REAL PROPERTY BASICS REAL PROPERTY BASICS A Estates

REAL PROPERTY BASICS

REAL PROPERTY BASICS A. Estates in Land 1. Freehold D. Deeds A. Fee Simple 1. Elements B. Life Estate 2. Some Types 2. Leasehold B. Statutory Estates E. Title 1. Holding Title 1. Community Property 2. Homestead 3. Tenancy by the Entirety 4. Dower/Curtesy – statutory Share C. Equitable Estates 1. Lien 2. Easement 2. Chain of Title F. Intake and Holding of Real Estate 1. Preliminary Title Report/Title Insurance 2. Appraisal A. Fair Market Value B. 60 days before gift 3. Cost Basis 4. Environmental Concerns 5. Surveys 6. Escrow 7. Insurance/ Hold Harmless

Freehold Estates in Land Fee Simple Definition • The greatest possible estate in land, • Wherein the owner has the right to use it, exclusively possess it, commit waste upon it, dispose of it by deed or will, and take its fruits. • If the owner dies intestate, the land will descend to the heirs. • West Encyclopedia of Law .

Fee Simple Determinable: The estate will be automatically terminated if the stated condition occurs. Established by durational language, fee simple determinable estates are followed by the future estates of a possibility of reverter. Deed - To A for as long as the property is used for a museum. A has a fee simple determinable, and will hold the land for as long as it is a museum; the grantor holds a possibility of reverter. If the museum is shut down, the land will automatically be transferred to the grantor. .

Fee Simple Subject to Condition Subsequent: The estate is similar to a fee simple, but has a condition attached. Established by conditional language, these estates are followed by a right of entry. If the triggering event occurs, the holder must take steps to establish possession of the land. Deed To A, but if A does not use the land for a museum, then the grantor has a right of entry. A has a defeasible fee simple estate subject to a condition subsequent, and the grantor has a right of entry. If the land is not used for a museum, then the grantor must take action to recover the land. If the grantor does not take action, the land will remain with A, even after it is not being used as a museum. .

Fee Simple Subject to Executory Limitation Fee Simple Subject to a Executory Limitation: A fee simple with a stated event, which if it happens, is automatically divested by an executory interest in a transferee (if the event happens, the land automatically goes to a third party). Deed To A so long as the land is used for a museum, but if used for anything else, to B. A holds a defeasible fee simple subject to an executory condition, B holds an executory interest. If the land is not used for a museum, it is automatically transferred to B. .

Life Estate Life estates are measured either by the life of the property recipient, or by the life of some other person; these latter are called life estates pur autre vie (Law French, "for the life of another"). A life estate pur autre vie is most commonly created in one of two circumstances. First, when the owner of property conveys his interest in that property to another person, for the life of a third person. For example if A conveys land to B during the life of C, then B owns the land for as long as C lives; if B dies before C, B's heirs will inherit the land, and will continue to own it for as long as C lives. Second, if A conveys land to C for life, C can then sell the life estate to B. Again, B and B's heirs will own the land for as long as C lives. LIFE ESTATE Limited in duration • Life of tenant or another • Terminates at death • No interest to pass to heirs Duty to exercise reasonable prudent care – Do not commit “WASTE. ” In either scenario, once C dies, the ownership of the land will revert to A. If A has died, ownership will revert to A's heirs. The right to succeed to ownership of the property upon the expiration of the life estate is called a remainder. .

Leasehold • Leasehold Estate - pertains to a lease in which the renter has the right to possess the leased property for a specific extended period of time but not own. .

Property Ownership Interest PRESENT INTEREST • Fee Simple Estate • Largest most complete ownership • Split Ownership • Life Estate • Duration measured by a life FUTURE INTEREST • Remainder Interest • Future enjoyments • Vested / contingent • Reversionary Interest • Future return to grantor .

A. Dower And Curtesy - A surviving spouse's right to receive a set portion of the deceased spouse's estate -- usually one-third to one-half. - Dower = wife - Curtesy = Husband B. To avoid discrimination on the basis of sex most states now have statutory share. Note: Under certain circumstances, a living spouse may not be able to sell or convey property that is subject to the other spouses dower and curtesy or statutory share rights. .

Other Statutory Estates I. Community Property II. Tenancy by the entirety III. Homestead – an artificial estate in land, created to protect the possession and enjoyment of the owner against the claims of creditors by preventing the sale of the property for payment of the owner's debts so long as the land is occupied as a home. .

Equitable Estates I. Liens – right to claim against land A. Statutory – Mechanics Lien B. Judicial – Judgement C. Equitable – claim in equity II. Easements - right to use A. Express – conveyed in Deed B. Implied - Use prior to parcel being split C. Necessity – similar to Implied - Landlocked D. Prescriptive – Statutory taking .

Elements of Valid Deeds 1. Writing 2. Competent Parties 3. Identified parties 4. Words expressing Intent 5. Sufficient legal description 6. Delivery 7. Acceptance Other consideration: Consideration, Date, Acknowledgement before Notary Public, Witnesses, Documentary Transfer Tax, Address

Most Common Forms Warranty Deed • • • Grantors possess the property lawfully Property is free of encumbrances Authority to transfer Grantor/Heirs will defend conveyance of title East Coast/Midwest Grant Deeds • Grantors possess property lawfully • Property is free of encumbrances • Used in Western States .

Title Ways to Hold Title: • • • One person is sole owner Corporation Trustee Joint Tenancy, TE, TC, CP Partnership Limited Liability Company

Chain of Title A Chain of Title Consists of: 1. 2. 3. 4. Past Owners Encumbrances Easements Other Recorded Documents related to the property

Preliminary Title Report CHECK! 1. Grantors are listed as owners in public record 2. Encumbrances!!! Red Flag 3. Easements 4. Recorded Deed’s legal description matches PTR legal description 5. Review with Counsel

Title Insurance You must get title insurance or title commitment to protect your entity for irrevocable gifts

Appraisal A. Fair Market Value B. 60 days before gift C. Appraiser must meet IRS guidelines for Appraiser

Cost Basis • Donor’s cost basis becomes the gifts cost basis • Cost basis is what the donor paid for the real property plus capital improvements • Beware of Depreciation on Income Properties

Environmental Concerns • ALWAYS have someone with experience walk the property • Complete initial environment survey • Work with Counsel to determine if Phase 1 and above is necessary

Surveys • Especially pertinent with commercial property • Have survey certified in the name of the entity

Escrow • Transfer Agent • Makes sure Deeds are recorded • Makes sure fees/taxes are paid

PROPERTY INSURANCE AND HOLD HARMLESS AGREMENTS Insurance/ Hold Harmless • Once property is acquired make sure insurance is set up • If revocable trust, have entity as corporation and trustee listed as additional insured • If not, make sure have hold harmless agreement on file