Chapter 2
Property Ownership
and Interests
2010©Cengage Learning. All Rights Reserved.
IN THIS CHAPTER
• The types of ownership of real property.
• Real estate agents must avoid the
temptation to give legal advice.
• Real estate licensees must recognize the
basic concepts of law.
• Licensees must encourage clients and
customers to become properly informed
through appropriate legal counsel.
2010©Cengage Learning. All Rights Reserved.
THE CONCEPT OF PROPERTY
• Real estate is the land and all
improvements made both on and to the
land, whether found in nature or placed
there by humans.
• Real property is real estate plus all legal
rights, powers, and privileges inherent in
ownership of real estate.
2010©Cengage Learning. All Rights Reserved.
Bundle of Rights
• The sticks in the bundle include the
major sticks of land, fixtures, and fruits of
soil, all of which are tangible (movable).
• The bundle also includes intangible rights
such as air rights, water rights, mineral
rights, easements, leases, mortgages,
licenses, profits, and so on.
2010©Cengage Learning. All Rights Reserved.
• Real property consists of land and
everything permanently attached to
land, as well as the rights of ownership.
– Ownership is transferred by a deed.
• Personal property (personalty or chattel)
is everything that is not real property.
– Ownership is transferred by a bill of sale.
2010©Cengage Learning. All Rights Reserved.
• Land is defined as the earth’s surface
extending downward to the center of the
earth and upward to infinity, including
things permanently attached by nature.
2010©Cengage Learning. All Rights Reserved.
Fixtures = Improvements
1. How permanent is the attachment?
2. What was the intent of the person
installing the item?
3. If it is removed, can the item be used
elsewhere?
2010©Cengage Learning. All Rights Reserved.
Trade Fixtures
• Items of personal property that a
business operator installs in a building
space (whether owned or rented) are
presumed to remain personal property.
2010©Cengage Learning. All Rights Reserved.
An estate in real property is an
interest in the property
sufficient to give the holder of
the estate the right to
possession of the property.
2010©Cengage Learning. All Rights Reserved.
Types of Estates
• Freehold estate is ownership for an
undetermined length of time.
• Nonfreehold or leasehold estate signifies
possession with a determinable end.
2010©Cengage Learning. All Rights Reserved.
Fee Simple Absolute
• Provides the most complete form of
ownership and bundle of rights available
in real property; also called fee simple.
2010©Cengage Learning. All Rights Reserved.
Life Estates
• A freehold estate that defines itself.
• It is ownership, possession, and control
for the life of someone.
• Ownership, possession, and control are
contingent upon living.
• Therefore, the ownership, possession,
and control are lost at death.
• Under a life estate, heirs of the deceased
owner inherit nothing.
2010©Cengage Learning. All Rights Reserved.
Estate Pur Autre Vie
• Based on the lifetime of a person other
than the life tenant.
• Provides for inheritance by the life
tenant’s heirs only until the death of
the person against whose life the estate
is measured.
2010©Cengage Learning. All Rights Reserved.
Statutory Dower Rights
• Both dower (recognized in Michigan) and
curtesy (not recognized in Michigan) refer
to an automatic life estate owned by a
surviving spouse in inheritable property
owned by the deceased spouse alone
during the marriage.
• If the owner of the land is the husband,
the wife has a life estate called dower.
2010©Cengage Learning. All Rights Reserved.
LEASEHOLD ESTATES
(NONFREEHOLD ESTATES)
•
•
•
•
Estate for Years (Fixed Termination)
Estate from Year to Year (Periodic Estate)
Estate at Will
Estate at Sufferance
2010©Cengage Learning. All Rights Reserved.
Ownership of Real Property
• Ownership in Severalty
• Concurrent Ownership
– tenancy in common
– joint tenancy
– tenancy by the entirety
– community property
o Right of survivorship
o Right of inheritance
2010©Cengage Learning. All Rights Reserved.
Condominium = Jointly Controlled
• “Horizontal Property Acts” authorize a
three-dimensional property description,
with a property line above and below the
condominium.
• These horizontal property lines create a
cube of air space or a volume that is the
privately owned condominium.
• Air rights and area below the land surface
are owned as tenants in common.
2010©Cengage Learning. All Rights Reserved.
Michigan Condominium Act
a prospective purchaser of a new construction condominium must be provided detailed
information concerning construction and proposed operating procedures.
1. the recorded master deed with the
attached bylaws and subdivision plans
2. a copy of the purchase and escrow
agreements
3. the Condominium Buyer’s Handbook
4. a disclosure statement
2010©Cengage Learning. All Rights Reserved.
Other Condo Considerations
•
•
•
•
•
Site Condominiums
Cooperatives
Timesharing
Michigan Uniform Securities Act
Syndications
2010©Cengage Learning. All Rights Reserved.
CHAPTER TERMINOLOGY REVIEW
bill of sale
fixture
bundle of rights
freehold estate
chattel
joint tenancy
community property
leasehold estate
concurrent
life estate
condominium
life tenant
convey
master deed
cooperative
Michigan Condo Act
co-ownership
Michigan Uniform
curtesy
Securities Act
declaration
nonfreehold estate
deed
ownership
defeasible
pur autre vie
dower
remainder
emblements
estate at sufferance
estate at will
estate for years
estate from year to year
estate in real property
fee simple absolute
reversion
right of first refusal
right of inheritance
right of survivorship
separate property
severalty
site condominium
syndication
tenancy in common
tenants by the entirety
timesharing
trade fixtures
unities of ownership
2010©Cengage Learning. All Rights Reserved.