obtain a federal tax lien. This type of lien is a general, involuntary, statutory lien that is held against all of the defaulting taxpayer's property. The IRS will first assess the taxpayer's liability, then send a Notice and Demand for Payment to the taxpayer. If the taxpayer does not respond within ten days after receiving this notice, the IRS may then create a lien for the amount of the debt. The lien creates a claim on the taxpayer's real and personal property, including any property purchased after the lien is filed. Releasing a Federal Tax Lien A federal tax lien may be released if the taxpayer satisfies the debt (unpaid income taxes) within 30 days by paying the amount due or by submitting a bond that guarantees payment of the debt. Homeowners and investors must pay federal income tax on profit made from the sale or use of real estate. However, both homeowners and investors can reduce these taxes through the use of tax shelters.
How Liens Work
Real estate liens "attach" to a specific piece of property. This way, a debtor cannot sell their property without the lien accompanying it, or without the lien being paid off at the closing of the sale of the property. A lien represents a superior claim to a piece of property even after it has been sold, unless the lien is cleared before transfer of title. So, in order to sell a property, the owner likely will have to take steps to clear the land of its liens. Although a person who has bought a property that has liens is not responsible for paying off the associated debts, the lien holders can still take legal action to gain control of the property. The priority of the liens will determine which lien holder is entitled to the property in what order.
Creation and Termination of Joint Tenancy
Remember that the big difference between tenancy in common and joint tenancy is that there is the right of survivorship in a joint tenancy. For joint tenancy to be established, all the owners have to sign a written contract. In Texas, tenancy in common is the default position if nothing is specified. No Accidental Joint Tenancy Again, a joint tenancy must be created on purpose with the help of an attorney. There is no way to accidentally create a joint tenancy. If one of the owners wants to withdraw from their ownership as a joint tenant, it would take more legal activity. If one of the parties disagrees with the ending of the relationship, then a court would have to make a decision on how the property or the proceeds of the sale are to be divided. Joint Tenancy Termination When any one of the four unities of joint tenancy is terminated, the joint tenancy is annulled. Bankruptcy, foreclosure, and suits to partition the land can cancel a joint tenancy. When the parties cannot or will not voluntarily agree to its termination, a legitimate way to dissolve a co-ownership is to have the land legally partitioned by a court. If a court cannot divide the land in a way that satisfies the co-owners, it will often force them to sell the land and divide the proceeds between the joint tenants.
Special Assessments Procedure
Special assessments may be imposed by implementing the following general procedures. A local government body submits a proposal for an improvement, or affected property owners petition the city for an improvement. Both submissions must indicate the need for or desirability of the improvement. The proper authority holds hearings on the improvement after the affected property owners have been notified of the proposal or petition. An ordinance is passed that describes the improvement, the cost of the project, and the area affected. The amount to be assessed is calculated against all assessable properties in an assessment roll. The assessment roll indicates how the cost will be divided, usually according to front footage or estimated individual benefit. Public hearings are held to confirm the assessment roll. Community members can raise objections at this time; the proposal is then decided by a local court. The special assessment becomes a lien on the affected owners' properties. Local authorities issue a warrant after the improvement is completed that allows a local collector to issue bills to begin collecting the special assessment.
Statutory Liens
Statutory liens are local, state, or federal law established liens for a specific set of circumstances. Because the liens are imposed through the law, they are called "statutory." These include federal tax liens, mechanic's liens, ad valorem tax liens, and judgment liens.
Subordination Agreements
Subordination agreements are written compromises between lien holders to change the priority of their liens. When buyers obtain a mortgage loan to purchase a property, lenders often require a highest-priority lien. (Highest priority liens are said to be "in the first position.") The bank will almost always want to be in the first position.
Tax Liens
Tax Liens are Statutory A statutory lien is a lien brought by a government entity. A tax lien is a kind of statutory lien that is imposed against real property if the property owner becomes delinquent in the payment of taxes. It is important to note that real estate professionals are not expected to be (nor should they be) treated as tax experts. They should, however, be familiar with the tax issues, and should direct a client to an accountant or tax advisor if they require specific tax information. General and Specific Liens Liens are claims that a lender, tax office, or a repair person has against a property. The lien could be against the real estate only, but it could also include the personal property. Any lien falls under the category of an encumbrance that would have to be resolved when selling the property. A lien that includes the real estate and the personal property is called a general lien. A lien that is against only the real estate is called a specific lien.
Three Types of Co-Ownership
Tenancy in common Joint tenancy Community property
Exempt from Homestead Protections
The Texas Constitution (section 28) and Property Code section 42.001(b)(1) provides that the homestead of a family or single adult is protected from a forced sale for purposes of paying debts and judgments EXCEPT in cases of: Purchase money Taxes (both ad valorem and federal tax liens against both spouses) Owelty of partition (divorce) Home improvement loans Home equity loans Reverse mortgages Liens predating the establishment of the homestead Refinance loans or the conversion or refinance of a lien on a mobile home that is attached to the homestead Specific Liens Notice that all of these liens listed above are specific liens in which the property was used as collateral for the loans. Other liens cannot affect a homestead. Even a permitted lien must be in writing and signed by both spouses to be valid. The protection of the homestead combined with the prohibition against the garnishment of wages has made Texas a more forgiving place for debtors (the parties that owe debts).
Defeasible Fee Estates
The defeasible fee estate is a property interest characterized by perpetual ownership on the condition that the property is used for a certain purpose or under specific conditions. Ownership reverts back to the original owner if these stipulations are violated. It's similar to a life estate (which we'll cover a little later) in that some event must take place for the estate to come to an end. Two Common Forms of Defeasible Fee Estates They are: Fee Simple Determinable Fee Simple Subject to Condition Subsequent
Determinable vs. Subject to Condition Subsequent
The difference is that this return to the original owner is automatic with fee simple determinable, but the reversion requires going to court if it's subject to a condition subsequent. Fee simple determinable doesn't require you to go to court to get your property back: It's already been DETERMINED that it'll be returned to you. Fee simple subject to condition subsequent does require you to go to court. That's another, SUBSEQUENT action you have to get to get your property back.
Concurrent Estates
The fourth main type of estate is a concurrent estate, which is an estate that is owned by two or more individuals (i.e., co-ownership). Three subcategory estates that fall under the concurrent estates umbrella are: Joint Tenancy: Property that is owned by two or more persons at the same time who all have an equal, undivided interest in the property Tenants in Common: When two or more parties own a property as a tenancy in common, each owner has a partial ownership interest and partial rights in a property Community Property: Recognized in Texas (and eight other states) as the type of joint tenancy that exists between married couples. The type of estate that is created by community property is also referred to as a statutory estate since it's an estate that was established by law in the legal union of marriage.
Federal Judgment Liens
The government can file a federal judgment lien for failure to pay certain debts, such as student loans. These liens are filed in the county where the real property is held. A judgment lien is a general, involuntary lien. It may attach to all of the owner's property except their homestead property.
Tenancy at Sufferance
The last type of leasehold estate is called tenancy at sufferance. Also known as an estate at sufferance, a tenancy at sufferance occurs when a tenant remains in possession of the property beyond their lease term, without the consent of the landlord. Continuing to occupy a dwelling after the lease is terminated is called tenancy at sufferance. The word "sufferance" here actually means to passively allow or tolerate something. When a tenant remains in possession of a property beyond their legal tenancy, the landlord has the right to evict them. The landlord is passively allowing the tenant to stay in the property until that eviction can occur. However, if the tenant offers to pay the landlord rent, and the landlord accepts, the tenancy at sufferance becomes a periodic estate. Holdover Tenants When a tenancy at sufferance occurs, the tenant is referred to as the holdover tenant because they no longer have a standard tenant-landlord relationship. The tenant is not considered a trespasser because the tenant originally had a right to be on the property. (A true trespasser never had a legal right to be on the property.) Tenancy at sufferance is the lowest estate.
Surviving Joint Tenants
The only way for a joint tenant to acquire an ownership interest that can be conveyed in a will is for that person to be the only surviving joint tenant. Otherwise, when any of the joint tenants die, their ownership interest reverts to the surviving joint tenants.
Leasehold Estates
The second type of estate is a leasehold estate. In a leasehold estate, one party owns the property, but someone else lives there. Tenants don't own the property, but they have the right of possession for a period of time. And, whereas a freehold estate may be evidenced by a deed, a leasehold estate may be evidenced by a lease. Working with Tenants Agents who practice residential real estate will encounter leasehold estates on a regular basis. Even if you don't practice property management, you may still list a home that has tenants. Although the sale may be made, the tenants do not have to vacate until the expiration of their lease period. This could be a problem if the buyers wanted to take immediate possession of the home. But the buyer could attempt to buy out the lease of the tenants if they chose to do so. Of course, if one investor bought the rental home from another investor and the tenants are current with their rent, the new owner would probably be very happy for the tenants to continue occupying the property. Tenant's Right of Possession Keep in mind that the most important aspect of the leasehold estate is that the tenant's right of possession continues until the lease has expired. The property reverts back to the landlord when the lease ends. So, again, leasehold estates are a type of property interest allowing tenants to occupy and use a property they do not own. Leasehold estates are established when a tenant has possession of a property and has the legal right to use the property, but they do not have actual ownership interest (i.e., they do not hold legal title and cannot legally sell the property). They may use the property for a specific period of time, and, in almost all cases, they would not have the option to purchase it. Tenants have a special kind of "possessory estate" in the property for the duration of their lease, as long as they honor the terms and conditions of the lease contract. Reversionary Right This form of estate has a reversionary right, which means possession of the property reverts back to the landlord after the lease term has expired. The landlord's interest in the property is specifically known as a "leased fee estate plus reversionary right." Leasehold vs. Leased Fee The tenant who leases real property has a leasehold interest in the property. This is true whether the tenant is a person leasing an apartment to live in or a developer leasing land with intentions of constructing an office building. If they're leasing, they have a leasehold. The landlord, on the other hand, has a leased fee interest in the property that they own and are leasing to someone else. A Sale Doesn't Affect a Lease One of the most interesting aspects of a leasehold estate is that the tenant has full possession of the property until the lease expires. If the owner should decide to sell the property during the lease period, the only thing that has changed for the tenant is that they have a new address to send the rent check to. Of course, documents filed at the courthouse will indicate who the new owner is, but the tenant remains in the property. This protects the rights of the tenant under the lease agreement in that they will know with certainty that as long as the tenant's side of the lease agreement is upheld, then they can continue living there until the end of the agreed-upon date.
Encumbrances
The term encumbrance refers to any claim or right against a property held by another who is not the fee title owner. It is a nonpossessory interest in someone else's land. Encumbrances affect the property's clear title or may limit the use of the property by the fee title owner. Encumbrances are attached to the title, not the owner of the property. Monetary or Physical A property could have one or more encumbrances. They could be monetary, such as a mortgage on the property, or they could be physical, such as an easement that gives someone else the right to use a portion of the property. When someone has a right to use an easement, what they actually have is an interest in the property, but not an estate in it. Financial Encumbrances Some encumbrances are financial in nature. The mortgage on a property is a claim the lender has that must be dealt with when the closing takes place. Also, it is possible for a property to have a financial encumbrance if there is an IRS lien or some other type of tax lien filed against the property. (Liens are a type of encumbrance, a term referring to any claim against a property that affects its title or use. We will talk more about liens later in this level.) And, of course, if a repairman has done work on the property and has not been paid, then they could file a mechanic's lien on the property. This would also be considered to be a financial encumbrance. Types of Encumbrances Because encumbrances affect the title interest or use of a property, it is important that the claims or rights of others are understood in the transfer of real estate. Encumbrances can affect the use of real property in the form of: Liens Easements Restrictions Encroachments
Equitable Estates
The third type of estate is the equitable estate. This occurs when a freehold estate owner has ownership interest on the property, but another party has an interest in the property that is less than the interest afforded by ownership. Or, if another party has an easement on your property, then that too is considered an equitable estate. Equitable Estates and Encumbrances Liens and easements are considered types of encumbrances. The term encumbrance refers to any claim or right against a property held by another that is not the fee title owner. These encumbrances affect the property's clear title or may limit the use of the property by the fee title owner. We'll discuss liens, easements, and other types of encumbrances in greater detail in the next chapter. But for now, just remember: Equitable Estates are commonly created by Encumbrances. That should be easy to remember, right? Look at all those "e"s. So many of them. Three, in fact.
How Ad Valorem Taxes Are Calculated
The way real estate property taxes work is that the county tax assessor will calculate the value of a property. This value is NOT necessarily the same as the market value of the property. Then each individual taxing authority will apply the tax rate that they decided upon to meet their financial needs in their budget. Usually, a consolidated bill will be sent to the property owner to pay. If there is more than one taxing entity (and there always is), the tax bill only has to be paid at one location. Tax Rate Calculation When a taxing district creates a budget for a fiscal year, it must determine the total expected expenses, as well as the expected revenues from sources like revenue sharing and fees. The difference between total expenses and total revenue is equal to the amount of money that the district must raise from the collection of real estate taxes. If a district expects to raise $40 million in revenues and expects to spend $50 million in a given year, then the district must raise $10 million in real estate taxes. To determine the tax rate applied to each property owner, the district divides the total amount to be raised from real estate taxes by the total assessed value of all real estate in the district. Real Estate Valuation The value of an individual parcel of property is usually assessed for tax purposes by local assessors whose methods of appraisal may vary from state to state. Assessments are based on the market value of the property. The value of the land upon which the property is situated is usually appraised separately. Assessed values are then listed in the local tax roll.
Three Forms of Ownership
There are three basic forms of ownership. Property can be: Individually owned 👤 Co-owned 👥 Held in trust 🔒
Two Types of Life Estate
There are two different types of life estates: Conventional life estate Legal life estate Conventional Life Estate The first type of life estate that we will discuss is a conventional life estate. It is an estate created by the grantor that is based on the life of the life tenant OR the life of another. When a life tenant in a conventional life estate dies, the estate is returned either to the original grantor by way of reversion or to some other designated person as a remainderman. Pur Autre Vie When a conventional life estate is based on the life of someone other than the life tenant, it is referred to as pur autre vie. This means "for the life of another" in French. Pur autre vie describes a life estate that grants one party ownership of a property for the duration of another individual's life. Here's how this type could come into play: A property owner may have an aging mother who does not want to leave her home and go to a nursing home. The owner might locate a caretaker who would be willing to care for her mom while living in the home. The owner could give the caretaker a life estate in the home. This would mean that the caretaker would be the owner of the home until the mother passes away. Once the mother passes, the caretaker would no longer be the owner. The estate would revert to the original owner or to someone else who was named in the deed that created the life estate. Legal Life Estate The second type of life estate is one created by state statute — a legal life estate. In Texas, a homestead is a popular type of legal life estate. Other types of legal life estates include dower and curtesy.
Easement in Gross
There is also such a thing as an easement in gross, in which an individual or company is allowed to be on the owner's property for specific purposes. Example: An electric company would have the right to be on someone's land to clear limbs from power lines thanks to an easement in gross. The difference between an easement in gross and an easement appurtenant is that easements in gross are granted to a person, not a property. Unless renewed, an easement in gross will expire* when: The person granted the easement in gross dies (if granted to an individual). The property ownership changes.
General Liens
These affect any property an individual or institution owns, including both real and personal property. This includes many kinds of taxes, such as IRS and inheritance taxes.
Specific Liens
These are claims against particular parcels of real estate, and they do not affect any other property. Examples of specific liens are vendor's liens, execution liens, vendee's liens, surety bail bond liens, mechanic's liens, mortgages, special assessments, property taxes, and attachments.
Fee Simple Subject to Condition Subsequent
These estates have specific requirements on them that, if they are not met, could cause the property to revert back to the original owner. But a fee simple subject to condition subsequent estate will NOT immediately go back to the grantor like a fee simple determinable estate. Instead, with the fee simple subject to condition subsequent estate, the previous owner would have to go to court to prove that they should be the proud owner again.
Open Beach Law
This gives the public the right to use the beaches. This basically states that even though someone may own a lot, no building may be built in an area that is an easement for the public.
Fee Simple Determinable
This particular defeasible estate will come to an end automatically and immediately upon the occurrence of a designated event, the time of such occurrence is uncertain. No legal action is required of the grantor in order to assume the recovery of the estate.
Freehold Estates
Three Types of Freehold Estates Okay, so now you know what a freehold estate is. Let's break it down further into three categories: Fee simple absolute estate Defeasible fee estate (also called qualified fee or fee simple defeasible) Life Estate
Mortgage Liens
Typically, when a person buys a home, the home itself becomes collateral for the loan, so the lender obtains a mortgage lien. Because the owner creates the lien, a mortgage lien is considered voluntary. Lenders may also require a preferred lien, which means that no other liens can take priority. Mortgage liens can also be deed of trust liens. Under a deed of trust (or trust deed), the title is held by a trustee as security for debt until it is paid. Mortgage liens are specific, voluntary liens. Specific because they only apply to the property that is secured by the debt and voluntary because the owner voluntarily enters into the contract.
Separate Property
Under community property law, property owned solely by either spouse before the marriage, acquired by gift or inheritance after the marriage, or purchased with separate funds after the marriage.
Equalization Factor
Value assessments for properties may vary substantially according to their location in a particular taxing district. This creates an inequity in tax assessments, and would result in an unfair distribution of statewide taxes. So, in order to equalize tax assessments throughout the state, the assessed values of properties are equalized by multiplying the assessed value of a property by an equalization factor. Taxes are then levied against the adjusted assessments, and all property owners in the state pay an equal share of the state tax.
Restrictive Covenants
We've talked a lot about easements. Let's move on to the next type of encumbrance, restrictions (often called restrictive covenants.) They are usually created by the developer of a subdivision, and they outline what someone may not do on their own personal piece of property. This is not the state or city government limiting the use of a property. It is a private individual telling a private individual what cannot be done on that piece of real estate. Some of the restrictions may be about how many pets can be kept on the property. Another restriction might limit the type or size of home allowed on the land. The type of encumbrances known as restrictive covenants (sometimes called deed restrictions) are added by previous owners or added to deeds by the developers for specific subdivisions. Restrictive covenants can put limitations on the use or maintenance of certain areas. They could also require specific standards for improvements, lot sizes, or architectural design. Any restrictions that violate the current laws would not be enforced in any conveyance of that deed. (A conveyance is a transfer of ownership of a piece of real estate from one person to another.)
Closing and Taxes
When a closing takes place, the title company will calculate how much is owed for the taxes up to that day. Then the title company will take away a portion of the amount the seller is receiving from the buyer and give it back to the buyer. This amount will be applied to the buyer's closing costs. At the end of the year, the buyer will be responsible for the entire year's taxes since they have already received the benefit of the tax amount that the seller had to give up on closing day. This is typically preferred to trying to collect taxes from the seller long after the closing. Closing Delays There will be times when a closing will be delayed. This delay could happen because there are documents missing that the title company needs or because the lender does not have everything they need to agree to the mortgage. A delayed closing means frustration for all involved: The buyer can't move in, the seller cannot get their money, the agents can't get their commissions, the mortgage company has to recalculate some of their fees, the title company cannot close the file. Whew! Plus, the money and documents are all with the escrow agent, but now some changes will have to be made because of the delay. Be Prepared for Closing Make sure that you, as an agent, prepare everything for the closing at the very beginning of the listing. Here are some of the ways you can do this: For sellers, obtain a copy of an existing survey For buyers, get the client pre-approved for a loan Call, prod, and move forward everyone that is involved in the transaction Doing these things will help ensure that everything happens in a timely manner.
Married Couples
When a married couple occupies a separate property (owned by just one of them, acquired before the marriage or by gift or inheritance), the non-owner acquires homestead rights. If the couple sells the home, the non-owner will also likely be required to sign the deed at closing to sever their homestead rights. Signing a listing agreement acknowledges the consent of both parties. This requirement can have serious ramifications. Best Practices In Texas, a broker is not generally liable if one spouse refuses to sign once the other spouse has accepted an offer. However, a prudent real estate professional would establish communication with both spouses from the beginning of a transaction to prevent this type of situation. Most brokers will not market a listed property when one of their sales agents obtains a listing signed by only one of the spouses. A prudent broker will likely have the agent contact the other spouse for a signature.
Estate at Will
When a tenant is occupying a property with the landlord's knowledge and consent, but without a formal lease agreement, it is called an estate at will (also known as tenancy at will). In an estate at will, a tenant can occupy a property for an unspecified period of time in the absence of a lease. Terminate at Any Time Under an estate at will, the landlord and tenant have all of the typical rights and obligations under any other type of leasehold estate, except that the tenant or landlord both have the right to terminate the lease agreement at any time. It will last until one of the parties decides to end it. Again, either the tenant or the landlord can end the situation at any time, including immediately, without notice. This differs from a periodic estate, in which there must be a notification to terminate the agreement, and the lease will end at the next renewal period rather than ending immediately. An estate at will is relatively rare because most tenants want to have more certainty about how long they will be able to stay in their dwelling, and most landlords don't want the unpredictability of a tenant (along with their rent money) leaving whenever. However, this type of tenancy can also benefit either party if they value the flexibility it offers.
Tenancy in Common
When two or more parties own a property as a tenancy in common, each owner has a partial ownership interest and partial rights in a property. The ownership interests may be divided in various ways, but there is no actual physical division of the property. Tenancy in common would be the default if two single people are buying property, and nothing is specified regarding how they want to take the title. Married couples can choose to be tenants in common if they want to, and this form of ownership allows for title in severalty.
level 13
chp 3
level 13
chp 4 property taxes
level 13
chp 5
level 13
chp 6 water rights
level 14
chp1 home ownership
level 14
chp2 co-ownership
Riparian Rights
govern the use of flowing water, such as rivers and streams that pass through or border a property. In accordance with riparian rights, a property owner does NOT own the water, but they may use the water and share those same rights and uses with other property owners whose land also interacts with the water.
If no third party is named as remainderman, when a life estate owner dies, the property reverts to the:
grantor
Life Estates
level 13 chp 2
Fee Simple Estate/Fee Simple Absolute
the highest interest in real estate recognized by law. holder is entitled to all rights to the property by law. runs forever. heirs.
Who initiates the foreclosure on an 80-10-10 loan?
the mortgage company
bundle of rights
the ownership of land with all of the legal rights of possession, control, enjoyment, exclusion, and disposition
Investment in Tax Liens
when a taxpayer fails to pay their real estate taxes, the state may impose a tax lien on the property and sell the tax lien at a tax sale. (Who doesn't love a good sale?) The highest bidder on the tax lien may purchase the lien. The buyer receives a tax lien certificate, which entitles them to one of the following: A yield from the lien that must be paid by the defaulting taxpayer upon redemption Title to the property after a specified period of time The buyer in this situation is not purchasing the property, only the tax lien on the property. These provisions make tax lien sales a lucrative opportunity for investment. Risks These are somewhat risky, however. In some states, if the delinquent taxpayer declares bankruptcy, IRS liens or liens from lenders may take priority, rendering the tax lien certificate worthless. Another risk associated with tax lien sales is that they are often sold with little opportunity to inspect the property. The purchaser may discover problems after obtaining the tax lien certificate.
