Unit 4: Forms Of Real Estate Ownership

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Although the forms of ownership available are controlled by state law, real estate may be held in one of three basic ways:

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• ownership in severalty (one owner)

• co-ownership (more than one owner)

• ownership by a trust (property held for the benefit of another)

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Ownership in severalty

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property is owned by one individual, corporation, or other entity

•sole rights to the property •sole discretion to sell, lease, •leave as a bequest in a will, •transfer part or all of the ownership rights to another person.

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co-ownership (concurrent owners)

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Title ownership held by two or more persons.

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Severalty

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Ownership of real property by one person only; also called sole ownership.

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Tenancy In Common (TIC)

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A form of co-ownership by which each owner holds an undivided interest in real property as if each were sole owner. Each individual owner has the right to partition. Unlike joint tenants, tenants in common have the right of inheritance.

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Joint tenancy

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Ownership of real estate between two or more parties who have been named in one conveyance as joint tenants. Upon the death of a joint tenant, the decedent’s interest usually passes to the surviving joint tenant or tenants by the right of survivorship

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The distinguishing feature of a joint tenancy is the:

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right of survivorship

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Four elements or unities are needed in joint tenancy

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TTIP

•Time •Title •Interest •Possession

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Partition

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a legal way to dissolve the relationship between co-owners of real estate when the parties do not voluntarily agree to its termination

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Tenancy by the entirety

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available only to spouses and which carries a right of survivorship. Property can be conveyed only by both spouses

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Community Property

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property acquired during marriage that is not separate property and requires agreement of both spouses to be conveyed

common law.

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Separate property

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property owned by one spouse before marriage, or acquired by one spouse during marriage by gift, inheritance, or with the proceeds of separate property.

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Buyers should obtain _________ to determine the most appropriate form of co-ownership

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Legal advice

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trust

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is a device by which one person transfers ownership of property to someone else to hold or manage for the benefit of a third party

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Trustor

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Person who creates the agreement

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trustee

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is the party who holds legal title to the property and is entrusted with carrying out the trustor's instructions regarding the purpose of the trust

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a living trust

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created by agreement during the property owner's lifetime

(the right to refuse medical treatment)

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testamentary trust

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established by will after the owner's death

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beneficiary

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the person who benefits from

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Real estate is the only asset of a:

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land trust

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In the case of a _________ the beneficiary is usually also the trustor, but the public record will not identify the beneficiary.

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Land trust

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Land trusts are frequently created for the conservation of:.

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•farmland •forests and other wildlife habitats •coastal land •scenic vistas

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Trust deeds have 3 parties

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•trustor •trustee• beneficiary

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A ______ sale has a much faster process than a foreclosure process

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Trustee

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Reconveyance deed

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legal document that indicates the transfer of a property's title from lender to borrower

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Trust deed

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an agreement between a home buyer and a lender at the closing of a property

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three types of property ownership

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•Condominiums, •cooperatives •time-share arrangements

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Condominium laws are often called:

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horizontal property acts

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Condominium

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•each unit holds a fee simple title to the unit

•absolute ownership of a unit in a multiunit building

•undivided interest in the ownership

•owned jointly with the other condominium unit owners.

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Condominium

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•each unit holds a fee simple title to the unit

•absolute ownership of a unit in a multiunit building

•undivided interest in the ownership

•owned jointly with the other condominium unit owners.

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Common Elements

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Parts of a property that are necessary or convenient to the existence, maintenance, and safety of a condominium or are normally in common use by all the condominium residents. Each condominium owner has an undivided ownership interest in the common elements.

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Condominium

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•fee simple title to the airspace of the unit

•absolute ownership of a unit in a multiunit building

•undivided interest in the ownership

•owned jointly with the other condominium unit owners.

•administered by HOA

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Common Elements

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•tenants in common

•condominium owner has an undivided ownership interest

Ex. courtyards, lobbies, the exterior structure, hallways, elevators, stairways, and the roof, as well as recreational facilities such as swimming pools, tennis courts, and golf courses

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limited common elements

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used exclusively by individual units but which must comply with restrictive covenants

Ex. Balcony and patios

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Highrise buildings, lowrises, town houses that share a wall, and detached structures can all be:

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condominiums

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Town House

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A type of residential dwelling with two floors that is connected to one or more dwellings by a common wall or walls. Title to the unit and lot vest in the owner who shares a fractional interest with other owners in any common areas.

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The condominium property is administered by a__________, which is made up of unit owners.

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HOA

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Assessments

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special payments required of unit owners to address some specific expense, such as a new roof.

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What do you get with a condo ownership?

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•ownership with airspace

•common elements

•limited common elements

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Cooperative

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A residential multiunit building whose title is held by a trust or corporation that is owned by and operated for the benefit of people living within the building who are the beneficial owners of the trust or shareholders of the corporation, each possessing a proprietary lease to a property unit.

•corporation holds title to the land and the building

•corporation then offers shares of stock to prospective tenants

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Cooperative

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•tenant-owner

•proprietary lease to the apartment for the life of the corporation

•corporation holds title to the land and the building

•corporation then offers shares of stock to prospective tenants

•shares may be transferred to new owners

•burden falls on remaining shareholders

•tax advantages

•free from maintenance chores

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Time-share ownership

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permits multiple purchasers to buy relatively small interests in real estate

•the right to occupy the facilities for a certain period of time

•the developer owns the real estate

•The right to transfer the period of occupancy—or even exchange within the same exchange organ

Ex. resort properties.

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partnership

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an association of two or more persons who carry on a business for profit as co-owners in a general or a limited partnership, as provided by state law.

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general partnership

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all partners participate in operation and management, and partners share full liability for business losses and obligations

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limited partnership

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has both general partners and limited partners.

general partners: run the business.

Limited partners: do not participate in running the business and are liable for business losses only up to the amount of the individual's investment.

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limited liability company (LLC)

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offers its members the benefits of the limited liability of a corporation, the tax advantages of a partnership, and a flexible management structure.