Real Property

Concepts and definitions

 Real and personal property
All property can be divided into two classifications: real property and personal property.
Although the original meanings of these terms had special relevance to how a case was
brought—and the court in which the action could be brought—these days the
differences have more to do with the way that ownership interests are transferred. In the
modern era, real property refers to land and anything permanently attached to land.
Personal property refers to all other types of property. As such, real property refers to
the land, houses, trees, and any other permanent structures. Personal property refers to
non-real estate items, including everything from apples to automobiles.
 Real and personal property
• The reason that the law makes a distinction between these two types of
property is that the classification affects many of the rights and legal remedies
available to the owners. For one thing, the way that ownership is transferred in
real estate is different from the way it is transferred in personal property.
 What makes real property unique?
• Real property has its own set of rules for selling, buying, mortgaging, and
investing. Real property also has unique physical attributes. For one thing,
real estate occupies a fixed point on the globe.
• As mentioned above, land occupies a specific point on the globe. Unlike
personal property, land is fixed and immovable; it cannot be relocated. For
this reason, it is the perfect vehicle for assessing taxes.
 Classifying property by use
• One of the oldest and most easily understood methods of classifying
property is by the use to which it is put. There are several different categories
of property, including unimproved land, residential property, commercial
property, industrial property, farm and rural property, recreational property,
and government-owned land.
 Types of property by use: definitions
• A. UNIMPROVED LAND

When land contains improvements, it means that it contains structures.

Unimproved land has no buildings or other structures on it, so it is often
referred to as raw land. Such property can be developed into any number of
uses: homes, businesses, farms, or parks. Once land has been improved, it can
be reclassified into residential, farm, commercial, industrial, or recreational
land. The categories are all based on the way in which the land is used.
 Types of property by use: definitions
• B. RESIDENTIAL PROPERTY

Property categorized as residential refers to land that has a structure designed

to be used for personal living, such as a home. There are numerous
subcategories of residential properties, including single- and multi-family units,
apartments, condominiums and townhouses, cooperatives, mobile homes, and
manufactured homes.
 Types of property by use: definitions
1. SINGLE- AND MULTI-FAMILY HOMES

The category of single- and multi-family homes includes residential houses,

duplexes (two family units sharing a single roof), triplexes (three-family units
sharing a single roof), and four-family homes (four-family units sharing a single
roof). When more than four family units share a single roof, the law
characterizes that arrangement as an apartment.
 Types of property by use: definitions
2. APARTMENTS
The technical definition of an apartment is a type of residential real estate
consisting of five or more living units per building; however, we use the term
to describe a wide range of landlord-tenant relationships.
 Types of property by use: definitions
3. CONDOMINIUMS AND TOWNHOUSES

Condominiums and townhouses share many characteristics, but there are important differences that a legal
professional should know.
a. Condominiums
A condominium resembles an apartment, but it is actually more like a hybrid between a home and an apartment.
The tenant in an apartment does not have any ownership interests 53 in the dwelling. He must seek permission
from the owner before making changes to the interior and is not allowed to make any changes to the exterior. By
contrast, a condominium gives the resident an ownership interest in the interior of the dwelling, but no rights to
the exterior. Condominiums are sold, just like homes, but the only thing that is being sold is what is inside the
four walls. No actual land is transferred in the sale of a condominium. The owner of a condominium receives
the same favorable tax treatment as a homeowner but does not have the responsibility of exterior upkeep and
maintenance.
 Types of property by use: definitions
3. CONDOMINIUMS AND TOWNHOUSES
b. Townhouses
While condominium owners have legal rights only to the inside of their
individual units, townhouse residents own the entire unit, both the interior and
the exterior. They also own the land that the townhouse is situated on. In many
states, there are no specific statutes that govern townhouses. Instead, the same
rules and statutes that govern single-family homes control townhouses.
 Types of property by use: definitions
4. COOPERATIVES
Cooperatives, unlike condominiums and townhouses, are often large tracts of
land or working farms in which several persons have an ownership interest.
Both interior and exterior portions of the property—which may include large
buildings—are owned jointly by all members of the cooperative.
 Types of property by use: definitions
5. MOBILE HOMES
Mobile homes are usually considered to be personal property and not real
property. Mobile homes can be reclassified as real property, but usually only
after removing the wheels of the unit and permanently affixing it to the
ground. Because real property houses are by their very nature permanently
attached to the land—thus meeting the definition of real property—anything
that a mobile home owner can do to duplicate this process will push the mobile
home away from a personal property classification toward a real property
classification.
 Types of property by use: definitions
6. MANUFACTURED HOUSING AND “KIT” HOMES
In recent years there has been a huge upswing in the construction of
manufactured housing. Manufactured homes are homes in which all or some of
the fabrication occurs away from the actual home site. In prior decades,
manufactured housing fell into the same category as mobile homes. However,
because these newer houses are actually permanently affixed to the real estate,
and are never intended to be movable, most states have abolished the
distinction between manufactured homes and traditional homes that are
constructed entirely on the site.
 Real property estates
An estate is a bundle of rights that accompanies title to property. We define an
estate in land as the quality of title that an owner possesses to use and enjoy the
property as well as the extent of that ownership. Different estates contain
different rights. There are numerous types of estates, from fee simple absolute
to life estates to several different forms of concurrent ownership estates.
Estates can be either present estates or future estates. A present estate confers
an immediate benefit on the owner. A future estate, on the other hand, will
confer a right at some point in the future.
 Fee simple estate
A person who has fee simple absolute ownership in
property has the most complete set of rights that it is
possible to have in a parcel of real estate. She can give,
sell, mortgage, use, and possess the property. Fee simple
absolute owners possess all of the following rights:
 Fee simple estate
■ The right to make a gift of the property to another
■ The right to put the property up for sale
■ The right to raise crops on the property and to sell those crops
■ The right to use and possess the property
■ The right to mortgage the property
■ The right to lease the property to others
The word “fee” originated under English law and referred to a grant from the king to an individual
landowner. The fee was the emblem of the owner’s obligation to provide military or tax support to the
monarch.
 Fee simple estate
Under the modern approach to real estate law, a fee simple absolute estate not
only confers specific rights on the owner, but also guarantees that the parcel
itself is free from encumbrances. A fee simple title is one that has no liens or
other impediments that would prevent the owner from freely transferring it to
another.
 Conditional fee simple estates
Although fee simple absolute ownership is the highest and best form of real
estate title, there are provisions that can limit even this estate.
When a seller (grantor) places conditions on fee simple ownership, this can be
referred to as fee simple defeasable states. These fall into two categories:
1) Fee simple determinable
2) Fee simple subject to a condition subsequent
 Conditional fee simple estates
1) Fee simple determinable:
A fee simple determinable estate is created when a person transfers property to
another with a stipulation that the property be used in a certain way. The owner
conveys the property to the buyer but insets a stipulation that the property
should always be used as a park or nature reserve. If the owner includes
language in the deed that automatically conveys title to the property back to
them or their heirs should the stipulation be violated, the condition is described
as fee simple determinable.
 Conditional fee simple estates
1) Fee simple on a condition subsequent
A fee simple on a condition subsequent closely resembles, and is often confused with,
fee simple determinable. The distinguishing feature between them is that while the fee
simple determinable automatically transfers title when a condition is violated, a fee
simple on a condition subsequent only gives the grantor (or grantor’s heirs) the right to
challenge title. When a deed contains a fee simple on a condition subsequent and a
future owner stops using the property in the way prescribed by the original owner, the
owner’s heirs can file suit to have title awarded to them. They will not, however,
automatically receive title to the property.
 Life estates
A life estate is created when an owner leaves her property to another person,
but only as long as the person lives. When the person dies, the title to the
property automatically vests in someone else. The typical formula used to
create a life estate is as simple as: to A, for her life, then to B.
An owner might include this provision in a deed or a will. As you can see, life
estates are relatively easy to create. Unlike fee simple determinable estates, they
are not closely scrutinized.
 Life estates
The person who receives the benefit of a life estate is often referred to as a life
tenant, or the holder of a life estate. We will use the term life tenant to describe
this person’s estate. A life tenant has almost all of the rights to the property
that the original owner enjoyed. A life tenant can possess, use, and grow crops
on the real estate. A life tenant can even sell the property, but the person who
purchases it has an important limitation: The new purchaser can only possess
the property as long as A is alive. When A dies, title to the property will
automatically transfer to B.
 Concurrent ownership in real estate
Many parcels of real estate are held in the names of two or more individuals.
When there are multiple owners for a single piece of property, they are referred
to as co-tenants. There are several different types of co-tenant arrangements,
including tenants in common, joint tenancy, and tenants by entirety, to name
just a few.
 Concurrent ownership in real estate
A. TENANTS IN COMMON
A tenancy in common is created when real property is conveyed to two or
more persons and there is no clear indication about the type of co-tenancy
involved. Under a tenancy in common, each co-tenant’s share of the real estate
transfers to her heirs upon her death. Each co-tenant has equal right to use,
possess, and transfer the property, but each may own the property in unequal
shares. For instance, one co-tenant might possess 20 percent of the property
while the other possesses 80 percent of the property.
 Concurrent ownership in real estate
B. JOINT TENANCY
A joint tenancy is a different form of concurrent ownership. While similar to a tenancy
in common, joint tenancy has one important difference: Joint tenants enjoy the right
of survivorship. The right of survivorship provides that in the event that one of the
co-tenants dies, her right to the property automatically transfers to the surviving co-
tenant. This arrangement effectively precludes the co-tenant’s heirs from receiving any
of the property interest. Because this arrangement avoids probate proceedings, courts
give it close scrutiny and require the parties to specifically state their intention of
creating a joint tenancy with the right of survivorship between the co-tenants. Without
this clearly stated provision, most courts will interpret language conveying title interest
to two or more people as a tenancy in common.
 Concurrent ownership in real estate
C. TENANCY BY ENTIRETY
Tenancy by entirety is a joint tenancy that is reserved for married couples.
Although not all states refer to this arrangement as a tenancy by entirety, all
states confer special privileges to married couples that are not enjoyed by
domestic partners or live-in lovers. Under this arrangement, when one spouse
dies, the other receives full title to the property, pending any other estate
proceeding such as forced share or statutory share.
 Concurrent ownership in real estate
D. TENANCY IN PARTNERSHIP
Among the other types of concurrent ownership acknowledged under the law is tenancy in
partnership. A relatively recent phenomenon, tenancy in partnership recognizes a legal
relationship between business partners. Under the rules of tenancy in partnership, business
partners enjoy the right of survivorship to all business-related property. To qualify for this
tenancy, the partners must have a partnership agreement and actually be in business together.
Under a tenancy in partnership, no partner can sell, transfer, or mortgage partnership property
without the consent of the other partners. The advantage of a tenancy in partnership is that an
individual partner’s creditors are not permitted to attach business property to satisfy a personal
debt. Similar to a joint tenancy, the business assets automatically vest in the surviving partners
in the event of the death of any partner.
 Concurrent ownership in real estate
E. THE RIGHT TO PARTITION
Regardless of the type of tenancy arrangement, most co-tenants enjoy the right of partition. A
partition is the division of the property along the ownership lines. In a tenancy in common, for
example, where one co-tenant owns 80 percent and the other owns 20 percent, a partition
proceeding might divide up the land according to the percentage. However, it isn’t always practical or
even possible to physically divide up parcels of real estate by the percentage of ownership. Instead,
the property will be sold and the proceeds of the sale divided according to the percentage of
ownership rights. Obviously, the right to partition is not universal in all concurrent ownership
estates. For instance, in a tenancy by entirety, a married couple would not have the right to partition
the marital property. Instead, they must first go through a divorce proceeding terminating the
marriage. Only then would they have the right to partition marital property. Partitions are most
commonly seen in the dissolution of tenancies in common and joint tenancies.
Enough for now…