Real Estate Legal Analysis

1. Real Estate Legal Analysis

2. Today’s Overview • Are Real Estate and Real Property the Same? • Can Property Rights be Divided? • What are Estates in Land? • How can properties be owned by more that one owner? • How do you legally identify a parcel of real estate?

3. Land • One of 4 factors of production in Economics • LAND, Labor, Capital, & entrepreneurship • Economic attributes of land • Is durable • Supply is finite • Is useful to people

4. Real Estate versus Real Property • Real Estate • Is the physical land and appurtenances (improvements or buildings) affixed to the land • Land and anything reasonably affixed to that land • Is Immobile and Tangible • Natural part of land • Building and site improvements • All permanent building attachments (fixtures) • Attachments above and below ground

5. Real Estate versus Real Property • Real Property • Includes all interests, benefits, and rights inherent in the ownership of physical real estate • Estate is a right or interest in real estate • “Bundle of Rights” • Right to use, sell, lease, enter, give away, etc…

6. What is a Title? Deed? Lease? • Title • Ownership rights to real property • Deed • Is the document normally used to convey the rights from one party to another • Lease • Conveys the rights of use and possession of real property under the agreed-on terms • Do not transfer ownership rights to the property

7. Can Personal Property become Real Estate? • Personal Property (aka “Chattel”) • Includes movable items of property that are not permanently affixed to, or part of , the real estate • Fixture • Is an article that was once personal property, but has since been installed or attached to the land or building in a rather permanent manner. Considered real estate • Trade Fixture (aka “Chattel Fixture”) • Is an article that is owned and attached to a rented space or building by a tenant and used in conducting a business • i.e. Grocery store refrigerators, Gas Pumps, underground storage tanks

8. Is it a Fixture? • Tests for Fixture Status • Determination of by Courts, use following criteria: • Test of Intent of the Parties • Intention of the party who attached the item • **BEST TO HAVE IT WRITTEN IN RE CONTRACT** • i.e. attach a bill of sale for gold bathtub fixtures • Test of Attachment • Manner in which item is affixed. • Can it be removed w/out serious injury to real estate? • i.e. portable AC versus central air & heat

9. Is it a Fixture? • Tests for Fixture Status • Determination of by Courts, use following criteria: • Test of Adaptability • Character of item and its adaptation to the real estate • Would its removal alter the usefulness of the real estate? • i.e. custom built entertainment center vs. stand alone

10. Mineral and Air Rights • If you own a parcel of Real Estate: • Do you own the air space above? • Do you own the minerals below?

11. Mineral and Air Rights • Air Rights • Real property rights to the space above the earth’s surface • Pie shaped • Transferrable • Mineral Rights • Real property rights to the minerals an other useful materials that exist below the surface • Transferrable

12. Water Rights http://mtcharlestonwaterco.com/relatedcompanies.htm

13. Water Rights • Water Rights • The right to withdraw water from the land • Rights related to Navigable Bodies of Water • Owner, or “littoral proprietor”, • generally owns the land to the high-water mark • Government generally owns land underneath the water

14. Rights to Nonnavigable Bodies of Water • Riparian Rights Doctrine • Dominates the Eastern US • All owners whose land underlies or borders the water have equal rights to the water • Can use all water needed • As long as not depriving other users • Prior Appropriation Doctrine • Popular West of the Mississippi River • Arid Land • “First Come, First Served” • Rule of Capture • Can deprive other users

15. Underground Water http://sincedutch.files.wordpress.com/2012/06/a004_us.gif

16. Underground Water http://www.twdb.state.tx.us/groundwater/aquifer/major.asp

17. Underground Water • Underground or Subterranean Stream • Water that flows in a defined channel • Apply same principles used if the body of water existed on the surface • Percolating Water • Water in pockets not clearly located • Landowner may use water beneath land for industrial, agricultural, or other purposes necessary, unless depletes adjoining neighbors

18. What are Estates? • Estates in Land • Bundles of ownership interests in real property • 2 Basic Types of Estates • Freehold = Ownership • Grantor- Seller • Grantee- Buyer • Leasehold = Right to use & possess • For Renters • Lessor- Owner • Lessee- Renter

19. Freehold Estates • Freehold Estates • Separated into present and future interests • Present Interests: • Fee Simple Absolute Estates • Qualified Fee Estates • Life Estates • Future Interests: • Accompany qualified fee and life estates • Reversion Interests • Remainder Interests

20. Freehold Estates • Fee Simple Absolute Estate • Is fullest and most complete set of ownership rights one can possess in real property • Alienable, Devisable, Descendible • Qualified Fee Estate • Owner’s rights can be “defeased” or lost in the future should a stated event or condition come to pass • Future interests follow “reversions” • i.e. Lumpkin House at Univ. of Georgia

21. Freehold Estates • Life Estates • Ownership terminates automatically and immediately upon the death of a named person • Life Tenant • Owner of the property as long as he/she lives • i.e. “To Joe, for Joe’s Life” • Joe owns until he dies

22. Freehold Estates • Life Estates • Estate pur autre vie • When life tenant is someone other than the person whose life the life estate is tied to • i.e. “To Joe, for Bill’s Life” • Joe owns as long as Bill is alive

23. Freehold Estates • Life Estates • Remainder • Rights to property upon death of life tenant • Remainderman • The party who holds the remainder interest associated with a life estate • 2 types of Remainder interests • Vested Remainder • Exists when remainderman is guaranteed ownership of the property at some time in the future • Contingent Remainder • Exists when there are conditions attached to the remainder interest that could prevent the remainderman from receiving a present interest in the property.

24. Leasehold Estates • Leasehold estate • Refers to the rights of use and possession (but not ownership) held by a tenant as a result of a lease agreement with a property owner. • Right of Reentry • Landlord as reversionary interest at termination of lease estate • Landlord holds “Leased Fee Estate” • Tenant holds “Leasehold Estate” • 4 Categories of Leases or Tenancies • Tenancy for a stated period • Tenancy from period to period • Tenancy at will • Tenancy at sufferance • Eviction

25. Concurrent Estates • Estates in Severalty • Estates “standing alone” • Estates in Concurrent • Ownership of property simultaneously by 2 or more persons • Include: • Tenancy in Common • Joint Tenancy (w/rights of survivorship) • Tenancy by the entirety (is a specialized Joint Tenancy) • Special to husbands and wives • Cannot sell interests unless spouse or court agrees • All interests pass on to surviving spouse • Not common for all states • Community property

26. Other Ownership Terms • Condominium ownership • Cooperative ownership • Time-Shares

27. Legal Descriptions • Legal Descriptions • Metes-and-Bounds Description • Metes = Distances used in description • Bounds = Directions of boundaries enclosing piece of land • Rectangular Survey System • Principal Meridians and Base Lines • Townships • Sections • Recorded Plat

28. Legal Descriptions • Rectangular Survey System • Principal Meridians and Base Lines • Principal Meridians – run North & South • Base lines – run East & West • Townships • Is 6 miles square (36 square miles) • Range lines -- run North & South, numbered consecutively from Principal Meridian • Township lines – 6 mile wide strips running East or West • Sections • 640 Acres, 1 square mile • 36 equal sized sections in a Township • Recorded Plat • Lots & Blocks, Streets

29. How Many Square Feet in an Acre? • 43,560 sq. ft.