Chapter 2-- Ownership, Interest, and encumbrances

Question 1

What does PETE stand for in regards to the limitations on ownership by governmental bodies?

Answer 1

Police Power: ability to enact legislation to preserve order, protect public health and safety, promote general welfare.
Eminent Domain
Taxation
Escheat

Question 2

What is eminent domain

Answer 2

Is the right of government to acquire privately owned real estate for public use.

Question 3

Condemnation

Answer 3

is the PROCESS by which the government exercises the right of Eminent Domain by judicial or administrative proceedings.

Ideally, the government would try to negotiate with the owner for fair compensation as many times they want the land for special purposes such as a school or church. If no agreement is met, then the government will initiate condemnation proceedings to acquire the property.

Question 4

What is quick take

Answer 4

Local units of government bodies are given power of eminent domain by Illinois Constitution and by Illinois Code of Civil Procedure.

In certain situations, Illinois law permits a summary proceeding in which a plaintiff/condemner may obtain immediate fee simple title to real property, including the rights of possession and use.

Question 5

Taxation

Answer 5

A part of PETE. Is a charge on real estate to raise funds to meet the public needs of government. Nonpayment of taxes give the government the power to claim an interest in the property.

Question 6

Escheat aka revert

Answer 6

Is a process by which the state may acquires privately owned real or personal property when a person dies and they have no heirs or living trust.

Illinois: Ownership tranfers to County the property is located.

National law transfer ownership to the state.

Question 7

What is an estate in land

Answer 7

To be an estate in land, an interest must allow possession. Meaning the holding and enjoyment of the property either now or in the future, and must be measured according to time.

Question 8

Illinois Law Refining Eminent Domain

Answer 8

The Equity in Eminent Domain Act is a law that makes the government prove that an area is blighted before forcing property owners to sell their property for private development projects.

This act also:

1. helps property owners receive fair market value
2. requires relocation costs for displaced residents and businesses.
3. pays attorney fees when property owners successfully sue to keep their property

Question 9

Free hold estates

Answer 9

These type of estates last for an indeterminable length of time. For example a lifetime or forever. They include fee simple (aka indefeasible fee), defeasible fee, and life estates.

Fee simple and defeasible fee continue for an indefinite period and may be passed along to owner’s heirs.

Life estates are based on the lifetime of a person and ends when that person dies.

Question 10

Leasehold estates

Answer 10

Last for a fixed period of time. Estates at will and estates at sufferance are also leasehold estates.

Question 11

What is a Fee Simple Estate?

AKA fee simple absolute

Answer 11

Is a type of freehold estate.
The greatest possible estate in land, wherein the owner has the right to use it, exclusively possess it, commit waste upon it, dispose of it by deed or will, and take its fruits. A fee simple represents absolute ownership of land, and therefore the owner may do whatever he or she chooses with the land. If an owner of a fee simple dies intestate, the land will descend to the heirs.

Question 12

Life estate

Answer 12

A life estate is the ownership of land for the duration of a person’s life. In legal terms it is an estate in real property that ends at death when ownership of the property may revert to the original owner, or it may pass to another person.

It Is a type of freehold estate. Life estates are NOT inheritable.

A life tenant is entitled to rights of ownership and can benefit from both possession and ordinary use and profits arising from ownership.

The life tenant’s ownership may be sold, mortgaged, or leased, but it is always subject to the limitation of the life estate.

Question 13

Pur Autre Vie

Answer 13

A term meaning for the life of another. A life estate pur autre vie is a life estate that is measured by the life of a person other than the grantee. Not considered an estate of inheritance.

Question 14

Legal Life estate

Answer 14

A life estate created by law; dowery, curtesy, and homestead.

Illinois has abolished the common law concepts of dower and curtesy in favor of the Uniform Probate Code. This gives the surviving spouse the right to take what is called an elective share on the death of the other spouse.

Question 15

Homestead Right

Answer 15

By state law it protects the owners of the property from forced sale of a property and the improvements on land.

If the debt is secured by the property then the property cannot be exempt.

Homestead reserves a certain amount of money for the family in the event of a court sale. Debts that are secured by the home (mortgage, unpaid taxes, mechanics lien are paid from proceeds first. The family is then paid the homestead exemption amount. Whatever amount remains is paid to unsecured creditors such as credit cards.

Illinois law: every homeowner is entitled to a value of 15k for single person and 30k for a married couple.

Question 16

Encumbrance

Answer 16

• A claim or lien on a property
• Does not have a possessory interest in real property
• can decrease value or obstruct the use of the property
• Is a right or interest held by someone other than the property owner that affects the title to the real estate but does not necessarily prevent a transfer of title.

Question 17

Lien

Answer 17

It is a type of encumberance. A right given by law to certain creditors to have their debt paid out of the property of a defaulting debtor, usually means court sale.

Question 18

Deed restrictions

Answer 18

Clauses in a deed limiting the future uses of the property. Deed restrictions may impose a vast variety of limitations and conditions such as dictating the types of structures that can be erected and preventing buildings from being used for specific purposes or from being used at all.

Question 19

Covenants, Conditions, and Restrictions (CC&Rs)

Answer 19

These are private agreements that affect the land use typically imposed by a developer or subdivider to maintain specific standards in a subdivision.

Can be enforced by the original owner, developer, or by the homeowner’s association in the courts.

Question 20

Easements

Answer 20

The right to use the land of another for a specific purpose, such as right-of-way. Includes airspace or right of way to the land.

Question 21

Easement in gross aka utility easement

Answer 21

A person or company has interest right to use someone’s else’s land without being appurtenant to that land. Example: Comed guy

• Involves 1 tract of land
• Benefits a person or legal entity
• personal gross easements terminate on the sale of the property or the death of the easement owner
• Commerical easements are usually assignable when the property is sold or on the death of the easement owner.

Ex. Billboard is a personal easement, Water Line is a commerical easement

Question 22

Easement by Necessity

Answer 22

Is created when a buyer purchases a property that has been landlocked by the seller.

Buyer must be given access rights to enter (ingress) and exit (egress) the property.

Question 23

Easement by Prescription

Answer 23

Created when a claimant uses a property for a statutory period of time. An easement acquired by continous, open, uninterrupted, exclusive, and adverse use of the property for a period of time prescribed by state law.

Ex. You have 2 land owners. Land owner 1 has been using land owner’s 2 backyard pond to fish. And he has been doing this for years. He never asked permission. He never tried to sneak and fish in the pond. Land owner 1 decides one day that he does not want land owner 2 to use his pond more. By law, land owner 2 can take him to court to obtain an easement by prescription to continue using that pond.

So easement by prescription only gives someone the right to use another’s land. It does not give the ownership.

Question 24

Terminating an easement

Answer 24

• when need is no longer needed
• when the owner of either the dominant or servant tenement becomes owner of both properties
• by release of the right to easement to the owner of the servant tenement
• abandonment of the easement to the owner
• non use of prescritpive easement
• destruction of the servant tenement
• lawsuit
• property conversion

Question 25

License

Answer 25

a personal privilege to use someone else’s land. Example: hunting license. Can be terminated or canceled by the licensor (the person who granted the license) at any time.

Question 26

Encroachments

Answer 26

Occurs when all or part of a structure (such as a building, fence, or driveway) illegally extends into someone’s property.

Spot surgery proves whether or not an encrochment is actually taking place.

Question 27

Riparian Rights (Riparian Rivers)

Answer 27

Common law rights granted to owners of land along the course of a river, stream, or similar body of water.

Question 28

Littoral Right

Answer 28

Rights of lakes. Owners whose land borders commercially navigable lakes, seas, and oceans. Owners own the land adjacent to the water only up to the mean high water mark. All land below this point is public.

Question 29

Percolation Test

Answer 29

a test to determine how the ground absorbs water.

Question 30

What are the 3 forms of ownership in a fee simple estate?

Answer 30

A fee simple estate may be held in
1. severalty: where the title is held by one individual or corp

2. co-ownership: where the title is held by 2 or more individuals. aka concurrent
3. In trust: where a 3rd person holds the title for the benefit of another.

Question 31

Severalty

Answer 31

In a fee simple estate, it is SOLE ownership of a property.

• 1 person or legal entity owns it
• 1 title
• Interest is 100% ownership
• Conveyance: yes, to whomever the owner stipulates
• Upon death passes to heirs or devisees
• probate neccessary? yes
• Unities: possession, time, interest, title
• termination: by sale or death of owner

Question 32

What is Co-ownerhsip?

Answer 32

In a fee simple estate, when the title to one parcel of real estate is held by two or more people, those parties are called co-owners or concurrent.

Question 33

Undivided Interest (Ownership)

Answer 33

In co-ownership, the physical property, however, is not divided into a specific half or third. Hence, it is not called undivided fractional interest. The co-owners have unity possession, meaning they are entitled to possession of the whole property. It is the interest of the property that is divided not the actual property.

Question 34

Tenant in Common

Answer 34

Each tenant holds an undivided fractional interest in the property. They will own 1/2 or 1/3 interest in the property.

• # of owners: 2 or more
• Title: each owner has separate legal title to that co-owner’s undivided interest
• interest: shares may be unequal; law will interpret them as equal unless stipilated
• conveyance: yes, without the consent of other owners
• right to partition: yes
• Status on death: passes to heirs or devisees
• Unities: possession
• Termination: by sale or death of the owner

Question 35

The 8 features of tenants in common

Answer 35

1. If no fractions are stated, the tenants are assumed to hold equal shares.
2. Because the co-owners own separate interests, the can sell, convert, mortgage, or transfer their individual interests WITHOUT THE CONSENT of the other co-owners.
3. No individual tenant may transfer the ownership of the entire property.
4. When one co-owner dies, the tenant’s undivided interest passes according to the co-owner’s will, heirs, or living trust.
5. In Illinois, tenant in common can be conveyed by a single deed which may show the propotional interests of each tenant.
6. When a single deed is used, lack of description of each tentants share means all tenants hold equal, undivided shares.
7. In Illinois, tenant in common can be covered by a separate deed issued to each tenant in common which shows his or her of their individual promotional interest.
8. In IL the law presumes that two or more owners hold title as tenants in common if the deed does not state specifically how title is to be held.

Question 36

Joint tenancy

Answer 36

Each tenant holds undivided fractional interest in the property. ALL SHARES MUST BE EQUAL.

• # owners: 2 or more with RIGHTS OF SURVIVORSHIP
• Title: One title
• Interest: shares must be equal
• Conveyance: yes, without the consent of the other owners
• Right to partition: yes
• status on death: passes to surviving owners
• probate neccessary: no
• unities: possession, interest, time, title
• termination: when any of the unities are broken

Question 37

Rights of survivorship in joint tenancy

Answer 37

1. cannot pass to their heirs
2. The deceased’s interests transfers directly to the surviving joint tenant. So one less owner.
3. A will has no effect
4. With each successive joint tenant death, the surviving joint tenants keep acquiring the deceased tenants interest.
5. Bypasses probate

Question 38

What are the 4 “unities” required to create joint tenancy?

Answer 38

PITT
Possession: all joint tenants holding an undivided right of possession

Interest: all joint tenants holding equal ownership interest

Time – acquire interests at the same time

Title- acquire their interest by the same document

IL allows a sole owner to execute a deed to herself and others as “joint tenants and not as tenants in common” in order to create a valid joint tenancy. Remember, unless it is specifically stated on the deed, IL will assume tenants in common.

Question 39

Tenancy by Entirety

Answer 39

Must be husband and wife.

• is recognized in IL
• each spouse has equal, undivided interest
• right to survivorship
• One title
• Interests: each owns 100% of the property
• Conveyance: when both owners agree
• right to partition: NO
• Status on death: when one spouse dies, the other spouse owns in severaly (the are now the sole owner)
• Probate neccessary: No
• Unitites: possession, time, interest, title, person
• Termination: death or divorce or By court-ordered sale of the property to satisfy a judgement against the husband and wife as joint

Question 40

How do you create a tenancy by entirety?

Answer 40

the deed must state that the property is to be owned by tenants as entirety.

Question 41

What is a partition suit?

Answer 41

It is a legal way to dissolve the relationship of co-ownership when the parties do not voluntarily agree to termination.

Steps:

1. they file action in court
2. Court determines if land can be divided equally. If it cannot be divided equally then the property is sold and each co-owner received proceeds based on their fractional interest.

Question 42

Is IL considered a community property state?

Answer 42

No. IL is a martial state.
Husband and wife acquire joint rights in all property acquired after the date of marriage for the duration of the marriage, all of which will be divided between the two parties in the event of a divorce.

Marital state is similiar to community property but has several differences. In IL, property is broken down into 2 categories: Martial and Non-martial.

Martial property: As a general statement, all property acquired by either spouse during the marriage is marital property and is subject to equitable division upon dissolution of marriage. It makes no difference how title to the property is held. If it is marital property, it will be divided in divorce.

Non-marital property- Property that was acquired prior to the marriage or by gift or inheritance at any times, even during marriage. If Non-marital property is exchanged, increases in value, or if it returns income, it is still considered property belonging to the individual.

Question 43

What is a Trust?

Answer 43

Trusts are established to manage property for the benefit of a 3rd party. There are 3 parties to a trust.

Trustor- the one who creates the trust, also known as settlor

trustee aka fiduciary- the one who holds legal title to the property in the trust

beneficiary- the one who benefits from the trust creation

IL permits real estate to be held in trust as part of living or testamentary trust or as sole asset in a land trust.

Question 44

When do testamentary trusts take place?

Answer 44

After the owner dies

Question 45

What is a testamentary trust?

Answer 45

A trust that is created under a will and becomes effective upon the death of the trustor.

Question 46

What is a living trust?

Aka inter vivos trust.

Answer 46

Is established and in operation during the life of the trustor/settlor.

Question 47

What is a land trust?

aka Illinois Land Trust

Answer 47

IL permits land trusts, in which real estate is the only asset. In land trusts the beneficiary is al the trustor (original owner names himself as the beneficiary). The beneficiary retains the rights mangement and control of the real property and has right of possession and the right to any income or proceeds from its sale.

Question 48

What is police power in regards to a governmental power?

Answer 48

It gives the state power to enact legislation to:

1. preserve order
2. protect the public health and safety
3. promote the general welfare of it’s citizens

EX. No smoking ordinance in bars

Question 49

What is the term used to describe the the right the state has to use police power?

Answer 49

enabling acts

Question 50

In Illinois, how much is a single person and a married couple entitled to under the Homestead Right?

Answer 50

Single: 15k
Married: 30k

Question 51

What are the 2 types of encumberances?

Answer 51

1. liens (monetary charges)

2. Physical restrictions, easements, licenses and encroachments.

Question 52

Who is the lienee?

Answer 52

The party whose property is subject to a lien.

Question 53

Who is the lienor?

Answer 53

The party holding the lien right.

Question 54

What is an appurtenant easement?

Answer 54

Is a type of easement that is attached to the ownership and is transferred if a property if sold. It gives the owner a right to use a neighbor’s land.

• Involves 2 tracts of land owned by 2 different people
  Ex. shared driveway
• The dominate estate benefits from the easement
• The servient estate is burdened by the easement

Picture on page 55 of Guide to passing AMP exam

Question 55

What does ingress mean?

Answer 55

enter

Question 56

What does egress mean?

Answer 56

exit

Question 57

What does adverse mean in terms of real estate?

Answer 57

without the owner’s permission

Question 58

In Ilinois, what is required to obtain an easement by prescription?

Answer 58

The use of land must be adverse, exclusive, under claim of right and continous and uninterrupted for 20 years.

Question 59

In Illinois, when a husband or wife own property in severalty, will a lender, grantee, and title insurers require the nonowning spouse to sign?

Answer 59

Yes. All 3 of them will require the nonowning spouse to sign documents including the listing and sales contracts to ensure the homestead is released.

page 46 in real estate book

Question 60

What is a partition?

Answer 60

A partition is a term used in the law of real property to describe an act, by a court order or otherwise, to divide up a concurrent estate into separate portions representing the proportionate interests of the owners of property.

This article gives good examples: http://real-estate.lawyers.com/residential-real-estate/partition-action.html

Question 61

What is right of survivorship?

Answer 61

In all joint tenancies, at the death of one of the joint tenants, ownership of the remaining property passes to the surviving tenants, or successors, who assert the right of survivorship.

Question 62

What is the Uniform Partnership Act (UPA) that was adapted in Illinois?

Answer 62

permits real estate to be held under the partnership name. Profits and losses are passed throught the partnership to each partner, whose individual tax situation determines the tax consquences.

Question 63

What is a partnership in terms of real estate?

Answer 63

It’s the assoication of 2 or more persons who carry a business for-profit as co-owners.