Chapter 2

Question 1

Define: Natural person

Answer 1

A human being

Question 2

Define: Non-natural person

Answer 2

A corporation. LLC, partnership, or limited partnership

Question 3

Define: Unity of title

Answer 3

A condition of ownership which is common to all who hold title to the property. The more unities there are, the more the owners have in common (in their ownership) with each other

Question 4

Define: Undivided interest

Answer 4

When there is more than one owner to a property, they are said to hold undivided interests meaning that no owner can claim a specific physical portion of the property as belonging to that owner only. Multi-party ownership deals with interests in rather than physical portions of the property.

Question 5

Define: Parition

Answer 5

To divide out an interest where there are multiple owners. This may be done by agreement of the owners where a legal description for the agreed upon portion of the property is created and deeded out to the partitioning party by the remainder of the owners. Or, it may be court ordered.

Question 6

Define: Tenant in severalty

Answer 6

There is only one owner. The title to the property has been “severed” from all others.

Question 7

Define: Tenants in common

Answer 7

There are two or more owners. The owners of the property as tenants in common have only “one unity of title.” This is the right of equal access and possession.

Tenants in common own undivided interests in the property and therefore may have access to any part of the property.

Question 8

Define: Joint Tenancy

Answer 8

Two or more natural owners. The owners of property as Joint Tenants have four unities of title:

Equal right of access and possession
Equal interests
Acquired their title all at the same time
Acquired their title all in the same document

Question 9

Right of survivorship

Answer 9

The primary significance of joint tenancy is that upon the death of one of the joint tenants, the share of the deceased joint tenant is divided equally among all of the surviving joint tenants.

Also referred to as the poor man’s probate

Question 10

Tenancy by the entireties

Answer 10

This form of ownership has the four unities of title found in joint tenancy, with the additional requirement that the parties must be married. 2 parties treated as one legal person

Question 11

Community property statutes

Answer 11

Not all states permit this statute.

Separate property is property owned by an individual prior to a marriage or acquired after the marriage by gift or by inheritance

Community property is all other property acquired by either the husband or the wife during the marriage and each spouse is presumed to own a 100% interest in the community property.

Community property differs from tenancy in that there is no right of survivorship. Upon the death of married parties in a community property state, the property would pass to the estate or to the heirs of the deceased, not automatically to the deceased party’s spouse.

Question 12

What is a Corporation

Answer 12

A corporation is a legal person meaning it can sue and be sued in court. A corporation consists of one or more shareholders who own stock in the corporation.

A corporation takes title to real property in severalty.

A corporation cannot hold property as a joint tenant (must be human)
or as tenants by the entireties (cannot marry)
or as community property (cannot marry)

Question 13

What is a General Partnership?

Answer 13

This form of business ownership can be an arrangement between humans or a combination of humans and other business entities such as corporations or other partnerships, where the parties agree to jointly undertake some activity. Normally the activity is a business activity for profit.

Question 14

Limited Partnerships

Answer 14

There are two classes in a limited partnership. There must be at least one general partner, and any number of limited partners.

The general partners have the right to full participation in the activities of the partnership and are individually liable for the obligations and debts of the partnership

The Limited partners do not have any right to participate in the activities of the partnership, and are not liable beyond their initial investment in their partnership.

If a limited partner dies, the partnership passes to his estate.

If a general partner dies, the partnership must usually be reformed.

Question 15

Cooperative apartments (co-op)

Answer 15

A way of turning an apartment complex that was designed to be rented into something that could be sold. The building becomes a corporation, and each tenant owns “stock” in the building, representing the apartment where they live

Question 16

Condominiums

Answer 16

The owner owns real estate rather than a share of stock like in a co-op. The owner owns the condo and everything inside of it, but the land on which it sits, the club house, swimming pool, etc, all belong to every condominium holder as tenants in common.

Question 17

Townhomes

Answer 17

Townhomes are like single family dwellings that are physically attached to adjacent structures. The owner of the townhome owns the land upon which the structure sits, and is a tenant in common with the other common properties

Question 18

Mixed Use Projects

Answer 18

A mixed use development will be designed around different but compatible users in it, such as residential, retail, restaurant, office and medical / dental facilities. Ownership arrangements vary, but are usually similar to condominiums

Question 19

Timeshares

Answer 19

The right to use and occupy a residential unit on a periodic recurring basis, according to an arrangement among the other owners

Question 20

Freehold estates

Answer 20

“Freehold” translates to “ownership” and provides the bundle of rights of ownership for an indeterminable period of time, either based upon someone’s lifetime or forever.

Question 21

Fee simple estate

Answer 21

Can be fee simple absolute or fee simple defeasible.

Fee simple absolute - highest quality interest in real estate in that the holder has all the rights recognized by law. With an estate in fee simple, the estate runs forever and upon the death of the owner, the property is inheritable to the heirs. This is the ideal form of ownership.

A defeasible fee (or fee simple defeasible) has an attached stipulation such as “for as long as” or “during” and provided that the condition is not broken, the holder remains in title. Upon the occurrence of that designated event, title to the property reverts back to the former grantor.

Because the title could revert to the grantor, the grantor is said to have a reversionary interest.

A defeasible fee estate is inheritable.

Question 22

Pur Autre Vie

Answer 22

translates to “for another’s life”

dictates that title to the property that the life tenant enjoys shall transfer to another individual upon the death of some other named person.

Question 23

Homestead Laws

Answer 23

protect a homeowner’s personal residence from certain creditors

Question 24

Elective Share

Answer 24

protects a surviving spouse in the event the deceased spouse left the surviving spouse out of the will. The law provides the surviving spouse with a percentage of the decedent’s net estate consisting of both real and personal property, a homesteaded property if any, and property owned as tenants by the entireties.

Question 25

What is the legal bundle of rights?

Answer 25

Possession
Control
Enjoyment (use)
Exclusion
Disposition

Question 26

Lease

Answer 26

The owner of real property is considered to own the legal bundle of rights. A lease is the temporary transfer of some of the owner’s rights to another, specifically the rights of possession and enjoyment (use).

Under the statue of frauds, a lease for one year or more must be in writing to be enforceable.

Question 27

leasehold interest

Answer 27

when someone leases a property and temporarily gains some of the bundle of rights, they are said to hold a leased interest in the property.

Question 28

leased fee

Answer 28

Once a lease is agreed to, the landlord is said to have a leased fee, meaning the landlord still owns the property, but has surrendered the rights of possesion and enjoyment to the tenant.

Question 29

Estate for years Lease

Answer 29

This type of lease has a definite starting and ending date. The term can be of any duration. In the event of the death of either party, any unexpired time on the lease is inheritable and binding upon the heirs.

Question 30

Estate from period to period lease

Answer 30

This lease has a stated period of time which will automatically renew for the same period over and over again until one party gives notice they no longer wish to continue.

Example: Month to month lease

Question 31

Estate at will Lease

Answer 31

an open-ended lease with no specific termination date and therefore, notice is required to terminate this lease. If the length of the notice was not specified in the contract, the courts will required a “reasonable” notice be given

Question 32

Estate at sufferance Lease

Answer 32

This is the status of the parties where the term of the lease has expired and the tenant remains in possession without the landlord’s consent. The tenant has no right to be there and is technically a trespasser. As the name implies, the landlord is “suffering” due to the tenant’s continued presence in the property.

Question 33

Gross Lease

Answer 33

In this type of lease, te tenant pays a fixed monthly rent and from those funds the landlord pays the operating expenses of the property. This is most common in residential and small office leases

Question 34

Net Lease

Answer 34

The tenant pays a base rent and in addition to that, pays some or all of the operating expenses of the property.

Question 35

Percentage Lease

Answer 35

The tenant pays a base rent plus a percentage of the gross business income

Question 36

Graduated lease

Answer 36

The tenant and the landlord have agreed that with the passage of time, the leased space will become more valuable and that the tenant’s lease payment should increase. The lease provides the dates on which the tenant’s lease payment will increase and the amount of the increase.

Question 37

Indexed Lease

Answer 37

The landlord ties the lease payment to an index for inflation, such as the Consumer Price Index (CPI), and as the index increases annually, so will the tenant’s lease payment

Question 38

Escalation Lease

Answer 38

Similar to an indexed lease, except that the tenant’s lease payment is increased by the actual increases in operating expenses of the property and not tied to an inflation index.

Question 39

Ground Lease

Answer 39

A lease of only the land where the tenant pays for and owns any improvements including buildings. This type of lease is commonly 99 years or a very long term.

Question 40

Leasehold improvements

Answer 40

These are improvements or alterations to the leased space. Normally they are done at the landlord’s expense and remain a part of the leased space as the landlord’s property when the tenant vacates.

Question 41

Trade fixtures

Answer 41

Items of personal property that are installed in such fashion as to make them a fairly permanent part of the leased space.

Normally these types of fixtures are installed at the tenant’s expense with the landlord’s consent. Normally they can also be removed by the tenant at the end of the lease. The tenant would have to repair the property after removing their fixtures.

Question 42

Options to extend or expand

Answer 42

If the tenant wants the ability to extend the lease, or expand into other space the landlord owns, this should be carefully spelled out in the lease

Question 43

Actual Eviction

Answer 43

The lawful process of dispossessing a tenant who has either overstayed the lease term, or who is in breach of the lease, and eviction is being used by the landlord.

The process varies state by state. Generally the tenant must be given a written notice and a period of time to vacate. If the tenant does not vacate, the eviction process will allow for intervention by sheriff or police to forcibly remove the tenant.

Question 44

Constructive Eviction

Answer 44

This means the landlord has done, or failed to do, something that has had the effect of denying the tenant the use and enjoyment of the leasehold. Often, this is maintenance that has not been performed by the landlord.

Example: It’s 110 degrees outside and the landlord is responsible for maintaining an air conditioner but it doesn’t work properly. The tenant operates a candle shop and the candles are all melting and no one can be in the store its so hot. The landlord has constructively evicted the tenant in this scenario.

Question 45

Lease options and purchases

Answer 45

These agreements start out as leases but include either an option to purchase or a purchase agreement that will go into effect by the expiration of the leasehold.

Question 46

Implied warranty of seisin

Answer 46

This implied warranty is found in that only owners of property would normally enter into negotiations about a property and then agree to sell it. There are no written warranties and is only an implication that the grantor has title and the legal right to convey it.

Question 47

Elements of a valid deed

Answer 47

• In writing
• Valid grantor (alive, lawful age, full mental capacity, adult)
• Identifiable grantee
• Consideration Clause
• Granting Clause (states interest paid)
• Vesting Clause The grantee or grantor would be named, followed by their ownership
• Habendum Clause - Only required in some states. Says “to have and to hold from this day forward”

Question 48

Valid legal description

Answer 48

A valid legal description includes either:

• lot, block and subdivision
• metes and bounds
• reference to the USGS survery

Question 49

Attestation

Answer 49

Attestation is the notary’s attestation that the signing parties appeared before the notary, swore they were who they said they were, were authorized to sign the deed, and did so

Question 50

Voluntary vs. involuntary alienation

Answer 50

Alienating refers to separating one’s self from the property.

This can happen voluntarily, or involuntarily.