Real Property Interests: An Overview

Introduction

This chapter provides an overview of real property interests, a fundamental concept in understanding property rights. We will explore the nature of real property, the various types of interests one can hold, and the scientific and legal principles that govern these interests.

1. Defining Real Property

• Definition: Real property, also known as realty, encompasses land and everything permanently attached to it, both natural and man-made. This includes not only the surface of the earth but also the subsurface rights (minerals, oil, etc.) and the airspace above the land.

• Distinction from Personal Property: Unlike personal property (personalty), which is movable, real property is immovable and fixed. The distinction is crucial because different laws and regulations govern each.

• Appurtenances: Something that transfers with real property ownership.

• Bundle of Rights:

  • Ownership of real property is often described as a “bundle of rights,” representing the various rights and privileges associated with ownership.
  • These rights may include the right to possess, use, enjoy, exclude others, and dispose of the property.
  • The specific rights included in the “bundle” can vary depending on the type of real property interest and any restrictions imposed by law or private agreement.

2. Types of Real Property Interests (Estates)

Real property interests, often referred to as “estates” in land, define the extent and duration of an individual’s rights in real property. These interests can be broadly categorized into freehold and non-freehold estates.

2.1. Freehold Estates

Freehold estates represent ownership interests with an indefinite duration. They are considered the highest form of property interest.

• Fee Simple Absolute:
  • The most complete form of ownership, granting the owner unrestricted rights to possess, use, and dispose of the property.
  • This estate is inheritable and perpetual, meaning it can be passed down to heirs indefinitely.
  • Example: Sarah owns her house in fee simple absolute. She can live there, rent it out, sell it, or leave it to her children in her will.
• Fee Simple Defeasible:
  • Ownership that can be lost if certain conditions or limitations are violated.
  • Two main types:
    • Fee Simple Determinable: Ownership automatically reverts to the grantor if a specified event occurs. The language often includes words like “so long as,” “while,” or “during.”
      • Example: A grant of land “to the town so long as it is used for a library.” If the town ceases to use the land as a library, ownership automatically reverts to the grantor or their heirs.
    • Fee Simple Subject to Condition Subsequent: Ownership can be terminated at the grantor’s option if a specific condition is violated. The language often includes words like “but if,” “upon condition that,” or “provided that.”
      • Example: A grant of land “to John, but if he ever sells alcohol on the premises, the grantor has the right to re-enter and repossess the property.”
• Life Estate:
  • Ownership that lasts for the duration of someone’s life (the life tenant).
  • The life tenant has the right to possess and use the property during their lifetime but cannot impair the value of the property for future owners.
  • Upon the death of the life tenant, ownership reverts to either the grantor (estate in reversion) or a designated third party (estate in remainder).
    • Estate in Reversion: The estate of the grantor who receives the life property upon the death of a party designated under a life estate.
    • Estate in Remainder: The party (other than the grantor) who is to receive the estate upon the termination of a life estate.
  • Example: Mary grants a life estate to her mother, Jane, with the remainder to her son, David. Jane can live in the house for the rest of her life, but upon her death, the property will transfer to David.

2.2. Non-Freehold Estates (Leasehold Estates)

Non-freehold estates, also known as leasehold estates, grant a tenant the right to possess and use property for a specified period of time under a lease agreement. These estates do not represent ownership.

• Tenancy for Years: A leasehold estate with a definite beginning and end date. The lease automatically terminates at the end of the term.
  • Example: A one-year apartment lease.
• Periodic Tenancy: A leasehold estate that automatically renews for a specific period (e.g., month-to-month) unless either the landlord or tenant provides notice of termination.
  • Example: A month-to-month rental agreement.
• Tenancy at Will: A leasehold estate that can be terminated by either the landlord or tenant at any time, with proper notice as required by law.
  • Example: An informal agreement to rent a room with no fixed term.
• Tenancy at Sufferance: Occurs when a tenant remains in possession of the property after the lease has expired without the landlord’s consent. The tenant is considered a trespasser.
  *Periodic Tenancy: A leasehold tenancy that renews itself automatically in the absence of notice to terminate.

3. Concurrent Ownership

Concurrent ownership, also known as co-ownership, exists when two or more people own the same real property simultaneously.

• Tenancy in Common:
  • Each owner holds an undivided interest in the property, meaning they have the right to use and possess the entire property, regardless of their ownership percentage.
  • Owners can have unequal shares of ownership.
  • There is no right of survivorship, meaning an owner’s interest can be passed down to their heirs through a will or by intestate succession.
  • Example: Two friends purchase a vacation home as tenants in common. One friend owns 60% and the other owns 40%. If the friend with 60% ownership dies, their share passes to their heirs, not automatically to the other friend.
• Joint Tenancy:
  • Each owner holds an equal, undivided interest in the property.
  • The key characteristic is the right of survivorship, meaning that if one owner dies, their interest automatically transfers to the surviving owner(s).
  • Joint tenancy requires the four unities:
    • Unity of Time: All owners must acquire their interest at the same time.
    • Unity of Title: All owners must acquire their interest through the same deed or instrument.
    • Unity of Interest: All owners must have equal shares of ownership.
    • Unity of Possession: All owners must have the right to possess the entire property.
  • Example: A married couple purchases a home as joint tenants. If one spouse dies, the other automatically becomes the sole owner of the property.
• Tenancy by the Entirety:
  • A form of joint tenancy specifically for married couples, recognized in some states.
  • It also includes the right of survivorship and requires the four unities.
  • In addition, neither spouse can transfer their interest in the property without the consent of the other spouse.
  • Community Property: Property that is jointly owned by husband and wife as defined by law.
• Condominiums: An apartment-like complex where each unit is separately owned.
• Cooperative: Ownership by a corporation where owners own a share in the corporation plus a lease from the corporation.
• Planned Unit Development (PUD): A development where lots are owned by unit owners but there are areas in common ownership.
• Time Share: A fractionalized ownership of a unit where owner has exclusive occupancy for a designated time period.

4. Non-Possessory Interests (Encumbrances)

Non-possessory interests, often called encumbrances, represent rights or claims that affect real property but do not grant the holder the right to possess the property.

• Easements:
  • A non-exclusive right to use the property of another for a specific purpose.
  • Easement Appurtenant: Benefits a specific parcel of land (the dominant tenement) and burdens another parcel (the servient tenement). The easement “runs with the land,” meaning it transfers automatically with the ownership of either property.
    • Example: An easement granting a landlocked property owner the right to cross their neighbor’s property to access a public road.
  • Easement in Gross: Benefits a specific person or entity, rather than a parcel of land. It is not tied to any particular property.
    • Example: An easement granting a utility company the right to run power lines across a property.
• Liens:
  • A financial claim against property used as security for a debt or obligation.
  • General Lien: A claim against all of the debtor’s property, both real and personal.
  • Specific Lien: A claim against a specific piece of property.
  • Voluntary Lien: Created voluntarily by the debtor, such as a mortgage.
  • Involuntary Lien: Arises by operation of law, such as a tax lien or a mechanic’s lien.
• Restrictive Covenants (Deed Restrictions):
  • Private agreements that restrict the use of property. They are typically included in the deed and “run with the land.”
  • Example: A restriction in a subdivision requiring all houses to be a certain minimum size or prohibiting the construction of fences.
    *Profit a Prendre: Right to take something from property (crops, timber, minerals, etc.).

5. Government Restrictions on Property Rights

Even with fee simple ownership, the government retains certain rights and powers that can affect private property.

• Eminent Domain: The government’s power to take private property for public use, even if the owner does not want to sell it. This power is constitutionally protected but requires the government to pay “just compensation” to the owner.
• Taxation: The government’s power to levy taxes on real property. Failure to pay property taxes can result in a tax lien and eventual foreclosure.
  • Ad Valorem Taxes: Taxation based on property value.
• Police Power: The government’s power to regulate private property to protect the health, safety, and welfare of the public. This includes zoning regulations, building codes, and environmental regulations.
• Escheat: The right of government to title when an owner dies without a will or heirs.

6. Conclusion

Understanding the various real property interests and their associated rights and limitations is essential for anyone involved in real estate transactions, property management, or land development. This chapter provided a foundational overview of these concepts, setting the stage for a deeper exploration of specific topics such as easements, liens, and co-ownership in subsequent chapters.

7. Key Terms

• Real Property: Land and everything permanently attached to it.
• Personal Property: Movable possessions.
• Freehold Estate: Ownership interest with indefinite duration.
• Fee Simple Absolute: The most complete form of ownership.
• Fee Simple Defeasible: Ownership that can be lost if certain conditions are violated.
• Life Estate: Ownership that lasts for the duration of someone’s life.
• Non-Freehold Estate: A leasehold estate granting temporary possession rights.
• Tenancy in Common: Concurrent ownership with no right of survivorship.
• Joint Tenancy: Concurrent ownership with the right of survivorship.
• Easement: A right to use the property of another for a specific purpose.
• Lien: A financial claim against property.
• Restrictive Covenant: A private agreement restricting the use of property.
• Eminent Domain: The government’s power to take private property for public use.
  *Escheat: The right of government to title when an owner dies without a will or heirs.