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REP
Section 4: Real Property Ownership
| Question | Answer |
|---|---|
| Land | The earth's surface extending downward to the center of the earth and upward to infinity, including permanently attached natural objects |
| Real Estate | Land, plus all things permanently attached to it naturally or artificially |
| Real Property | Real estate, plus the interests, benefits, and rights automatically included with real estate ownership |
| Personal Property | Everything that's not real property |
| Improvements | Permanent, man-made attachments that include things such as fencing, buildings, and walkways. Can affect value of land. |
| Rights Associated with Real Property | Possession, Enjoyment, Exclusion, Control, Disposition. |
| Possession | Right to occupy the property. |
| Enjoyment | Right to (legally) use the property however the owner desires. |
| Exclusion | The right to refuse others entry to, or use of, the property. |
| Control | The right to determine how the property will be used by the owner, or by others (similar to enjoyment, but extends to other parties) |
| Disposition | The right to dispose of (by sale, lien, easement, lease, etc.) any interest in the property |
| Severance | Altering the characteristic of an item from real property to personal property by removing it from the land |
| MARIA (acronym for understanding fixtures) | Method of annexation, Adaptability of item to land's use, Relationship of the parties, Intention in placing item on land, Agreement of the parties |
| Scarcity | Lack of availability of land |
| Situs | Location |
| Immobility | The geographic location of land is fixed - it can never be changed. |
| Indestructibility | While improvements may deteriorate over time, the land itself cannot be destroyed. |
| Uniqueness | One parcel (a piece of land) will not be exactly like another. This is the concept of non-homogeneity. |
| Economic or Physical Characteristic? Scarcity | Economic Characteristic |
| Economic or Physical Characteristic? Indestructibility | Physical Characteristic |
| Economic or Physical Characteristic? Uniqueness | Physical Characteristic |
| Economic or Physical Characteristic? Improvements | Economic Characteristic |
| Economic or Physical Characteristic? Immobility | Physical Characteristic |
| Economic or Physical Characteristic? Permanence of investment | Economic Characteristic |
| Permanence of Investment | Involves improvements, such as sewer, roads, and utilities, that are long-term, stable investments with relatively stable returns over time. |
| Location or area preference | A property's value is impacted by where it's situated and how interested people are in buying or living in the area. |
| Survey | A professional on-site measurement of the lot lines and dimensions of a property, including the location of any improvements (such as a house) on the lot, any encroachments that may exist, and any easements of public record. |
| True or False? An address is a sufficient legal description. | False |
| True or False? A legal description specifies location and boundaries of a specific piece of real property. | True |
| True or False? Legal descriptions appear on deeds and other legal documents. | True |
| True or False? A survey is a professional, on-site measurement of the lot lines and dimensions of a property. | True |
| True or False? A survey doesn't include any improvements (such as a house) on the property or any encroachments or easements. | False |
| True or False? A survey may be required to verify, clarify, correct, or create a legal description. | True |
| Metes | The direction and distance of a line forming the boundary of a property. |
| Bounds | The physical features that define the boundaries of the land. |
| Monument | A permanent physical marker that is either man-made or natural. Sometimes used in metes and bounds legal descriptions to describe very large pieces of property. |
| Lot and Block/Plat Reference System | Description by reference, plat, or lot and block. Mainly used in urban and suburban areas. |
| Rectangular (government) Survey System (RGSS)/Government Survey System (GSS)/Public Land Survey System (PLSS) | Divides land into six-mile-square townships, which can then be further divided. Originally used to survey federally owned blocks of land—is regulated by the Bureau of Land Management under the U.S. Department of the Interior. |
| Metes and Bounds | Method of legal description. One of the oldest land measurement systems used in the U.S. Uses precise locations, monuments, distances, and compass directions to describe property boundaries. |
| Metes or Bounds? 37 degrees north for 78 meters | Metes |
| Metes or Bounds? Beginning at the heart-shaped boulder in the middle of Fantame Creek | Bounds |
| Metes or Bounds? 90 feet due north, turn 12 degrees west for 15 feet, turn due north for 5 feet | Metes |
| Metes or Bounds? The direct center of the three trees forming a triangle | Bounds |
| In a metes and bounds description, the point of beginning is extremely important. What's the importance of the point of beginning? | The entire description is based off of the point of beginning. |
| True or Flase? Either a metes and bounds or a rectangular survey description is always the starting point for a lot and block survey. | True |
| True or Flase? The lot and block system includes numbered or lettered blocks and lots. | True |
| True or Flase? The lot and block system doesn’t include lot measurements or distances. | False |
| True or Flase? The U.S. Department of the Interior, Bureau of Land Management regulates the rectangular survey system. | True |
| True or Flase? The PLSS is used throughout the U.S. | False |
| True or Flase? The rectangular survey system divides land into townships and further into sections and fractions of sections from there. | True |
| Township (RGSS) | Consists of 36 one-square-mile sections |
| Section (RGSS) | Consists of 640 acres |
| Principal Meridian (RGSS) | The north-south line that runs through the initial point |
| Base Line (RGSS) | The east-west line that runs through the initial point |
| Range Lines (RGSS) | North-south lines that don't run through the initial point |
| Township Lines (RGSS) | East-west lines that don't run through the initial point |
| Surface rights | Both land and water rights. This can be particularly important for land in a part of the world where water is scarce, as well as in situations where water is necessary for agriculture and farming. |
| Subsurface rights | Pertain to the right to use underground resources, such as natural gas and minerals, which is why subsurface rights are often called mineral rights. |
| Air rights | The right to use the open space above buildings up to an elevation established by law. |
| Right of Profit | The right to profit off of the land (i.e. the right to harvest and sell timber) |
| Riparian rights | Granted to landowners whose land abuts a river or stream. |
| Littoral rights | Granted to landowners whose land borders closed bodies of water, such as lakes and oceans. |
| Accretion | The process in which water carries rocks, sand, and soil and causes land build-up |
| Alluvion | New deposits of land that are the result of accretion (common at the mouth of large rivers) |
| Accession | The increase of land or property due to natural or man-made causes |
| Erosion | Gradual loss of land due to natural force |
| Avulsion | Rapid loss of land |
| Reliction | Gradual receding of water, which uncovers new land |
| Prior Appropriation | Legal doctrine that grants water rights to the first individual or entity to take water from a source for beneficial use, such as agriculture or municipal water supplies. |
| Appurtenance | The inherent or automatic ownership rights that are the natural consequences of property ownership. Property owners may keep, sell, or lease these rights. |
| Profit | A legal term that means the right to take products out of the soil. |
| License | Permission to do something on another’s land without actually possessing any interest or ownership in the land. |
| Profit or License? Legal term that means the right to take products out of the soil | Profit |
| Profit or License? Permission to do something on another’s land without actually possessing any interest or ownership in the land | License |
| Profit or License? May be revoked by the owner at any time unless a termination date has been specified by contractual agreement | License |
| Estate | Legal interest or right one has in the land - intangible and immeasurable |
| Possession | The right to live or work on a property |
| Interest (Property) | The right or claim a person has to property |
| Fee Simple/Fee Simple Absolute | Form of real property ownership - fee simple is absolute ownership and most common form. Provides the most complete form of ownership and bundle of rights in real property. |
| Tenancy | Possession (rather than ownership) of property |
| Title | Evidence of ownership of a property |
| Interest | Right or claim a person has to property |
| Leasehold Estate (Leased Fee) | This defines the legal relationship between the parties who sign the lease. It grants possession, but not title, to the tenant, and is for a limited period of time. |
| Freehold Estate | Refers to ownership and provides homeownership for an undetermined length of time. An inheritable estate with absolute ownership. |
| Fee Simple Determinable | A defeasible fee estate where the property holder owns the property subject to a condition - if the condition is breached, the property automatically reverts back to the original owner |
| Fee Simple Determinable Estate | A defeasible fee estate where the property holder owns the property subject to a condition - if the condition is breached, the property automatically reverts back to the original owner |
| Fee on Condition | Type of defeasible estate recognized by the words ""but if."" The estate continues unless a specific event occurs, in which case it terminates |
| Fee Simple Subject to Condition Subsequent | A defeasible fee estate that doesn't end automatically when the stated event or condition occurs, but the grantor can reclaim ownership by taking action. |
| Fee Simple Defeasible | The property holder owns the property with all legal rights but subject to a condition - also known as a qualified fee estate |
| Qualified Fee | Inheritable freehold estate that's defeasible (the grantor can terminate the title) - e.g., a parent might transfer property to a child as long as the child remained unmarried - also known as fee simple defeasible estate |
| Life Estate | A freehold estate granted for someone’s lifetime |
| Life Tenant | The owner of a life estate |
| Act of Waste | Abuse of a property by a person who holds possession through a life estate |
| Remainderman | The person receiving title upon the death of the life tenant |
| Remainder Interests | Ownership rights upon the death of the life tenant. |
| Reversionary Interest | Right of repossession of the property by the owner after the end of the life estate |
| Pur Atre Vie Life Estates | "For the life of another" - a life estate that lasts for the life of someone other than the life tenant |
| Estate for Years | A fixed-termination type of lease that may be for a day, week, month, year, several years, or any definite period of time - when the specified date occurs, the lease terminates automatically |
| Periodic Estate | Possessory interest that is automatically renewed at the end of each period specified in the lease |
| Estate at Will (a.k.a. Tenancy at Will) | Leasehold estate in which the duration of the lease is unknown at the time it's created - may be terminated by either the lessor or lessee at any time |
| Dower | A wife’s interest in the real estate owned by her deceased husband - a form of legal life estate |
| Curtesy | A husband’s interest in the real estate owned by his deceased wife - a form of legal life estate |
| Escheat | The state’s power to claim the estate of a deceased person who left no will, heirs, or creditors |
| Homestead | An estate which gives the owner special rights in property used as a family home. For instance, an approved assessing unit may opt to have different tax rates for homestead properties than for non-homestead properties. |
| Freehold or Leasehold Estate? You purchased a Colonial home eight years ago using a traditional 30-year-fixed conventional loan. | Freehold Estate |
| Freehold or Leasehold Estate? You signed a two-year agreement to rent office space in a local commercial building. | Leasehold Estate |
| Fee Simple | An inheritable estate |
| Estate (Ownership) in Severalty | One person owns the property, and all other interests are severed |
| Co-ownership | When more than one person owns the same piece of real estate |
| Tenancy in Common | A form of ownership that includes an undivided interest in the property - owners may sell, convey, mortgage or transfer their interest without the consent of co-owners |
| Joint Tenancy | Property is owned by a group of two or more persons - the death of one person simply raises the stake the others have in the property - called right of survivorship |
| Tenancy by the Entirety | A type of concurrent estate in real property in which the owners of property are married - each spouse has an equal and undivided interest in the property |
| Tenancy by the Entirety: True or False? If one spouse dies, the other automatically becomes the sole owner. | True |
| Tenancy by the Entirety: True or False? If one spouse dies, that spouse’s share is passed according to the will. | False |
| Tenancy by the Entirety: True or False? One spouse may pledge the property without permission from the other spouse. | False |
| Tenancy by the Entirety: True or False? If the spouses divorce, they must sell the property. | False |
| Tenancy by the Entirety: True or False? If the spouses divorce, the tenancy by the entirety automatically ends, and the former spouses become tenants in common. | True |
| Community Property Rights: True or False? Madge and Steve are married. They decide to purchase a home in Arizona, with Steve as the sole owner, yet Madge still has property rights. | True |
| Community Property Rights: True or False? Sandy and John are married. Before they married, Sandy purchased an apartment in New York in her name only. John has property rights. | False |
| Community Property Rights: True or False? Gene has owned his home in New Mexico for six years. Four years ago, he married Jade. NM is a community property state, therefore, upon their marriage, Jade is entitled to community property rights. | False |
| Partition | The division of real estate between owners giving each an undivided interest. |
| Encumbrance | Any claim or lien held by another person or entity against the property that limits the owner’s use or rights, or decreases property value. Can impact the title to real estate, but in most cases, real estate can be transferred even with the encumbrance. |
| Types of Encumbrances | Liens, Easements, Encroachments, Private land controls (deed restrictions, covenants, etc.) |
| Lien | A creditor's legal right to have their debt paid out of the property of a defaulting debtor, usually by a court sale. (Monetary Encumbrance) |
| Easement | The authorized use of another's property for a specific purpose - runs with the land. Non-possessory right. |
| Non-possessory Right | No right to occupy the property |
| Possessory Right | A right to occupy the property |
| Encroachment | The illegal intrusion of some structure or object across a property boundary line |
| Deed Restriction | A private control which limits the use or appearance of a given property |
| Covenants, Conditions, and Restrictions | Usually referred to as CC&Rs, these are the usage limitations imposed on owners/shareholders of a community housing such as a homeowner's association, cooperative, condominium association. |
| Encumbrances: True or False? Real estate can't be transferred with any kind of encumbrance. | False |
| Encumbrances: True or False? An encumbrance is a claim on a property that increases the value of the property. | False |
| Encumbrances: True or False? An encumbrance is a claim on a property held by another person or entity that limits the owner’s use or rights. | True |
| Encumbrances: True or False? Encumbrances can be physical or monetary. | True |
| Encumbrance or not? An unpaid property tax lien | Encumbrance |
| Encumbrance or not? Overgrown weeds in the yard | Not an encumbrance |
| Type of Encumbrance? A debt against a property | Lien |
| Type of Encumbrance? An authorized physical restriction on a property’s use | Easement |
| Type of Encumbrance? An unauthorized, affixed intrusion into another’s property | Encroachment |
| Encumbrances: True or False? Because they limit the use or a appearance of a property, deed restrictions are a form of encumbrance. | True |
| Encumbrances: True or False? The CC&Rs put in place by a Homeowner's Association are a form of encumbrance. | True |
| Specific Lien | A lien levied against real property (e.g., mortgages, mechanic’s liens, and materialmen’s liens) |
| General Lien | A lien against a person and all the property owned by that person, whether real or personal (e.g., judgments, estate and inheritance tax liens, income tax liens) |
| Voluntary Lien | A lien that is agreed to, such as a mortgage |
| Involuntary Lien | A lien imposed on a property or person by someone else, such as for nonpayment of taxes |
| Special Assessment Lien | Levied against real property to help fund the cost of a specific improvement (e.g., putting in sidewalks) |
| Mechanic's Lien | A lien placed by a laborer on a property for nonpayment of work done |
| Lis Pendens | A public notice that a legal issue is pending. Isn’t an actual lien - instead it serves as constructive notice that someone other than an owner is claiming a potential ownership interest in real property. |
| Which Lien Is Which? A general, involuntary lien against a property due to a court decree resulting from a lawsuit | Judgment lien |
| Which Lien Is Which? A specific, voluntary lien against a single property that uses the property as collateral for loan repayment | Mortgage lien |
| Which Lien Is Which? A specific, involuntary lien against property owners who have not paid property taxes | Real property tax lien |
| Which Lien Is Which? A specific, involuntary lien placed by contractors or subcontractors against a non-paying client's property | Mechanic's lien |
| Mortgage Lien | Specific, voluntary lien that affects one property. Remains in place until the loan is paid off. The property itself serves as the loan collateral. |
| Property Tax Lien | Property taxes place a lien on a specific property until the owner pays the taxes. Should the owner fail to pay these taxes, the government entity charging the tax can begin legal proceedings toward foreclosure. |
| HOA-Related Lien | Result of a homeowner's failure to pay dues. Typically involves housing communities, especially those with covenants (owner-community agreement) that often require monthly fees and often levy special assessments for their homeowners associations (HOAs). |
| Vendee’s and Vendor’s Liens | When a seller defaults in performing a contract, the buyer has this against the property for sale to receive an earnest money reimbursement. Also allows a seller to repossess a sold property until the buyer pays the full, agreed-upon purchase price. |
| Attachment | An encumbrance on the property of a defendant in a pending lawsuit for money damages under special circumstances, such as when the defendant goes into hiding |
| Liens for Municipal Utilities | A lien placed by a utility company on a home for outstanding bills - the utility company can foreclose on the home to recoup the balance of those bills |
| Bail Bond Liens | A property bond posts the value of real estate as a way to obtain a pre-trial release from jail. Occasionally, the property value must be twice the bail amount to be accepted. |
| Corporate Franchise Tax Liens | Liens placed when a corporation or partnership hasn’t paid its corporate franchise tax, which is imposed on the privilege of doing business in that state. (Note: Is not an ad valorem property tax imposed on property owned by corporations/partnerships.) |
| Judgment Lien | Placed when monetary damages are awarded - can be placed on property until the debt is paid |
| Federal and State Tax Liens | Federal or state government's legal claim against your property when you neglect or fail to pay a tax debt. |
| Decedent’s Debts | The debts due by the deceased or expected to be due in his lifetime. |
| Lis Pendens | A public notice that a legal issue is pending |
| Which Lien Is Which? Attaches to real property due to federal income tax law violation, non-payment of gift taxes, or transfer after the owner’s death | Federal tax lien |
| Which Lien Is Which? Attaches to a taxpayer’s real property for not paying state income taxes | State tax lien |
| Which Lien Is Which? The devisee or heir at law takes title to the property subject to existing liens or encumbrances and to rights of creditors of the estate | Decedent’s debts |
| Voluntary or Involuntary Liens? Mechanic’s lien | Involuntary |
| Voluntary or Involuntary Liens? Judgment lien | Involuntary |
| Voluntary or Involuntary Liens? Mortgage lien | Voluntary |
| Voluntary or Involuntary Liens? Federal tax lien | Involuntary |
| Subordination Agreement | An agreement to subordinate a senior to a junior lien |
| Easement Appurtenant | This type of easement involves two landowners with adjoining property - one holds the dominant tenement or estate - the other the servient. |
| Easement in Gross | The easement owner does not own land adjacent to the property on which the easement applies. This is typically a governmental easement or a public utility easement. |
| Dominant Estate | The recipient or beneficiary of an easement right. |
| Servient Estate | The property that is impacted by the easement. |
| Express Easement | Written documents that typically outline the easement’s terms, location, and purpose |
| Easement by Prescription | Created through one party’s continued, uninterrupted, exclusive, and adverse use of another’s property for a specified period of time |
| Easement by Necessity | Typically created for the purpose of ingress and egress (the purpose of entering and exiting the property). |
| Ingress and Egress | The right to enter (ingress) or leave (egress) a property. |
| Right of Way (ROW) | Type of easement that differ from other easement types because they don’t allow usage of the land but instead provide a pass-through. |
| Express Agreement | Both parties agree, in writing, to terminate the easement. |
| Abandonment | The dominant estate owner takes action that shows a clear intent to stop using the easement, such as building a road so there’s no longer a need for an easement across a neighbor’s property. |
| Merger | If one of the parties buys or otherwise attains the other’s property, the dominant and servient estates are merged and there’s no longer a need for an easement. |
| Necessity Discontinues | If the easement is no longer needed, the easement is terminated. This is similar to abandonment, except that abandonment specifically requires action by the dominant estate’s owner. |
| Encroachment and Easement: T/F? An encroachment is an intrusion of a structure or object on another’s land. | True |
| Encroachment and Easement: T/F? An easement is a right to cross over or otherwise use another’s land for a specified purpose. | True |
| Encroachment or Easement? Susan lives next to a beach. In order for her neighbors to reach the beach, they must cross through her property. | Easement |
| Encroachment or Easement? Jeffery built a swimming pool behind his house. Turns out, the swimming pool is two feet inside his neighbor’s property. | Encroachment |
| License Facts: True or False? A license is permission to do something on another’s land without actually possessing any interest or ownership in the land. | True |
| License Facts: True or False? The owner may revoke a license at any time, unless a termination date has been specified by contractual agreement. | True |
| License Facts: True or False? A license isn't assignable or inheritable, and it's a temporary privilege. | True |
| Townhome (Townhouse) | A form of ownership that consists of an individual interest in a unit (commercial, industrial, or residential) and an undivided interest in the project's common areas. |
| Condominium (Condo) | A form of ownership that consists of an individual interest in a unit (commercial, industrial, or residential) and an undivided interest in the project's common areas. |
| Cooperative (Co-op) | Form of real property ownership in which the owner is a member of an association that owns the building and shares stock in that association. |
| Timeshare | A piece of real estate with multiple shared ownership or multiple shared use. |
| Planned Unit Development (PUD) | A mix of land uses such as residential and commercial in one contained development |
| Master-planned Community | This is a type of PUD that is self-contained, sometimes gated, and can range in size from a single subdivision to multiple subdivisions. They offer convenience and amenities. |
| Planned Unit Development | A mix of land uses such as residential and commercial in one contained development |
| Mixed-use Developments (MUD) | A development with mixed zoning uses, generally commercial and residential |
| Timeshare Estate | The type of timeshare ownership that is a fee simple ownership. Pieces of real estate owned by multiple unrelated individuals who occupy the dwelling unit in one- to two-week intervals during the year. |
| Timeshare Use | Gives the purchaser the right to possess the property at given times for a given duration, but does not convey ownership. |
| Vacation Ownership | Buyers agree to a one-time purchase price and an annual maintenance fee. |
| Campground Membership | The owner buys the right to use the developer’s facilities and may use the designated area at any time during the year. |
| Timeshare Ownership: True or False? Buyers of vacation timeshares aren't allowed to rent, give, or sell their time to others. | False |
| Timeshare Ownership: True or False? Fee simple ownership for a vacation timeshare works in the same way as other types of real estate: Ownership can be enjoyed, sold, or passed down to heirs. | True |
| Timeshare Ownership: True or False? Unlike other forms of owned real estate, timeshare estates cannot be sold or passed down to heirs. | False |
| Timeshare Ownership: True or False? Resale timeshares often don't recoup the buyers’ initial investment. | True |
| Right of Survivorship | The death of one person simply raises the stake the others have in the property. |
| Corporation | Defined by law. Intangible, taxable, recognized legal entity. Have tax rates separate from individual tax rates. |
| Characteristic of Sole Proprietorship? Business can be conducted and title to property held using your own name. | Characteristic |
| Characteristic of Sole Proprietorship? Business can be conducted and title to property held using your name in combination with the business name. | Characteristic |
| Characteristic of Sole Proprietorship? Business can be conducted and title to property held in your business name. | Not a Characteristic |
| Characteristic of Sole Proprietorship? Ownership of property is owned in severalty. | Characteristic |
| Characteristic of Sole Proprietorship? Ownership of property can be in the form of tenancy in common. | Not a Characteristic |
| Sole Proprietorship | One entity that owns real estate. |
| Partnership | Two or more entities that own real estate together. |
| Syndicate | Groups of investors pooling their money in pursuit of a single investment goal, such as buying an office building. Organizations with many participants with the common purpose of making a profit from a real estate investment. |
| Joint Venture | Temporary organization formed by two or more parties to invest in real estate (or other investments). Participants may be corporations, partnerships, LLCs, or other entities. The parties may hold title as joint tenants or tenants in common. |
| General or Limited Partnership? Participates in the management of the partnership | General Partnership |
| General or Limited Partnership? Silent partner | Limited Partnership |
| General or Limited Partnership? Personally liable (both jointly and separately) if partnership debts exceed partnership assets | General Partnership |
| General or Limited Partnership? Not liable if partnership debts exceed partnership assets | Limited Partnership |
| General or Limited Partnership? Receives return on investment before other partners | General Partnership |
| Characteristic of Corporations? Exists only in law and is intangible | Characteristic |
| Characteristic of Corporations? Physical brick-and-mortar establishment | Not a Characteristic |
| Characteristic of Corporations? S corporations - taxed at rates separate from individual income tax rates | Not a Characteristic |
| Characteristic of Corporations? C corporations - taxed using individual income tax rates | Not a Characteristic |
| Characteristic of Corporations? Can receive, hold, and transfer title to real property, and may give, or hold a mortgage to secure a debt owed to the corporation | Characteristic |
| Characteristic of Corporations? Can exist as a subchapter S corporation or C corporation | Characteristic |
| LLC Benefit? Shields personal assets from liability | Benefit |
| LLC Benefit? Commingles personal and company assets in terms of liability | Not a Benefit |
| LLC Benefit? Flexibility to establish specific management rights in the operating agreement | Benefit |
| LLC Benefit? Sets specific management structure for operating the company | Not a Benefit |
| LLC Benefit? May not have to file a separate tax return | Benefit |
| Real Estate Investment Trusts (REITs) | A company that owns and usually operates income-producing real estate and provides investment opportunities to shareholders in those properties. |
| Mortgage REITs | Invests in real estate debt, including mortgage-backed securities |
| Equity REITs | Purchases properties and makes money primarily from those properties' rents |
| Mortgage or Equity REITs? These REITs invest in real estate debt instead of buying properties. | Mortgage REITs |
| Mortgage or Equity REITs? These REITs make money by incurring short-term debt to acquire longer-term mortgage securities, earning the spread between the two rates. | Mortgage REITs |
| Mortgage or Equity REITs? Many of these REITs focus on buying mortgage securities backed by Freddie Mac and Fannie Mae. | Mortgage REITs |
| Mortgage or Equity REITs? These REITs buy properties. | Equity REITs |
| Mortgage or Equity REITs? These REITs primarily make money from their properties' rents. | Equity REITs |
| Mortgage or Equity REITs? These REITs tend to specialize in owning certain building types, such as apartments, regional malls, self-storage, office buildings, or hotels. | Equity REITs |
| REITs: True or False? REITs were originally created to take advantage of changes in tax laws that prevented double taxation on trust income. | True |
| REITs: True or False? Tax laws allow trusts to earn income from real estate investments without having to pay trust income tax. | True |
| REITs: True or False? To avoid the trust income tax, the trust must distribute 75% of the ordinarily taxable income to the trust beneficiaries, then the beneficiaries report the income for tax purposes. | False |
| REITs: True or False? Unlike non-listed REITs, public mortgage and equity REITs are registered with the SEC. | False |
| REITs: True or False? The main difference between public and non-listed REITs is that the non-listed REITs are sold by brokerage firms directly to investors and are not traded on any exchange. | True |
| Trust Roles: Trustor, Trustee, or Beneficiary? Person benefitting from the trust | Beneficiary |
| Trust Roles: Trustor, Trustee, or Beneficiary? Person carrying out the trustor's wishes | Trustee |
| Trust Roles: Trustor, Trustee, or Beneficiary? Person conveying title to a trustee | Trustor |
| Trust | An estate planning vehicle in which property is owned by an entity controlled by the trust maker |
| Trustor | The individual creating the trust |
| Trustee | The person in charge of carrying out the terms of the trust |
| Beneficiary | Person benefitting from the trust |
| Living Trust | Created during a person’s lifetime and is often used when minor children are involved. |
| Testamentary Trust | Created according to the terms of the will of a deceased person. Unlike living trusts, testamentary trusts do not avoid probate. |
| Trust Agreement | Property conveyed to the trustee with instructions for how the trustee is to hold and manage it on behalf of the beneficiary |
| Living Trusts, Testamentary Trusts, and Probate: T/F? A living trust is created during a person’s lifetime and is established to convey property. | True |
| Living Trusts, Testamentary Trusts, and Probate: T/F? A testamentary trust is one created according to the terms of the will of a deceased person. | True |
| Living Trusts, Testamentary Trusts, and Probate: T/F? Beneficiaries are not responsible for the cost of administering a testamentary trust. | False |
| Trustors, Trustees, and Beneficiaries of Trusts: T/F? To create a trust, the trustor conveys property to the trustee with instructions for how the trustee is to hold and manage it on behalf of the beneficiary. | True |
| Trustors, Trustees, and Beneficiaries of Trusts: T/F? The role of the trustor and trustee can’t be performed by the same person. | False |
| Trustors, Trustees, and Beneficiaries of Trusts: T/F? Spouses may transfer real and personal property into a trust and then name themselves as joint trustees with rights of survivorship. | True |
| Trustors, Trustees, and Beneficiaries of Trusts: T/F? In the case of a married couple, after the death of the second spouse, the estate is distributed to the beneficiary or beneficiaries named in the trust. | True |
| Trustors, Trustees, and Beneficiaries of Trusts: T/F? The creation of a trust is a legal process that is best handled by attorneys. | True |
| Trustors, Trustees, and Beneficiaries of Trusts: T/F? There are no costs associated with maintaining a trust. | False |
| Land Trust | Formed specifically to hold real estate. Real property is the only asset within the trust. |
| Land Trusts: True or False? A land trust is formed specifically to hold real estate. Real property is the only asset within the trust. | True |
| Land Trusts: True or False? With a land trust, the person who establishes the trust (the trustor) can't also be the beneficiary. | False |
| Land Trusts: True or False? Land trusts must be created at the time the real estate is purchased, not after it has been acquired. | False |
| Land Trusts: True or False? Under a land trust, the owner directs a corporate fiduciary to hold title to the real estate and provides instructions for the management, control, and disposition upon the owner’s death. | True |
| Land Trusts: True or False? Land trusts generally don't have a specified term. | False |
| Land Trusts: True or False? When the land trust term expires, the trustee must either extend the term or sell the real estate and provide the proceeds to the beneficiary. | True |
| Bundle of Rights | Rights of real property ownership, which can be sold separate from the land (e.g., air rights) |
| Economic Characteristics of Real Property | Scarcity, improvements, permanence of investment, situs (location) |
| Fiduciary | A term that refers to a legal relationship that is confidential between two parties. This relationship gives one party the right to act and make important decisions for the other party. |
| Probate | The legal process, which involves the courts, to ensure the wishes of the deceased person are followed as outlined in the will. |
| Subchapter S Corporation | Corporations that are taxed as partnerships. They don’t pay corporate income taxes, and shareholders may deduct losses on their taxes that represent their share of the corporation’s losses. |
| Subchapter C Corporation | The standard (or default) corporation under IRS rules. They file business tax returns, further separating personal and business assets. |
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