Unit 3 Law: Interests in Real Estate

• An estate in land is an ownership interest defined by the degree, quantity, nature, and extent of an owner's interest in real property
• Many types of estate exist, but not all interests in real estate are estates
• To be an estate in land, an interest must allow possession, meaning the holding and enjoyment of the property either now or in the future
• • A freehold estate lasts for an indeterminable length of time (of ownership) and can be passed to owner's heirs
  • A nonfreehold estate is one for which the length of time of the property's use can be determined (Also referred as leasehold estate)
• There are two types of fee simple estates

  1. Fee simple absolute
  2. Fee simple defeasible
• There are two types of fee simple defeasible

  1. Fee simple determinable
  2. Fee simple subject to a condition subsequent
• A fee simple estate is the highest interest in real estate recognized by law (Highest form of freehold estate)
• Fee simple absolute ownership entitles its owner to all the rights to the property by law. (Which means that it does not give the owner unfathered complete control)
• Fee simple absolute is also referred to as "in fee" or "fee simple" (runs forever)
• Upon the death of the owner is a fee simple absolute, the property interest passes to..

  • The decedent's co-owner, if there is one and the co-ownership was accompanied by a right of survivorship
  • The person or persons specified in the decedent's will (the devisee or devisees)
  • If the decedent has left no will, to the person or persons designated by the state's law of intestate succession
• Intestate succession means a person dies without a will
• A fee simple defeasible estate is a qualified fee estate that is subject to the occurrence or nonoccurrence of some specified event
• The two types of fee simple defeasible estates are..

  1. Fee simple determinable: the estate is qualified by a special limitation. The language used to distinguish this type of ownership is "so long as, while, during."
  2. Fee simple subject to a condition subsequent: owner gives real estate on condition of ownership. The language used to distinguish this type of ownership is "on condition of."
• Possibility of reverter is the right of a former owner for a fee simple determinable estate. This does not require court action, and it can be passed to former owner's heirs
• Right of reentry is the former owner's right for a fee simple subject to a condition subsequent. This does require court action, and it can be passed to former owner's heirs
• Fee simple defeasible estates are very rare in real life practices
• Possibility of reverter and right of reentry are future interests
• The types of freehold estates are..

  • Fee simple estates (fee simple absolute and fee simple defeasible)
  • Life estates
  • Pur autre vie
  • Legal life estates
• A life estate is a freehold estate that ends when the owner dies or when some other designated person dies
• A life estate is not inheritable, but it passes to the future owner according to the provisions by which the life estate was created
• As long as the owner is alive for a life estate, the property is a fee hold estate, which means it can be sold, mortgaged, or leased
• There are two types of life estate

  1. Conventional life estates (ordinary with remainder or reversion and pur autre vie with remainder or reversion)
  2. Legal life estates (dowers, curtesy, homestead)
• The deed trumps the will when it comes to life estates
• In real life, life estates are very rare
• Pur autrie vie is french for "life of another"
• Pur autrie vie gives the right to ownership only until the death of the identified person or persons
• Pur autrie vie was very popular before trust documents became a thing
• The fee simple owner who creates a life estate must plan for future owners. Future owners can be designated in two different ways:

  1. Remainder interest: the creator of the life estate mat name a remainder-men as the person to whom the property will pass when the life estate ends.
  2. Reversionary interest: ownership returns to the original owner upon the end of the life estate
• There are three types of legal life estates

  1. Dower
  2. Homestead
  3. Curtesy
• A legal life estate is created by state law rather than by a property owner
• Dower and curtesy provide non-owners to have a place to live

  • Dower is the life estate of a wife in the real estate of her deceased husband
  • Curtesy is the life estate of a husband in the real estate of his deceased wife
• Delaware does not recognize legal life estates, but it does recognized Uniform Probate Code (UPC)
• Most states have abolished the common law concepts of dower and curtesy in favor of the Uniform Probate Code (UPC)
• The UPC gives a surviving spouse the right to an elective share on the death of the other spouse
• A homestead is a family home that is protected from certain creditors
• Some states have homestead exemption laws, where a portion of the land or value of the property is occupied as the family home is exempt from certain judgments for debts
• An encumbrance is a type of interest in real estate that does not rise to the level of ownership or possession, yet still gives some degree of use or control of the property
• The types of encumbrances are..

  • Liens
  • Private restrictions on the use of real estate
  • Easements
  • Licenses
  • Encroachments
  • Lis pendens
• A lien is a charge against property (real or personal) that provides security for a debt or an obligation of the property owner. If the obligation is not repaid, the lien-holder is entitled to have the debt satisfied from the proceeds of a court-ordered or forced sale of the debtor's property
• Private restrictions that affect the use of real estate are often found in the deed. These are known as deed restrictions