Estates

An estate is the degree of ownership a person has in real property. Based on what you learned about real property, it should make sense what the term REAL ESTATE means.


There are two types of estate that we will discuss.

A freehold estate and a less-that free hold estate.

Freehold Estate


A freehold estate is an estate in which ownership is for an undefined length of time.


The 3 types of freehold estates are.

Fee simple absolute.

Fee Simple deafesable

And a life estate.


Fee simple absolute

A fee simple (or fee simple absolute) is an estate in land.   This form of ownership can not be defeated by the previous owner or the previous owner’s heirs; however it is not free from encumbrances. Fee simple absolute is the greatest interest in a parcel of land that one can possibly own. Sometimes designated simply as "Fee."   Fee simple ownership represents absolute ownership of real property but it is limited by the four basic government powers of taxation, eminent domain, police power, and escheat and could also be limited by certain encumbrances or a condition in the deed.


Fee simple Defeasible

If previous grantors of a fee simple estate do not create any conditions for subsequent grantees to own the conveyed property in fee simple title, which is commonly the case these days, then the title is called fee simple absolute. Other fee simple estates in real property include fee simple defeasible (or fee simple determinable) estates. A defeasible estate is created when a grantor places a condition on a fee simple estate (in the deed). Upon the happening of a specified event, the estate may become void or subject to annulment. Two types of defeasible estates are the fee simple determinable and the fee simple subject to a condition subsequent. If the grantor uses durational language in the condition such as "to A as long as the land is used for a park" then upon the happening of the specified event, the estate will automatically terminate and revert to the grantor or the grantor's estate; this is called a fee simple determinable. If the grantor uses language such as "but if alcohol is served" then the grantor or the heirs have a right of entry, but the estate does not automatically revert to the grantor; this is a fee simple subject to a condition subsequent. In the United States many of these concepts have been modified by statute in some states.


Life estate

A life estate is an interest in real property, which is held for the duration of the life of a designated person. It may be limited by the life of the person holding it or by the life of another person.


For example, Anne can give a property to Dan for the life of Anne.  Dan would be the life tenant.


A life tenant receives the property and is responsible for maintenance of the property and paying taxes.  If a life tenant allows a property to deteriorate it would be committing waste, a life tenant cannot commit waste.


A life tenant cannot leave a property to anyone in their will.    A life tenant may sell, mortgage or lease the property for the duration of the estate.   Thus all contracts would be terminated upon the death of the life tenant


For example, if Dan dies and the property were to go back to Anne, Anne would have the estate in Reversion.   If Anne dies, then the property would not be Dan’s because he had it as long as Anne was alive. Upon Anne’s’ death the property would go to Lisa, and then Lisa would have the estate in Remainder.


Less than freehold estate


A Less than freehold estate is an estate held by one who rents or leases property.

It is also known as a leasehold estate.  A leasehold estate is an ownership interest in land in which a lessee or a tenant holds real property by some form of title from a lessor or landlord.

Leasehold is a form of property tenure where one party buys the right to occupy land or a building for a given length of time. As lease is a legal estate, leasehold estate can be bought and sold on the open market. A leasehold thus differs from a freehold where the ownership of a property is purchased outright and thereafter held for an indeterminate length of time, and also differs from a tenancy where a property is let on a periodic basis such as weekly or monthly.


In a lease the landlord is the lessor and the tenant is the lessee, oral leases can be binding.  But generally leases are written and give exclusive possession to the property to the lessee and a reversionary right to the lessor.

A reversionary right means the owner has the right to regain possession of the property after the lease has expired.

Just like in any other contract a valid lease must contain Mutual agreement, Consideration, capable parties and lawful object


The lessee has the right of quiet enjoyment and possession of property which is the assurance that their possession will not be disturbed by anybody with superior title.


The lease is a bilateral contract because both the landlord and tenant have obligations to perform.

The lease agreement can restrict the tenant’s use of the property and specify the conditions of which a security deposit may retained and the duration of the rental.


Death does not usually terminate the lease, upon death of one of the parties; the responsibilities as stated in the agreement could pass on to the heirs of the deceased.


Generally when a property is sold the new owner would have to honor the lease, however this is not always the case.

Hence leases are personal property as they do not always run with the land.  It is a contract with and individual person.


Unless the lease forbids it the tenant has the right to assign or sublet the property


An assignment is a transfer of contract rights, where as a sublet is when you rent the property you lease to another person while still maintaining your responsibility to your landlord under your rental agreement.


Constructive eviction is a term used in the law of real property to describe a circumstance in which a landlord either does something or fails to do something that he has a legal duty to provide.


An example would be if the landlord refuses to provide heat or water to the apartment as a tenant can not live with out water, thus they need to vacate the premise, this would be constructive eviction.


Classification of a less-than-freehold estate includes an estate for years, periodic tenancy, estate at will, and estate at sufferance. 


Estate for Years

An estate for years is a leasehold interest in land for a fixed period of time it is often called a tenancy for years.  An example of an estate for years would be a summer rental, as it has a defined beginning and end date.  No notice to be terminated is need as the end of lease is established at the conception of the rental.


Periodic Tenancy

Periodic tenancy which is also known as an estate from years to years is a tenancy that is not bound to a lease with a fixed period like an estate for years.  A periodic tenancy follows a period such as a month-to-month, week-to-week or year to year.  Proper notice must be given to terminate this lease.


Estate at will

Estate at will means that it can be ended at any time.  An estate at will gives the lessee the right to possession until the estate is terminated by either party; the term of this estate is indefinite.


Estate in sufferance

An estate in sufferance arises when the tenant wrongfully holds over after the expiration of his term; often called a tenancy at sufferance. 


An example of an estate at sufferance would be a tenant that does not pay rent. In simple terms the landlord is suffering.  This is not a form of trespass as at one point the tenant had the right to be on the property.  The landlord would have to legally evict the tenant when a tenancy at sufferance is created.


Types of Leases


There are different types of Lease arrangements the lessor and lessee can have. Such as a gross lease, net lease, lease option and a percentage lease.


Gross lease

Gross lease is a rental agreement for the use of the property where the tenant pays a fixed amount which does not change as a result of changes in the various expenses of the property. The landlord pays for these expenses such as all repairs, taxes and operating expenses incurred through ownership. It is the opposite of a net lease in which these costs are incurred by the lessee.


Net lease

A net lease where the responsibility to pay taxes, insurance, and maintenance are incurred by lessee in addition to the monthly lease payment.  This is often referred to as a triple net lease.


Percentage lease

A percentage lease is a rental that is based on a percentage of the monthly or annual gross sales made on the premises. Percentage leases are common with large retail stores, especially in shopping centers. An underlying concept of the percentage lease is that both the landlord and the tenant should share in the locational advantages of the leased premises. There are many types of percentage leases: the straight percentage of gross income, without minimum (uncommon); the fixed minimum rent plus a percentage of the gross; the fixed minimum rent against a percentage of the gross, whichever is greater; and the fixed minimum rent plus a percentage of the gross, with a ceiling to the percentage rental (among others).

Lease option

A lease option is a rental agreement indicating a tenant's option to purchase a property during the term or at the end of the lease.  The Owner of the property would be the optionor, the tenant would be the optionee.


Consideration is given to the optionor in order to secure the option for the optionee. The consideration can be monthly payments consisting not only of rent, but an overage, or it can be money up front that can be applied towards a down payment on an already established amount.


If the optionee exercises the option, title would revert back to the time the contract began, not when the option was exercised.

Introduction

Bundle of Rights  

License   

Government Rights  

Police Power   

Eminent domain   

Taxation   

Escheat   

Real vs Personal Property

Annexation   

Appurtenances   

Fixtures   

Trade Fixture   

Emblements   

    OR-EE Rule   

Estates

Freehold Estate   

Fee simple absolute   

Fee simple Defeasible   

Life estate   

Less than freehold estate   

Estate for Years   

Periodic Tenancy   

Estate at will   

Estate in sufferance   

Types of Leases   

Gross lease   

Net lease   

Percentage lease   

Lease option   

Property management

Contracts

Essentials of a valid contract   

Capable parties  

Lawful object   

Consideration   

Offer and acceptance   

Types of Contracts   

Valid, Void & Voidable Contracts   

Implied contract   

Bilateral & Unilateral contacts   

Executed & Executory   

Option contract   

Land Contract   

Listings   

Types of Listings contracts   

Exclusive Listing   

Exclusive Authorization and right to sell Listing   

Exclusive Agency Listing   

Open Listing   

Net Listing   

Listings with an option   

Multiple listing service   

Agency   

Universal agent   

General agent   

Special agent   

Attorney in fact   

Principal and Client   

Transaction broker   

Dual or limited agency   

Practice and disclosure   

Stigmatized property   

Puffing   

Fraud   

Actual fraud   

Negative fraud   

Constructive fraud   

Negligence   

Federal Law   

Truth in Lending   

Fair Housing   

Steering   

Blockbusting   

Sherman antitrust laws   

Easement   

Easement in gross   

Implied easement   

Prescriptive easement   

Termination of Easement   

Encroachment   

Zoning

Property Transfer

    Deeds   

    Wills   

Title   

Title insurance   

Forms of ownership   

Tenancy in common   

Joint tenancy   

Community property   

Trust   

Subdivisions   

Condominium   

Cooperative   

Time Shares   

Cluster housing   

Liens   

Appraisal   

Appraisal Principles   

Principle of Highest and Best Use   

Principle of Substitution   

Principle of Conformity   

Principle of Contribution   

Principle of change   

Market Value   

Steps in the appraisal   

Appraisal methodology   

Market data approach   

Capitalization (income) Approach   

Cap Rate   

Cost (replacement) approach   

Gross Rent Multipliers   

Depreciation   

Physical Deterioration   

Functional Obsolescence   

Economic Obsolescence   

Financing   

Lenders   

Primary mortgage   

FHA   

VA   

Types of Loans   

Loans clauses   

Investing   

Construction Terms   

Test Taking Tips