Estates

Question 1

How estates differ from other interests that people or entities may have in real estates.

Answer 1

2 different types of estate classes.

Free hold and lease hold

Different kinds of fee estates and life estates.

4 main types of leasehold estates

Question 2

An estate may be created in a number of ways

Answer 2

Grant to another
Reservation
Operation of law

Question 3

Two broad classes of estates

Answer 3

1. Freehold estates last indefinitely for 1 or more lifetimes or in perpetuity.

These involve ownership of real property interests

Fee simple, life, reversion, remainder estates.

2. No freehold estates last for a lessor or temporary period of time.

These estates involve lease or rental of real estate.

They include an estate for years, periodic estate, estate at Will and estate at sufferance.

Question 4

Fee Simple

Answer 4

No restrictions on in heritable. Transferred by Will is called a devise.

If not transferred by will, through the laws of descent the estate may pass to heirs.

Question 5

A fee simple absolute estate

Answer 5

Can be conveyed with or without conditions or may even convey a lessor form of estate like a life estate which gives a new owner title for a lifetime and designates the party to whom the estate would pass at the end of the lifetime.

Question 6

A qualified fee estate aka a conditionally fee , a defeasible fee or fee simple defeasible estate.

Answer 6

This is an estate potentially unlimited duration and
Does not terminate upon death of the owner.

However, the estate has certain qualifications.

The term “defeasible” is used to indicate that if the event specified in the conditions were to occur, the estate would or could be defeated.

Question 7

Life estate

Answer 7

Not all life estates are for the life of one tenant.

A life estate may be measured by the life of someone other than the holder of the life estate. In such an instance, the life estates could extend beyond the life of the life tenant.

Life estates may be measured by the life of more than one person.

Question 8

Reversion of the life estate

Answer 8

The right of future possession by grantor creating the life estate.

1. To one person for his life
2. Deed upon termination of the life estate, title will pass to a third party called remainderman

With an estate in remainder, upon termination of a life estate, title passes to a 3rd party.

Question 9

More than 1 estate existing in property owned by life tenant.

Answer 9

The life estate is either an estate in reversion or an estate in remainder.

Once life estate is terminated, the estate in reversion or in remainder will usually change to a fee simple , however it is possible to give a remainder man a life estate.

A life tenant and the remainderman could agree to sell his interest to the remainderman or they could mutually agree to sell the estate to a new owner with a fee simple estate.

Question 10

Life estate uses

Answer 10

Serve as a poor man’s Will so inheritor will be the remainderman.

They can be used to tie property up for future use.

They can be used to gift property to charity or nonprofit.

They can be used in a second marriage where the 2nd wife will have a life estate so she can live on the estate but upon her death, the estate will not go to her relatives, but to his child as a remainderman.

Common element in freehold estates whether fee estates or life estates is they are of indefinite duration and involve ownership of a real property interest.

Question 11

Nonfreehold Estates aka less than freehold estate; leasehold estates or chattel real.

Answer 11

Limited in duration.

Personal property interest.

Question 12

Nonfreehold Estates

The lessee receives a leasehold estate giving him the right to use, possession and quiet enjoyment of the property.

His leasehold estate is:

Answer 12

Inheritable (able to Will it if leave to heirs)

Transferable by sale or assignment

Of certain duration, as it is either limited in time or by the desires of the parties

Question 13

4 types of Leasehold Estates

Answer 13

1. Estate for years (for a fixed period)
2. Periodic Estate (from period to period)
3. Estate at Will
4. Estate at Sufferance

Question 14

EState for Years

Answer 14

An estate for years is for a definite and fixed period of time.

It has a fixed and definite termination date that can be clearly established at the beginning of tenancy..

Generally an estate for years is referred to as a lease while any other tenancy may be referred to as a rental agreement.

Question 15

A Periodic Estate or periodic tenancy is a tenancy which automatically renews itself on the last day of the term for another term of same duration.

Answer 15

Periodic tenants typically run mo.tomorrow., day to day or year to year.

A periodic tenancy is automatically created when premises are rented for an indefinite time, with monthly or other periodic rent reserved

Question 16

Estate at Will. The tenant is in possession at the will of the owner

Answer 16

An estate at Will is created when a person enters into possession of real estate with consent of the owner and without the intent of creating a freehold interest.

It is a leasehold estate that continues for an indefinite period of time so long as both parties consent.

Question 17

Estate at Sufferance is when a person retains possession of premises without the consent of the owner or any other person having the right to give possession.

Answer 17

If tenant stays after expiration of a lease w/out landlord’s consent, he would be a holdover tenant and holds a tenancy at sufferance.

A tenancy at sufference is created when a tenant remains wrongfully. If a tenant were to pay rent and the rent was accepted, the tenant would not be a tenant at sufferance.

Question 18

A tenancy of sufferance is legally liable to pay reasonable rent for the actual time he occupied the premises and must, on demand, surrender possession to the owner, without prior notice.

Answer 18

From the POV of the lessee, a tenancy of sufferance is the weakest possible tenancy as

No notice is required to terminate tenancy and the tenant has NO right to remain.

The tenant can be evicted immediately.

Question 19

Sale-Leaseback. When a freehold estate can be converted to a less than freehold estate.

Answer 19

Owner sells the property, ending his freehold estate. At the same time he agrees to lease the property back from the purchaser under a long-term lease. This would result in his having a less than freehold estate.

Question 20

Sales Leaseback is used as a financing technique,

For seller:
Get cash for value of the property to use for other purposes
Possess the Property
Deduct entire rent payment from his taxable income if used for business purposes
Improve the balance sheet by converting a fixed asset (real property) to liquid asset (cash) and eliminate a major liability ( mortgage debt)

Answer 20

For buyer

Receive rent payments for a long time from reliable tenant
Realize appreciation in value of property
Declare depreciation on the building for tax purposes