2.1 Estates, Ownership Forms, Rights, and Interests

Ownership questions reward a candidate who can sort interests by duration (how long it lasts) and by number of owners (who holds it). Get those two axes straight and most of this domain answers itself.

The Bundle of Rights

Real-property ownership is described as a bundle of rights — a set of independent legal "sticks" an owner holds:

• Possession — the right to occupy
• Control — the right to use within the law
• Enjoyment — the right to use free from interference
• Exclusion — the right to keep others out
• Disposition — the right to sell, gift, lease, or will

Individual sticks can be removed without ending ownership. A lease hands the possession stick to a tenant; an easement removes part of the exclusion stick; a mortgage pledges the disposition stick as collateral. The owner still holds the remaining bundle.

Estates Sorted by Duration

An estate is the degree, quantity, and duration of a person's interest in land. The first split is freehold versus leasehold.

Freehold Estates

• Fee simple absolute — the largest estate; inheritable, with no conditions. The default when a deed says "to Maria."

• Fee simple defeasible — fee simple subject to a condition.

  • Determinable ends automatically when the condition fails ("so long as," "until"). The grantor keeps a possibility of reverter.
  • Condition subsequent gives the grantor a right of re-entry that must be exercised ("but if," "provided that").

• Life estate — measured by someone's life. The holder is a life tenant; on death the property passes by a remainder (to a named third party) or a reversion (back to the grantor or heirs).

A life tenant may use and even rent the property but must avoid waste — material damage or neglect that harms the future-interest holder. The life tenant generally pays taxes, insurance, and ordinary upkeep.

Trap: A life tenant cannot will the property. At death it moves to the remainderman automatically, regardless of the life tenant's wishes.

Ownership Sorted by Number of Owners

Sole ownership (severalty) is one owner. Concurrent (co-) ownership is two or more, and the form controls what happens at death.

The Four Unities (Joint Tenancy)

Joint tenancy is valid only if all four unities exist at creation — memorize T-TIP:

• Time — all take title at the same moment
• Title — all take through the same instrument
• Interest — all hold equal shares
• Possession — all have an undivided right to the whole

Break any unity and the joint tenancy converts to a tenancy in common for that share. The classic break: one joint tenant sells. With three joint tenants A, B, and C, if C sells to D, then D is a tenant in common holding 1/3, while A and B remain joint tenants (with survivorship) as to their 2/3.

Tenancy in common needs only unity of possession. Shares may be unequal — one owner can hold 70%, another 30% — and each passes to that owner's heirs.

Worked Survivorship Example

Four siblings own a cabin as joint tenants, each 25%. One dies. Because of survivorship, the deceased's share splits among the three survivors — each now owns 1/3. The heirs of the deceased receive nothing from the cabin. Had they held as tenants in common, the deceased's 25% would pass through that sibling's will or estate.

Leasehold Estates and Lease Types

Leaseholds transfer possession, not ownership:

• Estate for years — fixed start and end date; no notice needed to terminate.
• Periodic estate — renews automatically (month-to-month) until proper notice ends it.
• Estate at will — continues at the will of both parties; either may end it.
• Estate at sufferance — a holdover tenant who stays after the lease ends without consent.

Liens and Lien Priority

A lien is a charge against property securing payment of a debt. Liens are an encumbrance, not ownership, but they cloud title until released.

• Voluntary — created by the owner's act: mortgage, deed of trust.
• Involuntary — imposed by law: property-tax lien, judgment lien, mechanic's lien, IRS lien.
• Specific — attaches to one property (mortgage, mechanic's lien).
• General — attaches to all of a debtor's property (judgment, IRS).

Priority Rule

The default order is first in time, first in right — measured by the recording date, not the date the debt arose. So a mortgage recorded January 1 outranks a judgment lien recorded March 1.

Exceptions that jump the line:

1. Real-estate tax and special-assessment liens take priority over all private liens regardless of recording date.
2. Mechanic's liens may, by statute, relate back to the date work began or materials were first furnished, giving them priority over liens recorded after that date.

Subordination

Subordination is a voluntary agreement by a senior lienholder to accept a lower priority. A construction lender may subordinate to a permanent lender so the new loan records ahead of it.

Worked Priority Problem

Recorded order: property-tax lien (assessed but unrecorded), first mortgage recorded 2/1, mechanic's lien recorded 6/1 for work begun 1/15, judgment lien recorded 7/1. Payout order: (1) tax lien, (2) mechanic's lien (relates back to 1/15, before the mortgage), (3) first mortgage, (4) judgment lien. The relation-back rule is the trap that flips the mechanic's lien ahead of the earlier-recorded mortgage.

Air, Surface, and Subsurface Rights

Land ownership is three-dimensional and the layers can be sold separately:

• Surface rights — the ground itself.
• Subsurface (mineral) rights — oil, gas, coal below; often severed and sold independently.
• Air rights — the space above; used to build over rail yards or to transfer development density.

Exam Tip: Severed mineral rights mean a buyer can own the surface while a third party owns the right to extract minerals beneath it — a defect a title search must catch.