2.1 Estates, Ownership Forms, Rights, and Interests

Freehold Estates

An estate describes the degree, quantity, nature, and extent of a person's interest in real property. The two broad categories are freehold estates, which last for an indefinite period and carry ownership, and leasehold estates, which give possession for a determinable term and create a tenancy. A freehold owner holds title; a leasehold tenant holds only the right to possess for the lease term while the landlord keeps title.

The national portion of the salesperson exam expects you to classify any described interest into the correct estate and to predict what happens to title when an event - death, sale, or violation of a condition - occurs. Watch the exact words a grant uses, because a single phrase ('so long as,' 'for life,' 'for ten years') determines the estate created and who takes the property next.

Fee Simple

The fee simple absolute is the highest and most complete form of ownership recognized in law. It is of potentially infinite duration, freely transferable during life or by will, and inheritable. When an exam question says an owner holds property 'in fee' with no conditions, assume fee simple absolute.

A defeasible fee is ownership that can be lost if a stated condition is breached:

• Fee simple determinable - ends automatically and reverts to the grantor on a triggering event. Language: 'so long as,' 'while,' 'during.' The grantor retains a possibility of reverter.
• Fee simple subject to condition subsequent - the grantor may choose to reclaim title (right of re-entry) after a breach; it is not automatic. Language: 'but if,' 'on condition that,' 'provided that.'

Trap: candidates confuse the two. The keyword is automatic (determinable) versus optional action by the grantor (condition subsequent). Both are still fee estates of potentially infinite duration - they remain fee simple unless and until the condition is breached, which is why they outrank a life estate in the hierarchy of estates.

Life Estates

A life estate is a freehold estate measured by someone's lifetime - it is not inheritable because it ends at death. The holder (life tenant) may use, possess, and even lease the property but commits waste if value is destroyed.

When the measuring life ends, title passes to either:

An estate pur autre vie is measured by the life of a person other than the holder. Example: 'To Ann for the life of Ben.' If Ann dies before Ben, Ann's heirs hold the estate until Ben dies, then it terminates.

Worked example: A grantor conveys 'to Maria for life, then to the Red Cross.' Maria is the life tenant; the Red Cross holds a remainder. Maria can rent the home, but the lease automatically ends at her death because she could convey no greater interest than she owned. The Red Cross then takes fee simple.

Forms of Co-Ownership

Ownership held by one person or a single legal entity is ownership in severalty - the word means 'severed' from others, not 'several owners.' When two or more parties hold title together, the form determines survivorship rights and how shares transfer.

Tenancy in Common (TIC)

• Two or more owners hold undivided fractional interests; shares may be unequal (e.g., one owner 75%, another 25%).
• No right of survivorship - a deceased owner's share passes by will or to heirs.
• This is the default form when a deed to multiple unmarried parties is silent.

Joint Tenancy

• Equal, undivided shares with the right of survivorship - a deceased joint tenant's interest passes automatically to surviving joint tenants, outside probate.
• Requires the four unities (PITT): Possession, Interest, Time, Title. Breaking any unity (e.g., one tenant sells) severs that share into a tenancy in common.

Tenancy by the Entirety

• Available only to married couples in states that recognize it; includes survivorship and protects against one spouse's individual creditors. Neither spouse can convey alone.

Worked example: Anna, Beth, and Carl own land as joint tenants, each 1/3 with survivorship. Carl sells his interest to Dan. Dan cannot be a joint tenant because the unities of time and title are broken for his share, so Dan holds a 1/3 as a tenant in common, while Anna and Beth remain joint tenants between themselves (each 1/3, with survivorship as to each other). If Anna then dies, Beth takes Anna's share by survivorship and now owns 2/3 as a tenant in common with Dan's 1/3.

Encumbrances and Other Interests

An encumbrance is a right or claim that limits use or value but does not strip ownership. Two families:

• Liens (money claims): mortgages, property-tax liens, mechanic's liens, judgment liens. A general lien attaches to all the debtor's property; a specific lien attaches to one parcel.
• Non-money encumbrances: easements, deed restrictions, and encroachments.

An easement appurtenant benefits an adjacent parcel (the dominant tenement) and burdens another (the servient tenement); it runs with the land. An easement in gross benefits a person or company (e.g., a utility) with no dominant parcel. An encroachment is an unauthorized physical intrusion - a fence or eave crossing the boundary - usually revealed by a survey, not the title search.