Lesson 1: Chapter 2 - Real Property And The Law

Question 1

Land

Answer 1

Is defined as the earths surface extending downward to the center of the earth and upward to infinity.

Land includes not only the surface of the earth but also the underlying soil. Land also refers to objects that are naturally attached to the earth’s surface, such as boulders and plants. Land includes minerals and substances that lie far below the earth surface (subsurface). It even includes the air above, all the way into space (airspace).

Question 2

Real Estate

Answer 2

Is defined as land at, above and below the earth’s surface, plus all things permanently attached to it. Real Estate is similar to land but means much more: includes natural land along with all human-made improvements.

Question 3

Improvements

Answer 3

Any artificial addition to land, such as a building or fence.

The term as used in the real estate industry, refers to any addition to the land. The word is neutral: whether the artificial attachment makes the property better looking, more useful, or more or less valuable, the land is still said to be improved.

Land maybe also be improved by streets, utilities, sewers, and other additions that make it suitable for building.

Question 4

Real Property

Answer 4

Is the interests, benefits, and rights that are automatically included in the ownership of land and real estate.

It includes both land and real estate. It includes the surface, subsurface, airspace, any improvements, and the bundle of legal rights - the legal rights of ownership that attach to ownership of a parcel of real estate.

Question 5

Appurtenance

Answer 5

Anything associated with the property, although not necessarily a direct part of it.

Typical appurtenances include parking spaces in multi unit buildings, easements, water rights, and other improvements. An appurtenance is connected to the property, and ownership of the appurtenance normally transfers to the new owner when the property is sold.

Question 6

Surface Rights vs. Subsurface Rights

Answer 6

Surface rights are the right to use the surface of the earth. However, real property ownership can include subsurface rights, which are the rights to natural resources lying below the earth’s surface.

The two rights are distinct; an owner may transfer surface rights without transferring the subsurface rights.

Question 7

Air Rights

Answer 7

The rights to use the space above the earth which may be sold or leased independently, provided those rights have not been preempted by law.

Question 8

Economic Characteristics of Real Estate

Answer 8

Scarcity
Improvements
Permanence of investment
Location - sometimes called Situs

Question 9

Physical Characteristics of Real Estate

Answer 9

Immobility
Indestructibility
Uniqueness

Question 10

The most important economic characteristic of land

Answer 10

Location (sometimes called Situs). Does not directly refer to geographic location but rather to peoples preferences for given areas.

Question 11

Bundle of Legal Rights

Answer 11

• right of possession
• right to control the property (within the framework of the law)
• right of enjoyment (that is, to use the property as the owner wishes, within the framework of the law)
• right of exclusion (to keep others from entering or using the property)
• right of disposition (to sell, will, transfer, or otherwise dispose of or encumber the property)

Question 12

Personal Property

Answer 12

Also called personalty - this is property that is moveable and not affixed to or associated with the land. Includes all property except real property.

Question 13

Chattels

Answer 13

Are items of personal property, including tangibles such as chairs, tables, clothing, money, bonds, and bank accounts. Trade fixtures are included in this category.

Question 14

Manufactured Housing

Answer 14

Defined as dwellings that are built off site and trucked to a building lot where they are installed or assembled. Includes modular, panelized, precut, and mobile homes.

Manufactured housing is generally considered personal property even though its mobility may be limited to a single trip to a park or development to be hooked up to utilities. May be considered real property if it becomes permanently affixed to the land.

Question 15

Emblements

Answer 15

Annually cultivated crops such as wheat, corn, vegetables, and fruit. Generally considered personal property. As long as an annual crop is growing, it will stay with the real property unless other provisions are made into the sales contract.

Question 16

Severance

Answer 16

An item of real property can become personal property by severance.

I.e. a growing tree is real estate until the owner cuts it down, severing it from the property.

Question 17

Annexation

Answer 17

A process that changes personal property into real property.

I.e. a landowner buys cement, stones, and sand, mixes them into concrete, and constructs a sidewalk across her land.

Question 18

Deed

Answer 18

Real property is conveyed by deed

Question 19

Bill of Sale

Answer 19

Personal property is conveyed by bill of sale.

Question 20

Fixture

Answer 20

Personal property that has been so affixed to land or a building that, by law, it becomes part of the real property.

Examples include: heating systems, elevator equipment in high rise buildings, radiators, kitchen cabinets, attached bookcases, light fixtures, doors, and plumbing fixtures.

Question 21

Legal Tests of a Fixture

Answer 21

Primary test is a question of intent. Did the person who installed the item intend for it to remain permanently on the property or be removable in the future?

Courts use the following three basic tests:

1. Method of attachment
2. Adaptation to real estate
3. Agreement

Question 22

Trade Fixture

Answer 22

A special category of fixture that includes property used in the course of business. An article owned by a tenant and attached to a rented space or building or used in conducting a business.

Also called a chattel fixture.

They differ from other fixtures in two ways:
1. Fixtures belong to the owner of the real estate, but trade fixtures are usually owned and installed by a tenant for the tenants use.

2. Fixtures are considered a permanent pet of a building, but trade fixtures are removable.

Question 23

Examples of Trade Fixtures

Answer 23

Bowling alleys, store shelves, bars, and restaurant equipment.

Agricultural fixtures such as chicken coops and tool sheds are also included in this category.

Question 24

Accession

Answer 24

Trade fixtures that are not removed by tenants before the last day of the lease term become the real property of the landlord.

Question 25

Attachment

Answer 25

Personal property that “turns into” real property does so by attachment.

Question 26

Seven Sources of Law

Answer 26

US Constitution
Laws passed by Congress
Rules of the regulatory agencies
State constitutions 
State statutes
Local ordinances
Common law (court decisions)

Question 27

When is Illinois farmland customarily sold?

Answer 27

March 1 - because it falls after the last year’s crops have been harvested and before the new crops are planted. Because of this “standard” date, no special provisions are required regarding the annual crops (emblements). However, when possession is transferred to the buyer on March 1, it is also customary for the buyer to assume full payment of the current year’s tax bill without proration. This is because the buyer will receive the full benefit of the new crop for that tax year.

If the sale is closed at another time during the year before the crops are harvested, the sales contract should indicate whether the growing crops are included in the sales price.

Question 28

Real Estate License Act of 2000

Answer 28

The practice of real estate in Illinois is governed by the Real Estate License Act of 2000 (the Act), as amended in 2010, and rules established by the Illinois Department of Financial and Professional Regulation (IDFPR).

Rules and regulations that govern, the industry are established by a joint committee, with procedures governed by the provisions of the Illinois Administrative Procedure Act.

Question 29

Seven Sources of Law

Answer 29

Laws come from 7 different sources:

• US Constitution
• Laws passed by Congress
• Rules of the regulatory agencies
• State constitutions
• State statutes
• Local ordinances
• Common law (court decisions)

Question 30

Differences between Annexation, Accession, Attachment and Appurtenance

Answer 30

Accession - Trade fixtures that are not removed by tenants before the last day of the lease term become the real property of the landlord.

Annexation - A process that changes personal property into real property. I.e. a landowner buys cement, stones, and sand, mixes them into concrete, and constructs a sidewalk across her land.

Attachment - Personal property that “turns into” real property does so by attachment.

Appurtenance - Anything associated with the property, although not necessarily a direct part of it. Typical appurtenances include parking spaces in multi unit buildings, easements, water rights, and other improvements. An appurtenance is connected to the property, and ownership of the appurtenance normally transfers to the new owner when the property is sold.