1. Chapter 2 Legal Foundations to Value Real Estate FIN 331 Fall 2013

2. Chart illustrates the inflation-adjusted median price of a single-family home in the United States over the past 44 years. More recently, the inflation-adjusted price of the median single-family home has declined and is now testing support of its two-year upward sloping trend channel.

3. The Nature of Property A.Real Estate as a bundle of rights B.What do we mean by Rights? C.How do property rights differ from personal rights? D.How does personal property differ from real property

4. REAL PROPERTY AS A BUNDLE OF RIGHTS

6. C.How does real property differ from personal property? 1 Real property: Rights in land and its permanent structures (see Exhibit 2-2)  Surface of the earth and improvements  Air, up to reserved air space or tallest structure  Beneath the earth as far as technology allows: Minerals, oil and gas, water 2 Personal property: All other property  Personal and household goods  Intellectual property  Music

7. REAL PROPERTY AS A BUNDLE OF RIGHTS

8. 3.Special rule for “Fixtures” a.The manner of attachment b.The character of the article and manner of adaptation c.The intention of the parties d.Relation of the parties: landlord and tenant relationships 1)Trade fixtures considered personal property 2)Agricultural fixtures at taxes are considered property of the tenant 3)Same rules apply for residential tenants

9. Real Property Bundle of Rights

10. Possessory Interests [Estates]

11. Leasehold (Non-ownership or Non- freehold) Estates

13. Nonpossessory Interests in Land

16. Nonpossessory Interests Examples: On parcels A and C is a common driveway easement. On parcel C is an implied easement of access in favor of parcel B. Parcel E as an involuntary driveway easement known as an easement by prescription. Parcel F has an implied easement for access to extract oil. The power lines and the roadside electric lines are easements to permit installation and maintenance. The wildlife preserve on parcel G may be protected by a conservation easement.

17. Nonpossessory Interests in Land

18. Liens

20. FORMS OF CO-OWNERSHIP A.Indirect: Through business organizations or trusts 1.General Partnerships 2.Limited Partnerships 3.Limited Liability Companies 4.Corporation (Co-op) 5.Trust Entity holds title. Ownership passes through the entity. Interest may not be divided.

21. FORMS OF CO-OWNERSHIP

23. Two Main Forms of Marital Property Rights

24. TIMESHARE

25. SPECIAL ISSUES REGARDING LAND

27. HOMEWORK ASSIGNMENT A.Key terms: Dominant vs. Servient parcel, Types of Liens, Property rights, Restrictive Covenants, Forms of Tenancy, Fee Simple types, Easements, Mineral Rights – Rule of Capture B.Study Questions: 1, 3, 5, 7