Chapter 5 - Property and Estates in Land

Question 1

Real Property

Answer 1

LAND, anything ATTACHED to the land, and anything appurtenant to the land. It is IMMOVABLE and usually transferred with a DEED.

Buildings, trees, permanent fixtures, anything permanently affixed to the land

Question 2

Personal Property

Answer 2

Anything not real property. It IS MOVABLE and usually transferred with BILL OF SALE.

Anything not permanently attached to land.

Question 3

Bundle of Rights

Answer 3

Rights in real property that include the right to:

Use - to occupy and use
Possess - to transfer by contract for a specific period of time (lease)
Encumber - place a loan against the property
Transfer - to sell in whole or in part
Exclude a thing - the right to not take any of the above action

Question 4

What is the highest form of land ownership?

Answer 4

Freehold estate in land

Considered: Real property
Transferred by: Grant deed

Example – landlord who owns the real property

Question 5

Two types of Fee Simple Estate

Answer 5

Fee Simple Absolute –

Fee Simple Defeasible –

Question 6

Fee Simple Estates vs Life Estates

Answer 6

FEE SIMPLE Estates –
Highest form of ownership
Of INDEFINITE duration - not a set amount of time but continues indefinitely
Can be willed (estate of inheritance)
Are the greatest interest a person can own in land.
You own the building and the land

LIFE ESTATES –
Freehold Estates
Only for the duration of a person’s life.

Question 7

Freehold Estate

Answer 7

Highest form of ownership in land and is comprised of FEE SIMPLE and LIFE ESTATES.

Question 8

Leasehold Estate / Less-than-Freehold Estate

Answer 8

A tenant’s right to occupy real estate during the term of the lease.

Considered: Personal property
Transferred by: Lease or Rental Agreement

Example – a tenant is merely in possession of the property for a short period of time.

Question 9

Land includes:

Answer 9

1. Airspace
2. Surface
3. Underneath the Surface

Question 10

What happens if the previous property owner reserved mineral rights for themselves?

Answer 10

If a property’s mineral rights have been reserved by the previous owner, the previous owner will own the mineral rights to that land instead of the current home owner.

The preliminary title report will indicate if any mineral rights have been reserved in the past.

Question 11

Fixture

Answer 11

Personal property that is INCORPORATED INTO the land and BECOMES REAL PROPERTY.

Example –
Kitchen cabinets
Built-in microwaves

Question 12

Tests for a Fixture

Answer 12

M - method of attachment
A - adaptability or annexation
R - relationship of the parties
I - intent
A - agreement

Question 13

MARIA - Method of Attachment

Answer 13

The method a property is incorporated into the land. The degree of permanence is important to its classification as a fixture.

Example –

A built in hot tub attached to the yard with concrete = most likely a fixture = grant deed

vs

A hot tub that sits on top of the ground = most likely personal property = bill of sale

Question 14

MARIA - Adaptability or Annexation

Answer 14

Personal property that is attached to the land and is being used as an ordinary use in connection with the land is usually considered a fixture.

Example – a house key – because it’s an object used in connection with the home and is considered real property.

Question 15

MARIA - Relationship of the Parties

Answer 15

Buyer and seller must both agree what is considered a fixture or personal property. Example – a partially attached bookcase

Buyer’s agent should specify in the purchase agreement whether possible disputed items are REAL or PERSONAL property.

Question 16

MARIA - Intent

Answer 16

The most important test for a fixture.

Example – If a seller’s INTENT is that an item is considered personal property and will go with the seller to their new home. AND IF The buyer’s intent indicates the item is considered REAL property and will stay with the property. Then both the buyer and seller’s intents are in conflict and the only answer is what is specified in the purchase agreement.

The real estate agent should specify in the listing agreement what will stay with the home (considered fixtures/real property) or what will go with the seller (not a fixture/personal property).

Question 17

MARIA - Agreement

Answer 17

When there is a clear agreement between buyer and seller as to whether an item is considered a fixture/real property.

There should not be a dispute whether an item is real or personal property.

Question 18

Fructus Naturales

Answer 18

NATURAL occurring vegetation and trees in nature.

Considered real property because they are ROOTED to the land.

When a tree is cut off, then it becomes personal property because it becomes movable.

Question 19

Fructus Industriales

Answer 19

PLANTED trees and crops that are considered real property because they are attached by root to the land.

Question 20

Emblements

Answer 20

Growing crops that grow from annual cultivation (e.g., wheat crop) rather than fruit trees or timber that have a permanent root systems.

Considered real property.

Question 21

Doctrine of Constructive Severance

Answer 21

Allows a landowner to sell growing crops as PERSONAL PROPERTY while they remain attached to th eland.

Example – apples on an apple tree can be sold while they are still attached to the apple tree. When this happens, the growing crops (apples) are considered personal property, even though they are attached to the tree.

Question 22

Appurtenant to the Land or “Incidental to the land”

Answer 22

Anything that is used with the land and for its benefit. “Runs with the land” and is considered real property.

Examples -- 
easements
water company stock
riparian water rights
covenants
conditions and restrictions (CC&Rs)

Question 23

What is Easement and what are the 3 major types?

Answer 23

The ability to use someone else’s land.

Three major types –

1. Appurtenant easement - Runs with the land = real property
2. Prescriptive easement
3. Easement in gross

Question 24

Appurtenant Easement

Answer 24

Type of easement that allows a property owner (dominant tenement) to use the property of an adjoining property owner (servient tenement)

Question 25

Dominant Tenement

Answer 25

Owner of an appurtenant easement who can use another person's property.

Question 26

Stock in a Mutual Water Company

Answer 26

Homeowners may organize a mutual water company to secure ample water supply at a reasonable cost. Benefits: Reduced costs and steady supply of water for stockholders' properties. A non-profit or corporation owned by stockholders (homeowners) and used to obtain water for their own use. Each property owner owns stock in the mutual water company. The stock is APPURTENANT to the land (runs with the land) and is considered REAL PROPERTY. A lien may be placed if an owner does not pay for water used.

Question 27

Riparian Water Rights

Answer 27

Property owner can reasonably use water from a RIVER, STREAM, CREEK (flowing waterway) or watercourse adjacent to a parcel of land. RUNS WITH THE LAND and are considered REAL PROPERTY.

Question 28

Littoral Water Rights

Answer 28

Property owner can reasonably use water from a POND, LAKE, or OCEAN (standing body of water) adjacent to a parcel of land. RUNS WITH THE LAND and are considered REAL PROPERTY.

Question 29

Doctrine of Appropriation

Answer 29

Allocates water to property owners who are NOT located adjacent to a river, stream, watercourse, pond, lake or ocean. Allows those not located adjacent to water to receive an allocation of water from the local watershed. The ability of a property owner who does not have riparian or littoral water rights to receive water that is appropriated (allocated) by the local water company. Example -- the State of CA may provide permission to a non-littoral owner of a farm to use a nearby lake to water the owner's crops. The owner who is not adjacent to water will obtain water through the DOCTRINE OF APPROPRIATION.

Question 30

Well

Answer 30

In rural areas that are not serviced by a public water system, the property owner may drill down to the water table and install a well to bring water up to the surface.

Question 31

Surface water, Percolating Water, Artesian Water

Answer 31

Surface water - Surface water in CA percolate back into the water table when they drain down into the soil n their way back to the Pacific Ocean Percolating water - Water that drains down into the soil, but not through a defined channel Artesian water - Water that seeps from the ground from an unknown source.

Question 32

Draw Down Test

Answer 32

A good idea for rural single-family homes with an existing well during the due diligence period. Determined by pumping the well dry then observing how long it takes for water to replenish. If the water does not replenish fast enough, the homeowner may want to consider installing a pressurized holding tank on the well. If a loan is being used to purchase the property, a loan condition may be applied and must be completed before loan funding and close of escrow.

Question 33

Potability Test

Answer 33

Performed to verify well water is suitable for drinking. Sample water from the well is usually collected in a ziplock and sent to a lab for testing of harmful bacteria and other microorganisms. Potable water - drinkable water

Question 34

Septic System/ Septic Tank

Answer 34

Installed in rural areas to trap solid wastes and allow gray water to percolate back into the watershed.

Question 35

Leach Field / Leach Line

Answer 35

Horizontal lines buried underneath the ground that allow gray water to percolate back into the water table.

Question 36

Percolation

Answer 36

Determines how fast water percolates back into the soil and whether a parcel of real property can be used for a septic tank and leach field.

Question 37

Soil Pipe

Answer 37

Sewer line between the house and main sewer line (usually on the street).

Question 38

Chattel Real

Answer 38

Personal property located on a parcel of real property.

Question 39

Bill of Sale

Answer 39

Used to transfer personal property. ``` Required elements for validity-- Names & Addresses of both principals Description of property being sold Price paid Date of sale Seller's signature ```

Question 40

Manufactured Homes

Answer 40

Portable home on wheels that was built on or after July 15, 1976.

Question 41

Trade Fixtures

Answer 41

Items used in the course of trade (by a business) that are attached to real property and are considered PERSONAL PROPERTY. Will be transferred with BILL OF SALE Example -- Metal shelves in a retail store, when the tenant moves, they can take the shelves with them.

Question 42

Free Simple Estate

Answer 42

Highest form of ownership of real property.

Question 43

Life Estate

Answer 43

Freehold estate for the life of the owner or a designated person. Holder may rent, sell, or encumber a property. But cannot will it to their heirs.

Question 44

Two types of Fee Simple Estate

Answer 44

Fee Simple ABSOLUTE -- Highest form of ownership recognized by law. Owner has entire bundle of ownership rights without any restrictions. Fee Simple DEFEASIBLE -- An estate in fee subject to the occurrence of a condition subsequent whereby the estate may be terminated.

Question 45

Estate in Reversion

Answer 45

A life estate is a type of freehold estate and its duration is for the life of someone. When that person dies, the property may revert to the previous owner (estate in reversion)

Question 46

Estate in Remainder

Answer 46

A life estate is a type of freehold estate and its duration is for the life of someone. When that person dies, the property may go to another designated person (estate in remainder). The other person is called the remainder person.`

Question 47

Lessor vs Lessee

Answer 47

Lessor = Landlord Lessee = Tenant

Question 48

Estate for Years

Answer 48

Leasehold estate for a specific period of time.

Question 49

Estate from Period-to-Period/Periodic Tenancy

Answer 49

Leasehold estate that renews each month or other period of time.

Question 50

Estate at Will

Answer 50

Leasehold estate that can be ended either by the lessor (landlord) or lessee (tenant).

Question 51

Estate/Tenancy at Sufferance

Answer 51

Leasehold estate in which the tenant is not paying rent.

Question 52

3-Day Notice to Pay Rent or Quit

Answer 52

Eviction notice that lets a tenant know they are being evicted from the premises. The Tenant has three court days to respond to a three day notice.

Question 53

Unlawful Detainer Action

Answer 53

A lawsuit filed to evict a non-paying tenant.

Question 54

Writ of Possession

Answer 54

Used by courts to give possession of real property back to the property owner after the tenant has been evicted from the property.

Question 55

Abandonment

Answer 55

Occurs when a tenant leaves a property without prior notice to the landlord (lessor).

Question 56

Covenant of Quiet Enjoyment

Answer 56

The landlord cannot disrupt the tenant's quiet enjoyment of a property.

Question 57

Gross Lease

Answer 57

Lease in which the rent includes all expenses such as electricity, gas, water, etc.

Question 58

Industrial Lease

Answer 58

A lease for an industrial property that usually comprises an office in the front of the space and warehouse in the back.

Question 59

Net Lease

Answer 59

Lease that requires the tenants in the building to pay their pro-rata (fair) share of the property owner's total operating expenses.

Question 60

Modified Gross Lease

Answer 60

A lease that is between a gross/full-service lease and net lease.

Question 61

Percentage Lease

Answer 61

Lease that is paid as a percentage of the gross sales of the business.

Question 62

Graduated Lease

Answer 62

A lease that increases every year.

Question 63

Consumer Price Index (CPI)

Answer 63

Index that measures inflation.

Question 64

Inflation

Answer 64

An INCREASE in the price of consumer goods caused by too much money chasing too few goods.

Question 65

Escalator Clause

Answer 65

When a lease includes a provision that increases the rental amount each year to adjust for inflation.

Question 66

Deflation

Answer 66

When the prices of consumer goods DECREASE.

Question 67

Sublease

Answer 67

Lessee (tenant) becomes the sublessor and subleases a property to the sublessee. Lessee/sublessor remains liable for the lease.

Question 68

Assignment

Answer 68

Existing lessee (tenant) assigns the lease to a new lessee/tenant. Existing lessee is no longer liable for the lease.

Question 69

Agricultural Lease

Answer 69

Maximum 51 years

Question 70

Urban Lease

Answer 70

Maximum 99 years

Question 71

Lease-Option

Answer 71

Leasehold estate in which the tenant has an option to purchase the property from the landlord.

Question 72

Sale-Leaseback/ Sale-and-Leaseback

Answer 72

Business owns the land and building and sells it to an investor. Business becomes the tenant that pays rent to the investor.

Question 73

Condominium

Answer 73

Condominium owner owns the airspace of their unit separately as FEE SIMPLE, along with the common areas in common with the other condominium owners.

Question 74

Apartments

Answer 74

One OWNER owns the property FEE SIMPLE and rents out the units to tenants. Each TENANT has a LEASEHOLD estate which is possession of the unit for a very short period of time.

Question 75

Homeowner's Association (HOA)

Answer 75

Condominium complexes and planned unit developments usually have an HOA that is tasked with following and enforcing the bylaws of the association.

Question 76

Planned Unit Development (PUD)

Answer 76

A group of single-family homes that usually have common areas such as a community swimming pool.

Question 77

Sovereign Powers of the State

Answer 77

Include eminent domain, taxation, escheat, and police power.

Question 78

Eminent Domain

Answer 78

Sovereign power of the State to take a person's property for the public good.

Question 79

Condemnation Action

Answer 79

Government action to take a private person's real property. Must be for the public good and the government must pay the owner fair market value.

Question 80

Inverse Condemnation Action

Answer 80

Government is forced to buy a person's property because of something they did to reduce its value.

Question 81

Taxation

Answer 81

Power of the State to levy taxes on the public.

Question 82

Escheat

Answer 82

When a person dies without a will and without heirs, the real property will escheat to the State of CA.

Question 83

Police Power

Answer 83

Provides for the safety, health, and general welfare of the public, such as zoning and building codes.

Question 84

Zoning

Answer 84

Public restriction that limits the use of the property to specific uses that will best implement a county's master plan or general plan.

Question 85

Eviction Steps

Answer 85

"3UW" 1. 3-day notice to pay rent or quit - eviction notice 2. Unlawful detainer action - filed in court 3. Writ of Possession - issued by court to return possession to the landlord.

Question 86

Mobile Homes

Answer 86

Mobile & manufactured homes that are NOT registered with the CA Dept of Housing and Community Development cannot be sold by a real estate agent, but must be sold by a person who has a mobile home dealer's license. Mobile home dealer's license can be used to sell either new or registered mobile homes and manufactured homes.