Modern Real Estate Practice in Pennsylvania 12th Edition Chapter 5: Interests in Real Estate

5Interests in Real Estate Learning objectives –Identify limitations on ownership rights imposed by government action and form of conveyance –Describe various estates in land, the rights, and limitations they convey –Explain concepts related to encumbrances and water rights –Distinguish between the various types of government powers, and how they are exercised –Define key terms 2 ©2012 Kaplan, Inc.

5Interests in Real Estate Governmental powers (PETE) –Police power –Eminent domain –Taxation –Escheat 3 ©2012 Kaplan, Inc.

5Interests in Real Estate Freehold estates –Fee simple absolute –Fee simple defeasible –Fee simple determinable –Life estate Pur autre vie Remainder and reversion –Legal life estate Dower and curtesy Homestead 4 ©2012 Kaplan, Inc.

5Interests in Real Estate 5 ©2012 Kaplan, Inc. Pur Autre Vie with Remainder or Reversion Dower Homestead Fee Simple Estate Fee Simple Absolute Fee Simple Defeasible Conventional Life Estate Special Limitation with Possibility of Reverter Freehold Estates Life Estate Legal Life Estate Condition Subsequent with Right of Re-Entry Ordinary with Remainder or Reversion Curtesy

5Interests in Real Estate Police power –Enabling Acts: Power to establish legislation to preserve order Protect public health and safety Promote general welfare –Exercised by states, municipalities, and counties 6 ©2012 Kaplan, Inc.

5Interests in Real Estate Police power –Restrictions cover Environmental protection laws Zoning and building ordinances Use regulations Occupancy Size Location Construction restrictions Rental regulations 7 ©2012 Kaplan, Inc.

5Interests in Real Estate Eminent domain: the right to acquire privately owned real estate for public use Condemnation: the process Courts used to settle disputes 8 ©2012 Kaplan, Inc.

5Interests in Real Estate Kelo v. New London –Private property taken for a redevelopment plan anchored by private business Many states (PA included) redefined what a taking can be 9 ©2012 Kaplan, Inc.

5Interests in Real Estate Other governmental powers –Taxation Charge on real estate to raise funds to meet the public needs of the government –Escheat State law provides for ownership of real estate to escheat (revert) to the state when an owner dies leaving no will and no heirs can be located 10 ©2012 Kaplan, Inc.

5Interests in Real Estate Estates in land –Defines degree, quantity, nature, and extent of owner’s interest –Measured by duration Freehold estates (forever) –Real estate –Real property Leasehold estates (defined length of time) –Contract –Personal property 11 ©2012 Kaplan, Inc.

Freehold Estates Indeterminable length Fee simple estate –Fee simple absolute –Indefeasible Defeasible fee – Conditional fee – Determinable fee Life estate –Conventional life estate –Legal life estate Leasehold Estates Do not involve ownership Fixed period of time Types: –Estate for years –Estate from period to period –Estate at will –Estate at sufferance Involve a contract 12 ©2012 Kaplan, Inc.

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5Interests in Real Estate Fee simple estate –Highest interest in real estate recognized by law Fee absolute = All rights to property Fee simple determinable= Special limitation Fee simple subject to a condition subsequent (owner must go through court) 14 ©2012 Kaplan, Inc.

5Interests in Real Estate Life estates –Freehold estate –Limited to life of specific person (can be estate holder or another) –Entire bundle of rights EXCEPT cannot pass ownership to heirs and ends with death of owner of estate 15 ©2012 Kaplan, Inc.

5Interests in Real Estate Conventional life estate –Intentional act of grantor (owner) –Transferred during life or as part of will –Conveyed to life tenant –Ends on death of person against whose life estate is measured –May be sold, leased, mortgaged, or given away... –Cannot waste or harm the estate Pur autre vie—tied to the life of a third party 16 ©2012 Kaplan, Inc.

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5Interests in Real Estate Future rights –Remainder –Reversion 18 ©2012 Kaplan, Inc.

5Interests in Real Estate Legal life Statutory life estate –Created for surviving spouse –Spouse entitled to 33 percent of estate (by will or statute) 19 ©2012 Kaplan, Inc.

5Interests in Real Estate Spousal signatures –PA abolished dower and curtesy –PA does not require a non-owning spouse to sign real estate documents –May be required by lender or title company 20 ©2012 Kaplan, Inc.

5Interests in Real Estate Encumbrances: claim, charge, or liability –Attaches to real estate –Binding on real estate –Affects title 21 ©2012 Kaplan, Inc.

5Interests in Real Estate Liens –Financial charge against property –Provides security for debt or obligation of owner Lienholder (creditor) has the right to have the debt paid out of the debtor’s property Debt can be paid from the proceeds of a court-ordered sale 22 ©2012 Kaplan, Inc.

5Interests in Real Estate Deed restrictions –Private agreements that affect use of land Binding on subsequent owners Run with the land Limit use Enforced by private court action Covenants, conditions, and restrictions (CC&Rs) –Filed in the public record with the original subdivision plan 23 ©2012 Kaplan, Inc.

5Interests in Real Estate Easement: the right to use the land of another for a particular purpose –Appurtenant easement — annexed to the ownership of one parcel and allows this owner the use of a neighbor’s land –Easement in gross — an individual interest in or limited right to use the land of another 24 ©2012 Kaplan, Inc.

5Interests in Real Estate Commonly created by written agreement Express grant from the owner of the property over which the easement will run Deed of conveyance by the grantor –Reserving an easement over the sold land –Granting new owner easement over grantor’s remaining land Long-time usage: –Easement by prescription –Necessity (follows) –Implication—actions imply intent to create easement 25 ©2012 Kaplan, Inc.

Servient Tenement 26 ©2012 Kaplan, Inc.

Dominant Tenement 27 ©2012 Kaplan, Inc.

5Interests in Real Estate Easement by necessity –Created by a court order Not for convenience: must grant a landlocked parcel access to ingress and egress Tricky situation: appurtenant easement with a common grantor (owner subdivides and creates an easement for access) 28 ©2012 Kaplan, Inc.

5Interests in Real Estate Easement by prescription –Claimant uses land for certain time frames –In Pennsylvania: 21 years –Continuous, exclusive –Without owner’s permission –Cannot be acquired on public land –Tacking permitted 29 ©2012 Kaplan, Inc.

5Interests in Real Estate Party wall: building wall that straddles the boundary lines between two properties –Each property owner owns half of the wall, each owner has an easement right in the other half of the wall for building support –Each pay half of the expenses to maintain the wall –Can have a party driveway 30 ©2012 Kaplan, Inc.

5Interests in Real Estate Terminating an easement –Purpose no longer exists –Termination by merger –By release or abandonment –By nonuse of a prescriptive easement –By destruction (knock down a party wall) –By lawsuit: action to quiet title Actions may require legal steps 31 ©2012 Kaplan, Inc.

5Interests in Real Estate Licenses –Privilege to enter the land of another for a specific purpose –Not a permanent right — may be withdrawn Examples: –Park in driveway –Erect a billboard –Have a garden May be oral, should be written 32 ©2012 Kaplan, Inc.

5Interests in Real Estate Encroachment: unauthorized intrusion of an improvement or other real property onto another’s property –Extending from one property across the property line onto another parcel or beyond legal building lines –Can be discovered by spot survey –May lead to easement by prescription 33 ©2012 Kaplan, Inc.

5Interests in Real Estate Water rights –Waterfront property has value State laws govern the use of water Riparian or littoral 34 ©2012 Kaplan, Inc.

5Interests in Real Estate Riparian –Land bordered or traversed by river, stream, or waterway –Cannot interrupt or contaminate flow Non-navigable water split in middle 35 ©2012 Kaplan, Inc.

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5Interests in Real Estate Water rights Littoral –Land bordering oceans, seas, or large lakes –Land bordering tidal areas L---O----L Large Oceans Lakes 37 ©2012 Kaplan, Inc.

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5Interests in Real Estate Avulsion: sudden change in a stream’s course Accretion: an increase in land Alluvium: gradual depositing of solid material by a body of water Erosion: loss of property by the wearing away of water Relection: creation of dry land by gradual withdrawal of water 39 ©2012 Kaplan, Inc.

5Interests in Real Estate Doctrine of prior appropriation –Used in states where water is scarce –Right to use water, except for limited domestic use, is controlled by the state –Landowners must demonstrate they will use water in a beneficial way 40 ©2012 Kaplan, Inc.