2.1 Estates, Ownership Forms, Rights, and Interests

The Bundle of Rights

Ownership of real property is not a single right but a bundle of rights - the package of legal powers an owner holds. Memorize them with the acronym PCEED:

• Possession - to occupy and hold the property
• Control - to use it within the law
• Enjoyment - to use it without outside interference
• Exclusion - to keep others out
• Disposition - to sell, gift, lease, or will it

Any stick can be split off. A lease transfers possession; an easement removes part of exclusion; a mortgage pledges disposition as security. This is why two people can have rights in the same parcel at once.

Estates: Measuring the Quantity of an Interest

An estate is the degree, quantity, and duration of a person's interest in land. Estates divide into two families: freehold (ownership of uncertain duration) and leasehold (possession for a fixed or renewable term).

Freehold Estates

• Fee simple absolute - the largest, most complete ownership; inheritable, lasts forever, no conditions.
• Fee simple defeasible - ownership that can be lost if a stated condition occurs.
  • Fee simple determinable ends automatically (watch for words like "so long as," "while," "during"); the grantor keeps a possibility of reverter.
  • Fee simple subject to condition subsequent requires the grantor to act to retake it ("but if," "on condition that"); the grantor holds a right of re-entry.
• Life estate - lasts only for the life of a named person.

Exam trap: "Determinable" ends by itself; "condition subsequent" needs the grantor to go to court. The triggering words are the tested clue.

Life Estates and Future Interests

A life estate gives a life tenant full use during a measuring life but no power to will the property. What happens at death depends on the grant:

• Remainder - the interest passes to a named third party (the remainderman).
• Reversion - the interest returns to the original grantor.

A life tenant may use, lease, and even mortgage the interest, but must not commit waste (damage or neglect that harms the future holder). The life tenant ordinarily pays property taxes, ordinary repairs, and interest on any existing debt.

Worked Example - Pur Autre Vie

Maria deeds her home "to David for the life of Susan, then to the city." This is a life estate pur autre vie - measured by Susan's life, not David's. If David dies first, his heirs hold the estate until Susan dies; then it passes to the city as remainderman. If the grant had said "then back to Maria," Maria would hold a reversion.

Forms of Ownership

When one person owns alone, that is ownership in severalty. When two or more own together, the law recognizes four concurrent forms.

Right of survivorship means a deceased owner's share passes automatically to the surviving co-owners, outside probate, and cannot be willed away.

Joint Tenancy and the Four Unities

A valid joint tenancy requires the four unities, remembered as TTIP:

• Time - all owners take title at the same moment
• Title - all take from the same deed or document
• Interest - all hold equal fractional shares
• Possession - all have an equal right to the whole

Break any unity and the joint tenancy converts to a tenancy in common as to that share. The classic break: a joint tenant sells his interest. If A, B, and C are joint tenants and 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 the other 2/3.

Tenancy in Common Default Rule

Most states presume a tenancy in common when a deed to two or more people is silent, because the law disfavors taking away inheritance rights. Each tenant in common can sell, mortgage, or will their undivided interest without the others' consent. When co-owners deadlock, any one may file a partition action - partition in kind (physically dividing the land) or, far more common, partition by sale (sell and split proceeds).

Exam clue: "undivided interest, unequal shares, passes to heirs" = tenancy in common. "Right of survivorship" = joint tenancy or tenancy by the entirety.

Leasehold Estates

A leasehold estate gives a tenant the right of possession for a period of time while the landlord keeps a reversion. Four types are tested:

An estate at sufferance is the weakest interest: a tenant who stays after a valid lease ends, without permission (a holdover). It is not trespass, but the landlord may evict or treat the tenant as periodic.

Encumbrances, Liens, and Priority

An encumbrance is any claim or limitation that affects title. It may be a lien (a money claim) or a non-money burden such as an easement or deed restriction.

Liens are voluntary (a mortgage the owner chooses) or involuntary (a tax lien, judgment lien, or mechanic's lien imposed by law). The general priority rule is "first in time, first in right" - the earliest recorded lien is paid first in a foreclosure.

Priority Exception and Worked Math

Real-property tax liens and special assessments take first priority regardless of when recorded. Suppose a parcel sells at foreclosure for $300,000 with: unpaid property taxes $12,000; first mortgage recorded 2019 $250,000; judgment lien recorded 2022 $60,000. Taxes are paid first ($12,000), leaving $288,000. The first mortgage takes $250,000, leaving $38,000 for the $60,000 judgment - which is paid only partially, and the rest becomes an unsecured deficiency.

Mechanic's Liens and Subordination

A mechanic's lien secures payment for labor or materials on improvements. In many states it can relate back to the date work first began or materials were first delivered, letting it leap ahead of liens recorded after that start date. This is a frequent exam wrinkle to the "first to record" rule.

Subordination is a voluntary agreement by a senior lienholder to step behind a junior one. Lenders often require a ground lessor or existing lender to subordinate so a new construction loan can take first position.

Splitting Rights by Layer

A single parcel's rights can be sliced horizontally and vertically:

• Surface rights - the ground itself
• Subsurface / mineral rights - oil, gas, coal below
• Air rights - the space above, often sold over rail yards
• Water rights - riparian (flowing water) or littoral (lakes)

Mineral rights are commonly severed and sold separately, so the surface owner and the mineral owner may differ. A buyer should check whether such rights were previously conveyed away.

Exam tip: Selling "the right to drill below" while keeping the home is a severance of mineral rights, not a sale of the whole fee.