10/11/2012
Chapter 10: Interests in Real Property
Chapter 10
Interests in
Real Property
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Chapter Objectives
• Distinguish among the different forms of deeds.
• Discuss the purpose of the public records system
and the significance of a marketable title.
• Describe the purpose of title insurance.
• Identify alternate ways people can take ownership
of real property.
• Contrast freehold and leasehold estates.
• Discuss various types of liens and easements and
their impact on property.
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Deeds and Title
• Deed: Instrument that conveys a grantor’s
interest, if any, in real property
– Serves as evidence of title
• Title: Actual lawful ownership of real
property
• Equitable title: Interest in property created
on the execution of a valid sales contract,
whereby actual title will be transferred by
deed at a future date
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Chapter 10: Interests in Real Property
Requirements of a Valid Deed
• Valid deed must be in writing and contain:
1.Competent grantor(s)
2.Identifiable grantee to whom title will pass
3.Words of conveyance stating intent to convey
4.Legal description of the property being conveyed
5.Consideration as prove that sale took place
6.Acknowledgment signature of the grantor
• Usually before a notary public
• State sale of land is free and voluntary act
• Delivery and acceptance: Transfers title from grantor
to grantee
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Warranty Deeds: General Warranty
• Warrants title against defects that may have arisen
before or during grantor’s ownership
• Gives grantee greatest possible protection
• Most common for property transfers
• Typical covenants:
– Seizin: Grantor owns estate and has right to convey it
– Against encumbrances: Property is free of
encumbrances not recited as exceptions in the deed
– Quiet enjoyment: Grantee can possess land without
claims of title from others
– Warranty forever: Grantor will defend grantee’s interest
against all lawful claims of title
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Warranty Deeds: Limited Warranty
• Warrants title only against defects arising
from time grantor owned the land
• Guarantees grantor created no
encumbrances
• Common when conveying foreclosed
property
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Chapter 10: Interests in Real Property
Deeds without Warranties
• Quitclaim deed
– Conveys any interest in a piece of real property that the
grantor has at the time the deed is executed
– Makes no warranties regarding the title, if any, held by
the grantor
– Often used to clear up title problems
• Bargain and sale deed
– Implies grantor owns property and can convey it
– No warranties
• Fiduciary deed (or judicial deed)
– Executed by trustee, executor, or other fiduciary
– Conveys property fiduciary doesn’t own but is authorized
to manage
– Can only warrant that selling land falls within legal duties
as fiduciary
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Marketable Title
• Title that is free and clear from undisclosed
encumbrances or other defects that would:
– Expose purchaser to litigation
– Impede purchaser’s ability to enjoy property
– Impede purchaser’s ability to later sell property
easily
• Title search (examination) prior to
conveyance determines
– Ownership
– Quality of the title
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Public Record
• Recording: Filing a document in the county where
property is located so that it will be placed in the
public record
• Provides public notice of who holds interest in
property
• Requires a fee to county recorder
• Documents available to the public
• Allows property owners to defend their property
against others claiming interest
• Not legally required
– Unrecorded document may not be enforceable
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Chapter 10: Interests in Real Property
Notice
• Constructive notice: Knowledge that should be
known, even if it is not
– Everyone is considered to have constructive notice of the
contents of recorded documents
– Burden of discovery rests with the general public, buyer,
lender
• Actual notice: Individuals have actual knowledge of
a fact
– Includes what someone personally saw, heard, read, or
observed
• Inquiry notice: Indication of claim or other situation
that would alert a reasonable person to possible
problem
– Should lead to further inquiry
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Notice
Property owner Mary grants an easement across
her land to Bill, so Bill records the easement
document. Mary then sells her land to Joe. Joe
claims he doesn’t have to honor the easement
since he couldn’t tell it existed by looking at the
land, and Mary never told him about it.
Is the easement valid?
The easement is still valid because Joe is deemed
to have constructive notice of it. Although he didn’t
have actual notice, he could have found out about
the easement granted to Bill by checking the public
records.
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Abstract of Title
• Chronological history of title to a property
– All recorded documents that affect the title
– All public records searched, or not searched
• Title abstractor examines public records for:
–
–
–
–
–
–
–
Deeds
Taxes
Special assessments
Liens
Judgments
Mortgages
Other encumbrances that have ever affected the property
(even removed or satisfied)
• Does not guarantee validity of title
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Chapter 10: Interests in Real Property
Chain of Title
• Clear and unbroken chronological record of the
ownership of a specific piece of property
– Starting with current deed and going back a suitable
number of years
• Cloud on the title: Gap or flaw in the chain of title
– Creates uncertainty
• Suit to quiet title (quiet title action): Lawsuit filed to
determine and resolve deed problems
• Wild deed: Deed falling outside the chain of title
– Buyers and lenders do not generally have constructive
notice of wild deeds
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Recording Deeds
Ann buys a house and records her deed.
Later she sells the house to Bob, who does
not record his deed. Bob sells the land to
Curt, and Curt records his deed promptly.
Now there’s a break in the chain of title—the
record shows only Ann’s deed and Curt’s
deed, but the link between them (Bob’s
deed) is missing.
Whose deed, if anyone’s, is wild?
Curt’s deed is a wild deed.
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Recording Deeds
Ann is aware that Bob never recorded his deed and
decides to sell the same property a second time.
This time she sells it to Dan. Dan doesn’t know
about Bob or Curt, so he has no reason to look up
those names in the grantee/grantor index. He looks
up Ann’s name in the index, and as far as he can
tell from the record, she still owns the property. So,
Dan buys the house.
Does Dan have constructive notice of Curt’s
interest?
Dan does NOT have constructive notice of Curt’s
interest in the property, because Curt’s deed was
outside the chain of title.
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Chapter 10: Interests in Real Property
Marketable Title Act
• Law intended to improve marketability of title
• Simplifies the title search process by
extinguishing certain old claims
• Benchmark set by state statute, for example,
30 years
• Root of title: Deed most recent to be
recorded as of date before marketability is
determined
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Marketable Title Act
Date
Grantor
Grantee
July 12, 1889
U.S. Land Office
Robert Brown
March 5, 1934
Robert Brown
Lyle Baxter
June 21, 1956
Lyle Baxter
Peter Jones
April 4, 1989
Peter Jones
Margaret Headley
June 14, 2005
Margaret Headley
Denise Russell
Which is the root of title?
The deed from 1956.
Does Denise have marketable record title?
Yes
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Marketable Title Act
• Claims previous to root of title are
extinguished
• Possible exceptions
– Mineral reservations
– Government interests
– Railroad or utility easements
• Thorough title search should extend beyond
root of title
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Chapter 10: Interests in Real Property
The Torrens System
• Alternative to the recording system used by
some states
• Torrens certificate is issued after careful title
search and survey of the land
– Original certificate kept in registrar’s office
– Property owner receives duplicate
• Once “Torrenized:”
– All encumbrances must be registered with a
Torrens registrar
– No need to search public records
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Title Insurance
• Title company examines all documents to verify
good title
• Does not typically cure defects, but insures against
losses
• Policy protects lenders (and sometimes property
owners) up to the covered amount against loss due
to:
–
–
–
–
–
Disputes over ownership
Title defects not found in public record search
Claimants not listed on policy
Defects such as forged documents
Other defects not specifically excluded
• Generally paid for with a one-time premium
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Types of Title Insurance
• Mortgagee’s policy (lender)
– Protects the lender’s interest
– Policy for loan amount outstanding when claim is
paid
– Helps facilitate sale to secondary market
• Owner’s policy
– Issued in the name of the property owner
– Generally covers losses and damages if
• Title is unmarketable
• There is no right of access to the property
– Covered for as long as policyholder owns the
property
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Chapter 10: Interests in Real Property
American Land Title Association
• ALTA is the national trade association for title
insurance industry
• Provides standardized form for 1- to 4-family
residences that insures against:
– Title defects
– No right of access
– Invalid, unenforceable, subordinate mortgage
liens
• Funded development of Mortgage Electronic
Registrations System (MERS)
– Tracks loan ownership in secondary market
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Title and Ownership
• Title acquired and conveyed by:
– Deed – Document that transfers ownership of
real property
– Devise – Transfer by will after death of owner
– Descent – Transfer to heir after death of owner
with no will
• Ownership in severalty
– Simplest form of ownership
– Only one person or legal entity
• A single “real” person
• A single legal “non-living” entity, such as a corporation
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Co-Ownership
• Two or more persons share title with undivided
interest
– Right to possess whole property, not just part
• Also known as concurrent ownership
• May involve any number of people
• Three forms of co-ownership:
– Tenancy in common
– Joint tenancy
– Tenancy by the entirety
• Right of survivorship
– Property passes automatically to other co-owners when
one co-owner dies
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Chapter 10: Interests in Real Property
Co-Ownership Unities
• Conditions/unities define the form of co-ownership:
– Possession – All co-owners hold same
undivided right to possess the whole property
– Interest – All co-owners hold equal ownership
interests
– Time – All co-owners acquired interests at the
same time
– Title – All co-owners acquired interests by same
deed or will
• Most state law defines forms of co-ownership and
how property may be held or conveyed
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Tenancy in Common
• Two or more persons having an undivided
interest in the entire land
• No right of survivorship
– Interest passes to heirs at death of co-owner
• Most common form of co-ownership
• Requires only unity of possession
• Only co-ownership that can be owned in
unequal portions
• Assumed if not specifically stated in deed or
co-owners not spouses
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Joint Tenancy
• Two or more persons have equal undivided
interest in the entire land
• Includes right of survivorship
• Interest automatically passes to other coowners at death of co-owner
– Equally
– Simultaneously
• If interest conveyed by joint tenant:
– Joint tenancy ends
– Becomes tenancy in common
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Chapter 10: Interests in Real Property
Tenancy by the Entirety
•
•
•
•
Only for owners who are husband and wife
Each has equal and undivided share of property
Includes right of survivorship
Interest automatically passes to surviving
spouse
– Becomes owner in severalty
• Often assumed if not stated specifically in deed
• Ways to terminate tenancy by the entirety:
– Death of one spouse
– Both agree and sign new deed
– Divorce
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Adverse Possession
• Possible acquisition of title to someone else’s
real property by possession
• Designed to encourage productive use of land
• Requires open and notorious, hostile and
adverse, exclusive and continuous use of
another’s land for state-mandated number of
years
• Exceptions:
– Land owned by federal or state governments
– Municipal streets
– Torrens system registered land
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Possessory Interests: Estates
• Interest: Ownership, right to use, or financial claim
• Estate: Possessory interest
• Freehold estate: Possessory interest of uncertain
duration
– Fee simple estate: Fullest freehold estate
interest; includes all of bundle of rights without
condition
– Qualified fee: Grantor puts condition or
requirement in deed that would automatically
revert title
– Fee on condition: Grantor puts condition or
requirement in deed that could terminate
ownership
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Chapter 10: Interests in Real Property
Possessory Interests: Estates
• Life estate: A freehold estate lasting only as
long as the measuring life lives
• Life tenant can occupy and use property
– Conventional: Holder of life estate is the
measuring life
– Pur autre vie: Measuring life is someone else
• Life tenant can sell, mortgage or lease only
his interest (life estate)
• Life tenant cannot commit act of waste
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Dower Rights / Community Property
• Laws in some states related to spouses
• Dower – Usually references wife’s rights (curtsy for
husbands)
– Spouse’s interest in real property as statutory life
estate
– Includes property brought into the marriage
– Rights must be released in most real estate
transactions
• Community property
– Property acquired during marriage owned equally
– Property acquired before marriage owned only by
that individual
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Leasehold Estates
• Interest in real estate that gives holder
temporary right to possession, without
conveying title
– Holder of a leasehold estate is known as a
tenant or lessee
– Property owner is known as the landlord or
lessor
• Created by lease agreements
• Reversionary interest
– When lease ends, possession reverts to landlord
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Chapter 10: Interests in Real Property
Leasehold: Estate for Years
• Also called term tenancy
• Lasts for a specific period, after which it
automatically terminates
• Can be any amount of time, even just for one
day
• Neither party can terminate sooner than what
is in the lease unless:
– Mutual consent (surrender)
– Breach of contract
• Not terminated by death of either party or
sale of the property
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Leasehold: Periodic Estate
• Also called periodic tenancy
• Continues for successive equal periods of
length until terminated
• Requires proper notice from lessor or lessee
• Term may be any length of time agreed to
• Automatically renews itself at the end of each
period until terminated
• Not terminated by death of either party or
sale of the property
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Leasehold: Estate at Will
• Also called tenancy at will
• Does not have a lease to specify termination
date and rental period
• May or may not involve payment of rent
• If rent is paid, no reference to time periods
• Either party may end at any time with proper
notice
• Automatically terminates with death of either
party
• Not recognized in some states
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Chapter 10: Interests in Real Property
Leasehold: Tenancy at Sufferance
• Possession of property by tenant who
had valid lease but remains after lease
term without landlord permission
• Holdover tenant similar to trespasser
• Not technically a leasehold estate
• Landlord cannot forcibly remove a
holdover tenant
– Must start eviction proceedings
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Leasehold: Eviction
• Legal action taken by owner to terminate
lease upon tenant breach
• Also known as actual eviction and generally
involves:
1.A notice to vacate
2.A forcible entry and detainer lawsuit filed
by landlord
3.A writ of execution court order directing a
public officer to seize property to regain
possession for the owner
(Similar process followed after foreclosure if previous
owner refuses to vacate)
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Organization: Sole Proprietorship
• Owned by single individual (or husband
and wife) in severalty
• Owner personally responsible for debts
• May operate under sole proprietor’s
name or state-registered alias
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Chapter 10: Interests in Real Property
Organization: Partnership
• Association of two or more individuals as coowners of a business
– Specified in a partnership agreement
– Business certificate must be on file with county
• General partnership
– All partners share in financial liability, both
individually and as partner
• Limited partnership
– One or more general partners and one or more
limited partners
– Limited partners have no say in partnership matters
– Partners’ liability limited to original investment
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Organization: Corporation
• Legal entity created and operated under state law
– Public, private for profit, or private nonprofit
• Legal “person” separate from the individual
stockholders
– Shareholders not personally liable for corporate debts
– Property owned in severalty as legal person
• C Corporation
– Pays corporate income tax
– Shareholders pay income tax on dividends
• Subchapter S Corporation
– Does not pay corporate income taxes
– Income/losses passed through to shareholders
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Organization: Condominiums
• Separate fee simple interest in interior
airspace of individual unit; usually not land
• Undivided interest in common areas
– All residents own and use as tenants in common
• Must follow CC&Rs set by condo developer
• Mortgage lien on individual unit
– Foreclosure does not jeopardize community
• Property tax levied on individual unit
• Owners association fees
– Maintenance of common areas
– Hazard insurance on building and common
areas
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Chapter 10: Interests in Real Property
Organization: Cooperatives
• Buildings owned by corporations with
residents as shareholders with a proprietary
lease
– Interior of an individual unit
– Right to use common areas
• Shareholder pays prorated share of building
expenses (liability on entire building)
– Maintenance
– Property tax
– Hazard insurance
• Transfer of co-op interest requires
shareholders’ consent
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Organization: PUDs & Townhomes
• Planned unit developments (PUDs)
– Special type of subdivision
– May combine residential, non-residential uses
– May depart from ordinary zoning, subdivision
regulations
– Usually some form of association fees
• Townhomes
– Each co-owner has separate fee simple
interest in individual unit
• Roof, basement, land under unit; may
extend to patio or lawn
– Homeowner association fees
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Non-Possessory Interests
• Burdens a real property owner’s title without the
right to possess (encumbrance)
• Types of non-possessory interests include
easements, liens, and restrictive covenants
• Easement
– Right to use another’s real property for particular
purpose
– Creates limited rights for easement holder
– May be public or private
– May be put into deed before transfer or created
separately
– Classified by how land is burdened, who benefits
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Chapter 10: Interests in Real Property
Easements: Types
• Easement appurtenant
– Two separately deeded parcels owned by different
parties
– Burdens one piece of land for benefit of other
– Right that runs with the land; transfers with
ownership
• Easement in gross
– Specific parcel of land (subservient tenement) that
benefits a person or company (dominant tenant)
– Most commonly held by government and public
utilities
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Easements: Types
1.
2.
Easement in Gross
Easement Appurtenant
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
License or Easement
• License:
– Temporary, revocable, non-assignable
permission to enter another’s land for a
particular purpose
– Does not create an interest in property
– Not considered an encumbrance
– May be created by oral contract
– Cannot be assigned
– Becomes invalid if licensee dies
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Chapter 10: Interests in Real Property
Easements: Creation
•
•
•
•
Created voluntarily or involuntarily
Must be in writing to be valid
Should be recorded
May be created by:
–
–
–
–
Express grant – included in deed
Implication – longstanding use
Necessity – for land with no access
Prescription – open, notorious use (similar to
adverse possession)
– Condemnation – power of eminent domain
– Party wall – between two connected properties
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Easements: Termination
• Release – easement holder signs document;
should be recorded
• Merger – two or more properties united
under one owner
• Abandonment – failure to occupy or use
property
• Prescription – Non-use for specified period of
time
• Failure of purpose – purpose for which it was
created no longer exists
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Encroachment or Encumbrance
• Encroachment
– Physical object intruding onto a neighbor’s
property
– Often unintentional
– Owner may sue to have encroachment
removed; may not destroy
– Not an encumbrance
– Encroacher could get easement to allow
encroachment
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Chapter 10: Interests in Real Property
Financial Encumbrances: Liens
• Security for debt that gives lienholder right to
foreclose for non-payment
• Does not prevent property transfer
• Buyer may take title subject to liens
• Seller generally required to clear liens at
closing
• Classified as:
– General – attaches to real and personal property
– Specific – attaches only to specific property
• Voluntary or involuntary
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Voluntary Liens: Mortgages
• Liens placed on property with consent of
owner as collateral for repayment of debt
• Upon default, creditor can pursue judicial
foreclosure
– Could result in sheriff’s sale to repay debt
– Deficiency judgment may be granted if
sale does not repay entire debt
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Involuntary Liens
• Operation of law without consent of property
owner; general or specific
• Mechanic’s and materialman’s – Claimed by
someone who performed work or supplied
materials on real property and was not paid
• Tax liens – For nonpayment of property tax
(specific) or federal income tax (general)
• Judgment – Against a person’s property through
court action (general)
• Attachment – Intended to prevent property transfer
pending litigation outcome
– Lis pendens serves notice
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Chapter 10: Interests in Real Property
Lien Priority
• Determines order of payment after foreclosure
• First attached is generally first paid
– Exception: Property tax lien
• Subsequent liens paid off in full
– Later liens may not be paid at all
• Subordination agreement
– Creditor voluntarily puts its lien in lower priority
• State-specific homestead laws
– Give owner-occupied residences some protection from
lien foreclosure
– Exempts some of a homeowner’s equity in real estate
– May be limited by statute to a set amount
– May apply only to attachment or judgment liens
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Mortgage Principles and Practices 4th Edition (02/21/2012)
Chapter 10: Interests in Real Property
Lien Classification
Type
Voluntary
Involuntary General
Property Tax
X
Income Tax
Mortgage
X
X
X
X
X
Mechanic’s
Judgment
Specific
X
Attachment
X
X
X
X
X
X
X
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Mortgage
Illinois
Real
Principles
Estate Broker
and Practices
Pre-License
4th Edition
Topics (02/21/2012)
2nd Edition
Chapter 10: Interests in Real Property
Key Term Review
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Abstractor
Acknowledgment
Adverse Possession
Chain of Title
Clouds on the Title
Co-ownership
Condominium
Cooperative
Deed
Dower
Easement
Encumbrance
Estate
Fee Simple
Mortgage Principles and Practices 4th Edition (02/21/2012)
•
•
•
•
•
•
•
•
•
•
•
•
•
Freehold Estate
Leasehold Estate
Lien
Life Estate
Marketable Record Title
Possessory Interest
Quitclaim Deed
Recording
Root of Title
Severalty
Title
Undivided Interest
Warranty Deeds
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Chapter 10: Interests in Real Property
Summary
1. Deed: An instrument that conveys
ownership in real property; evidence of title
– Title refers to holding the rights conveyed in a
transfer; actual ownership; not a document
– Seller is the grantor; buyer is the grantee
– Valid deeds must be written and have
competent grantor’s signature, identifiable
grantee, words of conveyance, description of
property, consideration, acknowledgment, and
delivery and acceptance
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Summary
2. General warranty deeds have guarantees
– Obligate grantor to defend the grantee from
claims against the title
– Give the grantee the best possible protection
– Most often used for real estate transfers in
many states
– Quitclaim deeds – grantor conveys only the
interest he may have in the property, without
warranty; used to clear up clouds on title
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Summary
3. Title insurance
– Protects lenders and sometimes property
owners up to the coverage amount
•
•
Disputes over ownership of a property
Defects in the title not found in the search of the
public record
– American Land Title Association (ALTA)
•
•
•
National trade association
Provides standardized title insurance policy
forms
One- to four-family residences
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Summary
4. Recording documents gives notice of ownership
or rights
Actual notice – fact known to be true
Constructive notice – all filings in public records
State marketable title acts
• Unbroken chain of title deeds back a specified
number of years finds the root of title
• Establishes marketable title
– Easements and other rights must be recorded or
mentioned specifically in deeds to preserve the
rights
– Torrens System – rare, must be recorded with
registrar
–
–
–
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Summary
5. Ownership – can be held in severalty (one
person) or co-owned by two or more persons with
each having an undivided interest
–
–
–
–
–
–
Undivided interest – each co-owner has right to possess
whole property, not just part of it
Forms of co-ownership are tenancy in common, joint
tenancy, or tenancy by the entirety
Title to real property can be held by associations of
individuals: Corporations, general and limited partnerships
Condominium units are owned in severalty; owner has an
undivided interest in the common areas
Cooperatives are owned by a corporation; each
shareholder has proprietary lease for one unit
Adverse possession – acquiring title to other’s real
property by open and hostile possession for specified
number of years
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Summary
6. Estates – possessory interests in real property,
either now or in the future
– Freehold estates – uncertain duration
•
•
Fee simple – inheritable, transferable, perpetual
Life estates – for life of specified person
– Fee simple absolute – fullest interest
•
•
Defeasible or conditional fee – can be undone
Dower or curtsy – interest held by married
persons in each other’s real property (some states)
– Leasehold estates – give tenants temporary
possessory interest without title
•
•
Estate for years – any fixed period of time
Actual eviction – legal removal of a tenant
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Summary
7.
Easement – non-possessory right to use another’s land
for a certain purpose
• Appurtenant or in gross
• Created by express grant, reservation, implication,
necessity, or prescription
– Lien – non-possessory interest, financial encumbrance
– Lien holders can foreclose on default, force sale to
repay debt
– Most common liens: Mortgages, tax, mechanics’,
judgment
– Usually prioritized (and thus paid out in foreclosure) in
the order they are recorded
• Property tax liens always have priority
• Later recorded liens may not be paid
– Lis pendens – recorded notice that lawsuit is pending
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Chapter 10: Interests in Real Property
Chapter 10 Quiz
1. A deed is
A. actual ownership to real estate rights.
B. better than title.
C. a document that must be recorded.
D. evidence of title.
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Chapter 10 Quiz
2. A grantor acknowledges a deed before a
A. federal official.
B. lender representative.
C. notary public.
D. witness.
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Chapter 10 Quiz
3. Requirements for a valid deed include all
EXCEPT
A. an acknowledgment before a notary
public.
B. an adequate description of the property
conveyed.
C. delivery and acceptance of the deed.
D. the signature of a competent grantee.
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Chapter 10 Quiz
4.
Alice and Conrad bought a house and received a
general warranty deed. Later, they discover that the
previous owner’s wife didn’t release dower. What’s
the best way to correct this?
A. The previous owner executes a quitclaim
deed.
B. The previous owner and spouse execute
another general warranty deed.
C. The previous owner and spouse issue a wild
deed.
D. The wife of the previous owner executes a
quitclaim deed.
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Chapter 10 Quiz
5. Documents are recorded to give
A. actual notice.
B. constructive notice.
C. inquiry notice.
D. legal notice.
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Chapter 10 Quiz
6. A Marketable Title Act says that proper
title is established by
A. adequately searching the public
records.
B. buying adequate title insurance.
C. making sure that no wild deeds exist.
D. an unbroken chain of title back a
specified number of years to the root
of title.
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Chapter 10: Interests in Real Property
Chapter 10 Quiz
7. How many persons may share
ownership in severalty?
A. one
B. two, as long as they are married
to each other
C. two or more, as long as there is
unity of title
D. any number, regardless of unity
of title
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Chapter 10: Interests in Real Property
Chapter 10 Quiz
8. Which rights are NOT transferred
with real property?
A. disposal rights
B. easements
C. encroachments
D. surface rights
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Chapter 10 Quiz
9. Which is NOT an encumbrance on
real property?
A. appurtenant easement
B. judgment lien
C. personal license
D. restrictive covenant
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Chapter 10: Interests in Real Property
Chapter 10 Quiz
10. In deciding who gets paid from a
foreclosure sale, which lien has
priority?
A. first lien recorded
B. lien for delinquent property taxes
C. mechanics or materialmen who file a
timely notice after commencing work
on the property
D. mortgagee or original lender
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Chapter 10: Interests in Real Property
Chapter 10 Quiz
11.A non-possessory interest in real
property is also called a(n)
A. encumbrance.
B. leasehold estate.
C. license.
D. servient tenement.
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Chapter 10 Quiz
12.Which condition of use is NOT required
for adverse possession?
A. continuous use for a number of years,
as specified by state law
B. hostile and adverse
C. open and notorious
D. permission of the owner
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