Chapter 2
Property Ownership and Interests
Learning Objectives
 Define and give examples of real property and personal property
 Define and give examples of fixtures, as well as describe tests for
determining if an item is a fixture
 Define and list the freehold estates
 Define severalty and concurrent property ownership including
condominiums, townhouses, cooperatives, PUD’s, and timeshare
property
 List and define types of liens
 List and define types of easements
 Define encroachments, water, air, and subsurface rights
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Chapter 2
Property Ownership and Interests
Real Property
 Real property consists of land, improvements, rights and privileges
 Conveyed by deed
Tenements and Hereditaments
 Tenements include those things that can be touched and seen
(buildings) as well as things that are intangible (easements)
 Hereditaments are those things capable of being inherited
 Plants include fruits of the soil (fructus naturales or perennials) or
fruits of industry (fructus industrials or annuals)
 Plants requiring annual cultivation are considered personal property
 Plants not requiring annual cultivation are considered real property
unless in a movable container
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Chapter 2
Property Ownership and Interests
Appurtenances
 Rights or privileges that “runs with the land”
Subsurface Rights
 Rights that exist under the surface of the earth (i.e. mineral rights)
Air Rights
 Rights that exist above the surface of the earth
 Limited to what the owner is reasonably expected to use
Riparian Rights
 Rights of an owner bordering a flowing body of water
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Chapter 2
Property Ownership and Interests
Lateral and Subjacent Support
 Lateral - Right of land to be supported in it’s natural state by adjacent
land
 Subjacent – Right to have land supported from below (i.e. mining)
Personal Property
 Anything not considered real property
 Conveyed “Bill of Sale”
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Chapter 2
Property Ownership and Interests
Fixtures
 Item that was once personal property that has become real property by
virtue of its’ attachment
 Total circumstance test:
1. Intent – major determinant
2. Relation of the attacher
3. Method of attachment
4. Adaptation or customization
 Trade fixtures – fixtures used in the conducting of commerce.
Considered personal property and can be removed at end of lease
 Uniform Commercial Code – provides for a lender to have a fixture
considered personal until paid off
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Chapter 2
Property Ownership and Interests
Improvements
 Anything attached that increases the value or utility of the land
 Can be “to the land” or “on the land”
 “To the land” includes roads, utilities, grading, etc.
 “On the land” includes buildings
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Chapter 2
Property Ownership and Interests
Estates and Real Property
Eminent Domain
 The Right to take private property for a public use by paying the
owner fair and just compensation
 The actual taking of the land is considered condemnation
Police Power
 The right of a government to make and pass reasonable rules and
regulations to promote and protect the public welfare (i.e. building,
fire, health, and sanitation codes)
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Chapter 2
Property Ownership and Interests
Estates and Real Property
Taxation
 Real property taxes is the largest source of income for local
government
Escheat
 When an owner dies without leaving a valid will, and no apparent
heirs, the property will convey (escheat) to the state
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Chapter 2
Property Ownership and Interests
Estates in Land
 Either “freehold” or “Nonfreehold” (leasehold or less than freehold)
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Chapter 2
Property Ownership and Interests
Freehold Estates
 Freehold lasts for at least a lifetime
 Can be inheritable or non-inheritable
Estates of Inheritance
 Fee Simple Absolute:
• Also known as “fee simple” or “fee”
• The highest and best form of ownership available in real property
 Fee Simple Determinable
• Grantor sets conditions on future use of real property
• Title AUTOMATICALLY reverts to grantor if conditions are violated
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Chapter 2
Property Ownership and Interests
Estates of Inheritance
 Fee Simple Subject to Condition Subsequent:
• Grantor sets conditions on future use of the property in some way
• Grantor, his heirs, or the remainderman must take action to regain
title if conditions are violated
• Note: Both Fee Simple Determinable and Fee Simple Subject to a
Condition Subsequent are defeasible or qualified fee estates
 Estate Pur Autre Vie:
• Estate based on the lifetime of another (i.e. Person A conveys title to
Person B for the lifetime of Person C)
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Chapter 2
Property Ownership and Interests
Estates of Not of Inheritance
 Conventional Life Estate:
• For the life of the named life tenant
 Marital Life Estate:
• Allows surviving spouse a life estate in 1/3 of real property owned
in severalty by the deceased anytime during the marriage
 Dower/Courtesy:
• Wife’s/Husband’s right to a life estate in the property owned by a
deceased spouse during the marriage
• Abolished and replaced by the Marital Life Estate created by North
Carolina Intestate Succession Statutes
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Chapter 2
Property Ownership and Interests
Life Estates
 Conventional Life Estate:
• Created by the act of parties
• Non-inheritable freehold estate
 Marital Life Estate:
• Created by the operation of law
• Governs the distribution of property for a spouse who dies intestate
• A will cannot defeat the marital interest of a surviving spouse
• Statute does not apply to property owned as tenants by the entirety
• Surviving spouse has a choice of EITHER:
• Marital life estate
OR
• Property of the deceased spouse willed to the surviving spouse
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Chapter 2
Property Ownership and Interests
Life Estates
 The grantor or his/her heirs will have a reversionary interest in the
estate
• At death of life tenant, estate will revert to grantor or his/her heirs
Grantor
Grantee (life tenant)
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Chapter 2
Property Ownership and Interests
Life Estates
 Alternatively, the conveyance of the life estate could specify that the
estate pass on to someone other than the grantor or his/her heirs (life
estate in remainder)
• This person would be called a remainderman and has a
remainder, or future, interest in the property
Grantor (in a deed)
Grantee
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Remainderman
Chapter 2
Property Ownership and Interests
Life Estates – Rights of Responsibilities of Life Tenants
 Right of alienation:
• Life tenant may transfer his/her title to another
• May pledge the title as security for a debt
• Note: May only transfer or pledge title to life estate, not to whole
bundle of rights
 Responsibility of preservation:
• Must not commit waste
• Must preserve the estate for the benefit of the remainderman or
holder of the reversionary interest
 Right of estovers:
• Allows life tenant to cut and use a reasonable amount of timber
from the land to repair buildings or to use as fuel
• Does not allow the tenant to cut and sell timber for profit
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Chapter 2
Property Ownership and Interests
Life Estates – Rights of Responsibilities of Life Tenants
 Responsibility for taxes:
• Has an obligation to pay the real property taxes on the property in
which he/she has a life estate
 Responsibility to repair:
• A duty to make repairs to the improvements on the land
• Cannot permit the property to deteriorate due to lack of repairs
causing depreciation of improvements
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Chapter 2
Property Ownership and Interests
Non-Freehold Estates
 Estate for years:
• For any fixed period of time
• Automatically terminates at the end of that period
• No notice required to terminate
 Estate from year to year (periodic estate):
• A periodic estate that automatically renews at the end of its period if the
parties do not provide otherwise
• Notice is required to terminate
 Estate at will:
• An indefinite duration
• May be terminated by either party instantaneously by giving notice to the
other party
• Payment of rent would change this to a periodic estate
 Estate at sufferance:
• A holdover situation created when the tenant’s lease has expired and
he/she fails to vacate the premises
• Differs from trespassing in that tenant originally entered property legally
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Chapter 2
Property Ownership and Interests
Forms of Ownership
 Ownership in Severalty:
• Title is held in the name of only one person
 Concurrent (Joint) Ownership:
• Simultaneous ownership of real property by two or more people
 Tenancy in Common:
• Two or more people holding title to property at the same time with no right
of survivorship
• Each tenant in common holds an undivided interest in the entire property
• These interests may be, but need not be equal
 Joint Tenancy:
• Must acquire interests at the same time and on same deed
• If joint tenant sells his/her share, the new owner will become a tenant in
common
• No automatic right of survivorship in North Carolina
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Chapter 2
Property Ownership and Interests
Forms of Ownership
 Tenancy by the Entirety:
• Limited to ownership of husband and wife
• Right of survivorship
• Surviving spouse receives title by operation of law
• Marriage does not create tenancy by entirety for property one spouse brings
into the marriage
• One spouse may convey ownership to both spouses as tenants by the
entirety
• Both spouses must sign deed to convey property held as tenants by the
entirety to one of them in severalty
• After decree of divorce, ownership reverts to tenancy in common
 Community Property:
• Not practiced in North Carolina
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Chapter 2
Property Ownership and Interests
Condominiums
 Includes the ownership of the airspace of the individual unit in any form of
ownership
 Airspace owners own common areas as tenants in common however, the right
to partition is waived
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Chapter 2
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Chapter 2
Property Ownership and Interests
Combination (Hybrid) Forms of Concurrent Ownership
Condominiums
 Ownership of the individual unit plus co-ownership of the common areas
The 1986 North Carolina Condominium Act
 Pertains primarily to residential condominiums
 Public offering statement:
• Must be provided by the developer to the prospective buyer before the
contract is signed
• Must disclose certain information pertaining to the project, including the
right to cancel
• Does not apply to resale
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Chapter 2
Property Ownership and Interests
The 1986 North Carolina Condominium Act
 Purchaser’s right to cancel:
• Can cancel for any or no reason, within SEVEN DAYS after signing
contract
• Does not apply to resale
 Escrow of deposit:
• Deposits must be kept in an escrow account the full SEVEN DAYS or until
cancellation and refund occurs
 Resale certificates:
 Disclosure of monthly assessments for common areas and other fees for
which owners are responsible is required
 Warranties:
• Unit is constructed in an acceptable manner, free from defects, and suitable
for the purpose intended unless warranty has been disclaimed so as to void
it
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Chapter 2
Property Ownership and Interests
Combination (Hybrid) Forms of Concurrent Ownership
Townhouses
 Ownership of the unit as well as the specific portion of land upon which the
individual unit is located
 The Home Owner’s Association owns the common areas
Cooperatives
 Ownership of shares of stock in a corporation that owns a building containing
cooperative apartments
 Right of possession is provided by a proprietary lease
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Chapter 2
Property Ownership and Interests
Combination (Hybrid) Forms of Concurrent Ownership
Time Shares
 Any right to occupy a property for five or more separated time periods over a
span of five or more years
 Purchasers must be given a public offering statement
 Five day right of rescission
 Escrow requirement ten days
Planned Unit Developments (PUD’s)
 Small community that includes some form of housing, recreational areas, and
supporting commercial activities
 Any form of residential ownership may be present; such as single-family
homes, condominiums, or townhouses
 Concept of land development rather than a form of ownership
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Chapter 2
Property Ownership and Interests
Encumbrances to Real Property
Liens
 A claim or a charge against the property that can result from a contractual
agreement or from the operation of law
Easements
 The right someone has in the lands of another
Encroachments
 A trespass on the land of another as a result of an intrusion or invasion by some
structure
 As disclosed by a survey
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Chapter 2
Property Ownership and Interests
Classification of Liens
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Chapter 2
Property Ownership and Interests
Classification of Liens
Specific Liens
 Mortgage
• Pledges a specific property as security for a debt
• North Carolina uses deed of trust as security instrument
• Default on repayment of the mortgage or deed of trust note will cause
the lender to foreclose by having the property sold at public auction
• The proceeds of the sale are used to satisfy the debt
 Real property tax
• Taxes levied by a local government
• This type of lien has priority over all other liens
• Real property tax liens are good for ten years
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Chapter 2
Property Ownership and Interests
Classification of Liens
Specific Liens
 Special assessment:
• A charge against a property for the prorata cost of some improvements
made to areas adjoining the property (i.e. street paving, water and
sewer lines, sidewalks)
 Mechanic’s lien:
• A lien filed by anyone who provides labor or material to a property
• Must file within 120 DAYS from the last day that labor or material
was furnished to the property
• Effective from the first day that labor or material was furnished to the
property
• Must be enforced within 180 DAYS from the last day of work
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Chapter 2
Property Ownership and Interests
Classification of Liens
General Liens
 A court decree of the amount one person is indebted to another
 Judgment:
• General lien against all real and personal property the judgment debtor
owes in the county in which the judgment is recorded
• May be recorded in any county in the state
 Personal property tax:
• Annual tax assessed on certain personal property owned as of January
1st of the tax year
• Covered in detail in Chapter 3
 Income tax:
• A general lien for federal and state income taxes
• This lien does not have a special priority
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Chapter 2
Property Ownership and Interests
Classification of Liens
General Liens
 Estate & inheritance tax:
• Federal government imposes a tax on the estate (real and personal
property) of deceased persons, called the estate tax
• States also impose a state inheritance tax upon the inheritance of real
and personal property
• Taxes continue until they are paid
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Chapter 2
Property Ownership and Interests
Classification of Liens
Priority of Liens
 Priority generally based on the time (day and hour) the lien is recorded with
those recorded first taking priority
 This system is also known as the pure race system
 Exceptions to this priority are:
• Real property taxes – always given priority over all other liens
• Personal property taxes – like real property taxes, given priority over all
other liens
• Mechanic’s liens – priority relates to the first date of work on the job rather
than the date of recordation
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Chapter 2
Property Ownership and Interests
Classification of Easements
 Appurtenant easement:
• An easement between two or more adjoining properties, owned by two or
more separate owners, and is said to, “Run with the land”
• Land that is benefited from the easement is the dominant tenement and the
land encumbered by the easement is the servient tenement
 Easements in gross – not dependent upon ownership of an adjoining property.
No dominant tenement; only a servient tenement
• Commercial easements in gross are assignable and can be conveyed
• Most common use of commercial easement in gross is for the purpose of
installing power lines, telephone or cable lines, and gas lines above, on, or
under the surface of the earth
• Personal easements in gross are:
• Not assignable
• Cannot be conveyed
• Not inheritable
• Personal easements in gross are rare
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Chapter 2
Property Ownership and Interests
Classification of Easements
 Appurtenant easement:
• An easement between two or more adjoining properties, owned by two or
more separate owners, and is said to, “Run with the land”.
• The land that is benefited from the easement is the dominant estate and the
land encumbered by the easement is the servient estate.
 Easements in gross – An easement between a parcel of land and a person or
legal entity. This involves a servient interest only.
• Commercial easements in gross are assignable and can be conveyed
• Most common use of commercial easement in gross is for the purpose of
installing power lines, telephone or cable lines, and gas lines above, on, or
under the surface of the earth
• Personal easements in gross are rare
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Chapter 2
Property Ownership and Interests
Creation of Easements
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Chapter 2
Property Ownership and Interests
Creation of Easements
 Express (specifically stated or written)
• Grant or reserve:
• Seller may grant or buyer may reserve easement by including
appropriate language into the deed
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Chapter 2
Property Ownership and Interests
Creation of Easements
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Chapter 2
Property Ownership and Interests
Creation of Easements
 Party walls:
• Used by adjoining neighbors to support the side wall of each unit
• When the property line is in the middle of the wall, each owner has a cross
easement into the others property or tenancy in common
• When the wall is entirely within the property of one party, the other has an
easement in the use of the wall
 Dedication
• An easement granted for public use such as water and sewer lines
 Implied
• Necessity:
• Implied when the actions of a party demonstrate an intent to create an
easement
• Reference to recorded plat:
• Implied from a plat showing the existence of an easement
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Chapter 2
Property Ownership and Interests
Creation of Easements
 Operation of law – Easement acquired by continuous, long term adverse use
• Prescription:
• Using another’s land for a prescribed period of time
• Must be used without permission
• Must file suit to quiet title to prove conditions have been met before
acquiring title
• Condemnation:
• Enables the government to take private land for the benefit of the
general public under the power of eminent domain
• Commonly used to obtain easements for rights-of-way, not to obtain
title
• Statutory cartway proceeding can be created when the owner of a
landlocked property petitions to have a cartway sectioned off of another
owner’s property for ingress/egress
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Chapter 2
Property Ownership and Interests
Termination of Easements
Easements may be terminated as follows:
• Release of the easement by the dominant owner to
the servient owner
• Combining the dominant and servient properties
into a single tract
• Abandonment of the easement by the dominant
owner
• Cessation of the purpose for which the easement
was created
• Expiration of a specified time for which the
easement was created
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