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Real Property Rights. Real Estate 310 Principles of Real Estate Dr. Longhofer. What is Real Estate?. Real estate is defined as land at, above, and below the earth’s surface, plus all things permanently attached to it, whether natural or artificial

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Real Property Rights

Real Estate 310

Principles of Real Estate

Dr. Longhofer

Principles of Real Estate

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What is Real Estate?

  • Real estate is defined as land at, above, and below the earth’s surface, plus all things permanently attached to it, whether natural or artificial

    • Mineral rights relate to everything below the surface

      • The rights to extract minerals are often sold

      • Subsurface rights may also be acquired to construct subways and other underground structures

    • Air rights relate to control of everything above the surface

      • Solar and “view” rights are an evolving area of real estate law

    • Although unlimited in principle, mineral rights are constrained by legal and technological restrictions

Principles of Real Estate

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What about the Water?

  • What about the water that runs across the land or is adjacent to it?

    • The answer depends on the statein which the land is located

  • The riparian rights doctrine isused in most Eastern states

    • Each land owner has equal rightsto use the water, as long as they don’t interfere with the rights of other riparians

    • Ownership of the land usually extends to the mid-point of the river or stream

Principles of Real Estate

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What about the Water?

  • The prior appropriation doctrine usually applies in arid Western states

    • Under this doctrine, the first land owner to use the water for some beneficial economic purpose has the right to all the water needed

    • A permit system is typically used to assign water rights among users

Principles of Real Estate

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Real Property Rights

Principles of Real Estate

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Real Property vs. Personal Property

  • Ownership of real estate entails more than just the physical possession of land and buildings

    • Real property refers to the interests, benefits, and rights that are included in the ownership of real estate

  • A legal interests in any other type of property is called personal property

    • Items that can be moved, such as cars, furniture, appliances, and clothing, are personal property

Principles of Real Estate

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Fixtures and Trade Fixtures

  • A fixture is personal property that has become a part of the real estate because it is permanently attached to the land or an improvement

    • Fixtures generally must remain with the real estate unless they are specifically excluded

  • Trade fixtures are articles owned by a tenant but attached to a rented space or building, and are used in conducting a business

    • Trade fixtures may be removed by the tenant

    • The cost of repairing any damage is the responsibility of the tenant

Principles of Real Estate

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Tests for Fixture Status

  • When conflicts arise as to whether an item of personal property is a fixture, the courts apply several tests to determine if an item is a fixture

    • Intent Test: Did the person who installed the item intend it to remain permanently with the real estate?

    • Test of Attachment: Was the item permanently attached to the real estate? Can it be removed without causing damage to the surrounding property?

    • Test of Adaptability: Has the item been specifically adapted for use with the real estate? Would removal of the item substantially alter the usefulness of the remaining real estate?

Principles of Real Estate

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Fee Simple Ownership

  • The most complete interest you can own in real estate is a fee simple absolute estate

    • This is the most common form of title (legal right to ownership of real estate)

  • Someone holding a fee simple interest can

    • Possess the property

    • Use and modify the property within legal constraints

    • Exclude others from the property

    • Sell or give the property to whomever he wishes, including his heirs

Principles of Real Estate

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Can You Own Less Than aFee Simple Interest?

  • A qualified fee interest is one that can be lost in the future

    • This is a legal right that is subject to the occurrence or nonoccurrence of some event

      • Example: Land might be donated to the city on the condition that it always be used as a park

    • The person to whom the property would be transferred holds a reversion interest

  • An ordinary life estate is an interest that ends upon the death of a named person

    • The person who receives the property after the death holds a remainder interest

Principles of Real Estate

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Leasehold Interests

  • When a property owner leases her real estate to someone else, the rights are separated into two parts

    • The tenant obtains a leaseholdinterest that gives him the right to possess and use the real estate, within the limits of the lease agreement

    • The landlord, however, still owns the real estate (a leased fee interest with the right of reentry)

Principles of Real Estate

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Joint Ownership of Real Estate

  • Real estate can be jointly owned by two or more people

    • Don’t confuse joint ownership with a partnership; although multiple people may belong to a partnership, legally it is a single entity

  • A tenancy in common is the traditional form of joint ownership

    • Each owner has equal rights to use and possess the real estate, although the size of their interests may differ

    • Tenants in common can transfer or mortgage their interests without the consent of other co-owners, and the interest may be passed on to the owner’s heirs

Principles of Real Estate

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Joint Ownership of Real Estate

  • Joint tenancy is very similar to a tenancy in common

    • Co-owners retain the right of survivorship in a joint tenancy, meaning that when one owner dies the other owners receive his interest

  • In a joint tenancy,

    • Each owner must hold the same percentage interest in the real estate

    • Each owner’s interest must reflect the same legal estate (e.g., fee simple)

Principles of Real Estate

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Condominiums vs. Coops

  • With condominiums, residents have independent ownership of their individual units and jointly own the common areas

    • As a result, each resident may mortgage or sell his unit independently

  • With cooperative ownership, residents purchase shares in a nonprofit corporation that owns the real estate

    • Shareholders don’t have full rights to sell or mortgage their individual units

    • Coops make joint financing of the building possible

Principles of Real Estate

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Time Shares

  • A time share is a joint ownership structure in which each co-owner has the right to possess the real estate for a certain period of time

    • Time share interests can be ownership interests (as in a condominium) or leasehold interests

Principles of Real Estate