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Chapter 7 Real Estate Property Rights, Fixtures and Ownership

Chapter 7 Real Estate Property Rights, Fixtures and Ownership. “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner. Major Topics. What is real property? Holding title to the real property Property owner rights Surface, Water, Air Duration of ownership

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Chapter 7 Real Estate Property Rights, Fixtures and Ownership

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  1. Chapter 7Real Estate Property Rights, Fixtures and Ownership “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  2. Major Topics • What is real property? • Holding title to the real property • Property owner rights • Surface, Water, Air • Duration of ownership • Fixtures • Subsurface • Forms of ownership “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  3. Real Property • Surface of Land • Attachments to that surface • Area beneath surface • Rights in the air “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  4. Real vs. Personal Property • Real property: Rights in land and its permanent structures • Surface of the earth and improvements • Air, up to reserved air space or tallest structure • Beneath the earth as far as technology allows: Minerals, oil and gas, water • Personal property: All other property

  5. Fixtures • Items that are attached to real property and have become integral part of the building’s function • An item classified as fixture is transferred as part of real property • Determining whether an item is a fixture or not: • Intent • Attachment • Uniqueness or adaptation to the property • Ownership • Trade Fixture – tenant-landlord • Always personal property “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  6. Construction Valuable chandelier Custom drapes Kitchen rangeand refrigerator? Retail display cases Restaurant booths and other furnishings Basketball goal attachedto a garage Backyard playhouse Distinguishing Real andPersonal Property Which are personal property and which arereal property?

  7. Texas Water Rights • “Texas owns all surface water in a natural body of water or watercourse. According to Texas case law, a watercourse contains three features: a defined bed, visible banks and a permanent supply of water.” • Navigable waters = public highways, streambed owned by state • Nonnavigable waters – owners own to exact center of waterway • Land transferred from state to private ownership before 7/1/1895 carries riparian rights • After, land subject to prior appropriation

  8. Texas Water Rights • Domestic & Livestock use exempt • Riparian Rights – Owner has right to use water, but not alter flow or contaminate • Prior Appropriation – Right to use water controlled by state • Person must show beneficial use for water • Obtain permit • 1967 -- Water Rights Adjudication Act • Riparian right claims granted "Certificates of Adjudication“ • After 1969, all new claims need permits • Water bank

  9. Texas Water Rights • Littoral Rights = lakes, oceans • Land owned to “mean vegetation line” • Surfside Beach • http://www.surfrider.org/texas/issues/suit/ • http://www.business.txstate.edu/users/gt10/Surfside.jpg • http://www.surfrider.org/texas/issues/archives/2005-Leg/index.html • http://www.surfrider.org/texas/issues/archives/protectubes/images/ProTecTube_cross-section.jpg WSJ Article

  10. Air and Subsurface Rights • Air Rights • Mineral Rights • Oil and Gas • Groundwater • “Law of Capture” • Groundwater Conservation Districts -- read • Aquifers, GCDs, wells • Pickens “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  11. The Freehold Estates • Fee simple or Fee simple absolute • Fee simple defeasibles • Fee simple determinable • Fee simple subject to a condition subsequent • Life estate “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  12. Co-Ownership & Business Ownership • Tenants in common • Joint tenancy • Community Property • Multi-Unit Ownership • Condominiums • Cooperative • Business (Investors): • General, Limited Partnerships • Corporations and S-Corps • Limited Liability Corporations • Real Estate Investment Trusts “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  13. Tenancies in Common • ‘Tenants in common’ hold title together to same property • Each has an individual interest in the property “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  14. Joint Tenancies • Four unities of a joint tenancy: • Time, Title, Interest & Possession • Joint tenants must own equal shares • Joint tenants must have equal right of possession “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  15. Condominiums • Condominium • Combines single ownership and tenancy in common • Owner holds fee simple interest in specified space • Owns common areas via tenancy in common • Right to sell, lease, mortgage and convey by will the condominium interest “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  16. Cooperatives • The dwellers of a multi-housing own an undivided interest in their unit through their ownership of a corporation (shares) that owns the entire land and building • Cooperative affords existing owners more control over the transfer of the units “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  17. Community Property • A system of marital property ownership (Spanish origin) • Both spouses contribute equally to the benefit of the property as “community property” • Separate property • Owned solely before marriage • Acquired by gift/inheritance after marriage • Purchased by separate funds “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  18. Partnerships • General Partnerships • “Hands-on” ownership • Limited Partnerships • At least one partner has full and complete liability and is known as “general partner” • Liability of other “limited partners” is limited to their capital contribution to the partnership “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  19. Corporations • Non-human entity with permanent legal existence and is owned by individual investors • Advantage – limited liability • Disadvantage – Double taxation • S Corporation • IRS Code permits slight variation on the “double taxation” by flowing its income and losses through its shareholders “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  20. Limited Liability Companies (LLC) • A statutorily-created entity offering limited liability of corporation and flow-through advantage of partnership • Pays no federal taxes on its income. All income and losses flow through owners (members/shareholders) “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  21. REITs • Real Estate Investment Trust: A statutory entity that permits investors to hold diversified real estate holdings by being beneficiaries in a trust • REITs might be “public” or “private” “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  22. REIT Requirements • Assets: invest at least 75% of the total assets in real estate assets • Income: 95% of income must be from dividends, interest, rents, or gain from sale of RE assets • Income: 30% max income can be derived from sale of stock/securities held < 6 months or RE property held < 4 years

  23. REIT Requirements • Composition: have a minimum of 100 shareholders • Composition: no more than 50 percent of the shares held by five or fewer individuals • Distribution: Must distribute at least 90% of taxable income

  24. Non-Possessory Interests in Land • Easement: The right to use land for a specific and limited purpose • Easement Appurtenant • Right of use a (dominant) parcel of land “enjoys” over an adjacent (servient) parcel • “Runs with the land”: Rights and obligationsare inseparable from the parcels involved • Easement in Gross • Right to use land, unrelated to any other parcel “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  25. How Easements Can Be Created • Express easement • Implied easement (or Easement by necessity) • Easement by prescription road Easement across A Water Servient Tenement A Dominant Tenement B “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

  26. Non-Possessory Interests in Land • License: Similar to an easement in gross, but conveys permission rather than right • Revocable • Automatically terminated at the death of the grantor or sale of the land • Liens • Mortgage, Mechanic, Tax • Covenants and Deed Restrictions “Real Estate Principles for the New Economy”: Norman G. Miller and David M. Geltner

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