CHAPTER FIVE: REAL PROPERTY OWNERSHIP

What about leases?

Anytime a party has a lease and desires to let another party take over the entire lease in full prior to its expiration, the parties will execute a lease ASSIGNMENT. If a party wishes to give up only a portion of his or her existing lease, he or she will execute a SUBLEASE. For example, if a tenant would like to rent out one of several bedrooms to another.

There are four methods of involuntary alienation:

Descent and distribution, Escheat, Eminent Domain, and Adverse possession

V. OWNERSHIP LIMITATIONS AND RESTRICTIONS

From the very beginning of the allodial system of property ownership, a person was said to own a "bundle of rights." Since that time, the "bundle of rights" has undergone a great deal of restricted change. Originally, the right of the individual property owner was paramount. Today, individual property rights are not absolute. There are two distinct areas of property ownership limitations and restrictions:

B. Private Restrictions: Restrictions on the use of real property can be imposed by the private sector. Unlike governmental restrictions, private limitations are often negotiated between parties involved with the restrictions. There are two categories of private restrictions that are used:

1. DEED RESTRICTIONS allow the seller of real estate to place limitations on the property's future use. Prior to zoning, the only way property values could be protected was through restricting property use by new owners. Many developers still use restrictive covenants which are a form of deed restriction. 2. An EASEMENT is a form of conveyance that gives a party the right to enter or use another's property. Most easements are given through negotiations between the parties involved. Easement examples include utility easements and ingress/egress easements given for the purpose of gaining access. There are, however, some easements that are granted through the courts, such as an Easement by Necessity or Easement by Prescription. An Easement by Necessity is given when a property is landlocked with no means of ingress/egress. Easement by Prescription is granted if the easement has been in uninterrupted use for twenty or more years. Some easements can be terminated through agreement or may exist in perpetuity and only the party owning the easement may terminate its use. 3. A lease is the right that a person or group has to occupy and use a property even though they do not hold title. The property owner that gives the lease is known as the lessor while the tenant receiving the lease is known as the lessee.

There are two parties to a deed: grantor and grantee.

1. Grantor: The GRANTOR is the person or group who is giving title to another. In most cases, the owner is the grantor. 2. Grantee: The GRANTEE is the person or group who is receiving title from another.

There are two types of title insurance:

1. Owner's Policy: The owner's title insurance policy, also referred to as the mortgagor's policy, is usually based on the purchase price and will pay for all claims made against the property up to the face amount of the policy. An owner's policy is non-transferable. 2. Lender's Policy: The lender's title insurance policy, also referred to as the mortgagee's policy, is required by the lender if a property is mortgaged. This policy will cover the lender's investment. A lender's policy is transferable.

There are nine important elements to a deed:

1. The deed must contain the names of the grantor and grantee. The grantor must be of legal age and mentally competent. 2. There must be a recited consideration. Although no specific dollar amount needs to be stated, the recited consideration can be the actual purchase price or might be stated as "$10.00 and other good and valuable consideration". 3. There must be words of conveyance found in the GRANTING CLAUSE. Typically a deed will recite that the grantor hereby "conveys, transfers, remises" or other words of conveyance. 4. The HABENDUM CLAUSE describes the type of estate that is being conveyed (either fee simple or life estate). For example, a deed may state that the grantee is to "have and to hold in fee simple forever." 5. The Reddendum clause describes any reservations or restrictions that run with the land, such as a deed restriction. 6. When stated in a deed, an appurtenance refers to other physical improvements on the property besides the main purpose of the sale 7. The complete legal description. The physical address is not important or required. 8. For title to legally transfer, the deed must be delivered to and voluntarily accepted by the grantee. 9. A valid deed must be signed by a competent 1 grantor with two witnesses. A deed does not have to be ACKNOWLEDGED (notarized) or recorded to be valid. However, a deed must be acknowledged to be recorded. If a person fails to record his or her deed he or she may be stopped from ownership under certain conditions.

C. Deed Requirements:

In order for a deed to be legally valid, it must adhere to the following requirements: 1. Must be in writing 2. Must contain the names of the grantor and grantee 3. Must recite the consideration 4. Must contain a granting clause (words of conveyance) 15. A habendum clause define the type of estate 6. There must be a complete legal description 7. The competent grantor must sign the deed with two subscribing witnesses 8. In order to accomplish the conveyance, the deed must be delivered to and accepted by the grantee

A. Governmental Restrictions: The federal, state, and local governments restrict and limit what we can do, or not do, with our property. There are three categories of governmental limitations:

1. The government has the right to enact laws and regulations to protect the health, safety, and welfare of the public through the exercise of its POLICE POWERS. Examples of Police Power include zoning laws that divide areas of a community into various uses (residential, commercial, industrial, etc.) and building codes that set guidelines for construction specifications and quality. 2. Eminent Domain is the right of government to take real property owned by individuals and convert it to whatever use or non-use has been chosen. If the property owner disputes the amount of financial compensation being offered, the owner is entitled to a legal determination of value through the court system. 3. Taxation is a governmental restriction because owners must pay property taxes to continue their property ownership. The non-payment of real estate taxes can cause liens or even a forced public sale of the property.

6. Committees Deed:

A COMMITTEES DEED is used to convey title of someone mentally incompetent.

5. Guardians Deed:

A GUARDIANS DEED is used to convey 30 title of a minor.

4. Liens:

A LIEN is a document stating that a party is owed money, and ultimately that party may seek a forced judicial sale of the property if the debt is not satisfied. The creditor is the lienor while the debtor is known as the lienee. A general lien, such as a recorded judgment, attaches to all the lienee's real property located in the county where the lien is recorded. A specific lien, such as a mechanic's lien, attaches to only one particular property.

In practice, What covers the mortgagee's policy and owner's policy ?

In practice, the mortgagee's policy covers the bank's investment while the owner's policy covers the owner's equity up to the original purchase price. A property owner may subsequently increase the face amount of his or her title insurance by paying an additional premium.

MOST LIENS ESTABLISH PRIORITY BASED ON :

Most liens establish priority based on the date they were recorded although mechanic's liens date back to the date materials were first delivered or the date work was first performed. Real estate tax liens, special assessment liens, and federal estate tax liens are considered to be superior liens. That means they will take a higher priority than any other lien regardless of the recording date. Although Federal Income Tax liens are not defined as "Superior", they must be dealt with when title transfers and cannot be foreclose or eliminated through bankruptcy.

IV. DEEDS/A. Parties:

A deed conveys title from one party to another.

4. General Warranty Deed:

The GENERAL WARRANTY DEED is the most common type of deed used in real estate conveyances and it contains the following warrants and covenants:

1. Quit Claim Deed:

The QUIT CLAIM DEED is utilized to cure title defects or lawsuits to quiet title. The grantor makes no warranties, guarantees, or promises of actual ownership of title.

A CHAIN OF TITLE

The chain of title, on the other hand, is simply a history of ownership. The chain of title is part of the abstract.

D. Statutory Deeds:

There are four types of statutory deeds. Each of these deeds transfers title. The difference, however, depends on how much the grantor is willing to defend the quantity and quality of title being conveyed.

Deed/ B-Elements:

There are various elements that make up a deed. Some elements are required while others are simply needed for clarity.

2. Bargain and Sale Deed:

This type of deed contains no warrants or covenants other than the warrant of SEISEN (a statement of ownership

2. Will:

A valid last will and testament that specifies a real property transfer through the decedent's estate is considered to be a voluntary alienation. When a person dies with a will (TESTATE), the real property is transferred according to terms stated in the will.

III. PROTECTING TITLE

When a person buys real estate in Florida, the condition of its title should be of the utmost importance. The title needs to be examined by an expert to make sure negative information or claims have not attached that will then become the responsibility and problem of the new owner. For example, if a debt is owed, a lien in the amount of the debt could be attached to the property causing a new owner to lose title in a foreclosure proceeding.

4. Adverse possession:

When a property owner allows another to take possession of his or her property and fails to take legal action to have that person (ADVERSE POSSESSION) removed, the true owner may lose his or her rights or interests to the adverse possessor. There are several requirements necessary to acquire property through adverse possession.

Involuntary Alienation:

When property is transferred without the specific intent of the owner, we refer to the conveyance as involuntary alienation.

Voluntary Alienation:

When real property is transferred according to the actual desires and intent of the owner, the title is being transferred through voluntary alienation. There are two voluntary alienation methods: deed or will.

1. Descent and distribution:

Whenever a person dies without a valid will, they have died INTESTATE. All real and personal property will transfer to the decedent's heirs or closest known relatives, if any.

2. Escheat:

Whenever a person dies without a will (intestate) and has no heirs, all real and personal property will transfer to the state of Florida through the process of ESCHEAT.

3. Special Warranty Deed:

With this type of deed, the grantor provides a warrant of seisen and a warranty of title against any acts that were performed by the grantor or the grantor's agents. The grantor promises to defend any title defects that allegedly arose during the period of time that the property was owned by the grantor. The Special Warranty Deed is often used by banks for properties that have been taken back through foreclosure. Typically, banks do not want to warrant good title for the time period before the foreclosure.

A party named in a will to receive personal property is called:

a beneficiary and is entitled to inherit a bequest.

A party named in a will to receive real property is called:

a devisee and is entitled to inherit a devise.

The person who dies (decedent) leaving a will is called either:

a testator (male) or testatrix (female).

In ADVERSE POSSESION there are two important conditions:

a. Adverse possession must continue for seven or more consecutive years without the true owner's consent. b. Real estate taxes must be paid by the adverse possessor during the entire time of adverse possession. If the true owner continues to pay taxes, there can be no adverse possession.

General Warranty Deed contains the following warrants and covenants:

a. Covenant of Seisen is a statement of ownership. The grantor warrants that it has the quantity and quality of title being conveyed ("I promise I own it and I promise I have the right to sell it"). b. Covenant against encumbrances guarantees that there are no other claims or liens against the property being conveyed other than those already known by the grantee. The grantor takes full responsibility for any and all claims, regardless of when the claim occurred up to the day the grantee accepted title. c. Covenant of quiet enjoyment assures the grantee that there will be no other claims of ownership or any other interest claim on the property being conveyed. d. Covenant of Further Assurance provides that the grantor will produce or sign any legal documents necessary after closing to perfect good title. e. Covenant of warranty forever insures that the grantor will do whatever is necessary to protect and defend good title forever.

There are five primary types of leases

a. GROSS LEASE: The tenant pays a fixed rent and the landlord pays all property costs, such as taxes and insurance b. NET LEASE: The tenant pays a fixed rent, plus the property costs c. PERCENTAGE LEASE: The 1 tenant pays a rent based on its gross sales d. VARIABLE LEASE: The tenant pays a rent that is related to an index, such as the consumer price index. If the index increases, the rent increases also. e. GROUND LEASE: The tenant pays rent for the ground only and builds upon the leased property.

I. Liens are created either voluntarily or involuntarily. Different types of liens include the following:

a. Mortgage liens are created when a person borrows money from a bank and pledges real estate as collateral for the loan. The collateral instrument is known as a mortgage. When the lender records the mortgage, giving public notice the debt, it becomes a mortgage lien. Once the debt is repaid, a satisfaction of mortgage is recorded releasing the property as collateral. Mortgage liens are voluntary liens. b. Judgment liens are court judgments recorded in the public records. Once recorded, these judgment liens become a lien on all of the debtor's real property located in the county where the judgment is recorded. Judgment liens are involuntary

II. Liens are created either voluntarily or involuntarily. Different types of liens include the following:

c. Mechanic's liens are utilized whenever a party has work performed on a property and does not pay for that work or the materials used. The party performing the work (or the party supplying materials) can file a mechanics lien. The lien can only attach to the property where the work was performed, must be recorded within 90 days of the completion of the work, and is valid for one year. A mechanics lien is involuntary and its priority in a foreclosure sale is retroactive to the date the work was first performed or materials were first delivered. d. Real estate tax liens become effective January 1st of each year, even though the tax bill does not become due until November of the same year. Real estate tax liens are involuntary.

III. Liens are created either voluntarily or involuntarily. Different types of liens include the following:

e. Federal Income Tax liens (IRS) are general tax liens and are levied on anything and everything that a person owns for the non-payment of income taxes. IRS liens are involuntary. f. Special Assessment liens occur as a result of the property owner's failure to pay a special assessment. A special assessment is a one-time tax levied to pay the cost of a public improvement that directly benefits the assessed property. Special assessment liens are involuntary.

An ABSTRACT OF TITLE

is a complete history of a property that could date back to its origin (patent deed). The abstract contains every legal event that has ever happened to that property including deeds or other conveyances, mortgage liens, satisfactions of mortgage, divorces, and foreclosures.

1. Deed:

is a written document evidencing transfer of ownership by either sale or gift. Conveying property by deed is the most common method of transferring title from one individual or group to another.

3. Eminent Domain:

is the right of government (or a quasi-government agency) to take property from individuals anytime that government feels it is necessary. Examples of quasi government agencies include railroads and utility companies. This is sometimes referred to as "government land snatching" and is accomplished through the process of condemnation.

A person who leaves a will must be:

of legal age (eighteen years of age or older) and must be mentally competent.

The MARKETABLE RECORD TITLE ACT

provides that if continuous chain of title has existed for at least thirty years, any potential title defects more than thirty years old is considered cured.

TITLE

refers to the concept of real property ownership. When a party's name appears on a deed, that person has "title" to the property. Having title to real property includes ownership of a certain "bundle of rights" associated with the type of ownership estate (i.e.: whether title is in fee simple or a life estate). Title to real property is transferred (conveyed) from one owner to another on a voluntary or an involuntary basis.

There are two methods to give notice that ownership or some other interest in real property has been acquired:

A. Actual Notice: If a person actually observes a deed, ACTUAL NOTICE has taken place. In some cases, verbal communication of ownership or physical possession of a property might be considered actual notice. B. Constructive Notice: Recording a document in the county public records establishes legal notice known as CONSTRUCTIVE NOTICE. Anytime conveyances or other documents are made part of public record they must first be acknowledged (notarized). A good example of constructive notice is the filing of a Lis Pendens which is public notice of a pending legal action.