California Real Estate License Express: All-in-One Review and Testing (2020)
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California
Real Estate
License
Express
All-in-One Review and Testing to Pass California’s Real Estate
Exam
2nd Edition
David Cusic
Stephen Mettling
Ryan Mettling
Performance Programs Company
502 South Fremont Ave., Ste. # 724
Tampa, FL, 33606
www.performanceprogramscompany.com
Real Estate
License
Express
All-in-One Review and Testing to Pass California’s Real Estate
Exam
2nd Edition
David Cusic
Stephen Mettling
Ryan Mettling
Performance Programs Company
502 South Fremont Ave., Ste. # 724
Tampa, FL, 33606
www.performanceprogramscompany.com
Material in this book is not intended to represent legal advice and should not
be so construed. Readers should consult legal counsel for advice regarding
points of law.
© 2021 by Performance Programs Company
502 S. Fremont Ave., Suite #724,Tampa, FL 33606
info@performanceprogramscompany.com
http://www.performanceprogramscompany.com/
All rights reserved. No part of this book may be reproduced in any form by
any means without the express written consent of the publisher.
be so construed. Readers should consult legal counsel for advice regarding
points of law.
© 2021 by Performance Programs Company
502 S. Fremont Ave., Suite #724,Tampa, FL 33606
info@performanceprogramscompany.com
http://www.performanceprogramscompany.com/
All rights reserved. No part of this book may be reproduced in any form by
any means without the express written consent of the publisher.
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Table of Contents
INTRODUCTION: OVERVIEW & INSTRUCTIONS
SECTION I: Real Estate Principles & Law Key Point Review
Rights
Interests & Estates
Ownership
Encumbrances & Liens
Transferring & Recording Title
Leases
Land Use
Legal Descriptions
Contract Law
Agency
Listing Agreements
Brokerage
Sale Contracts
Economics
Appraisal
Finance
Investment
Taxation
Professional Practices
Closings
Risk Management
Property Management
SECTION II: CALIFORNIA PRINCIPLES & LAWS KEY POINT
REVIEW
Part I: Department of Real Estate
Structure, Duties and Powers
Handling Complaints
Disciplinary Action
Real Estate Fund & Consumer Recovery Account
Part II: Licensing Regulation
INTRODUCTION: OVERVIEW & INSTRUCTIONS
SECTION I: Real Estate Principles & Law Key Point Review
Rights
Interests & Estates
Ownership
Encumbrances & Liens
Transferring & Recording Title
Leases
Land Use
Legal Descriptions
Contract Law
Agency
Listing Agreements
Brokerage
Sale Contracts
Economics
Appraisal
Finance
Investment
Taxation
Professional Practices
Closings
Risk Management
Property Management
SECTION II: CALIFORNIA PRINCIPLES & LAWS KEY POINT
REVIEW
Part I: Department of Real Estate
Structure, Duties and Powers
Handling Complaints
Disciplinary Action
Real Estate Fund & Consumer Recovery Account
Part II: Licensing Regulation
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Licensed Activities and Exemptions
CA License Types
Licensing Process
Reciprocity and Nonresident Licensure
Place of Business
Fictitious Names
License Renewal
Continuing Education
License Status
License Violations
Part III: California Agency and Fiduciary Relationships
Law of Agency in California
Definitions and Responsibilities of Principals
Types of Agency and Agency Relationships
Creation and Termination of Agency
Responsibilities of Agent
Agency Disclosures
Liabilities of Principal and Agent
Part IV: Brokerage Activities
Broker-Salesperson Relationships
Commissions and Fees
Compensation Agreements
Place of Business
Brokerage Supervision
License Retention
Branch Offices and Managers
Recordkeeping Requirements
Handling Trust Funds
Part V: Ethics, Fair Housing, and Standards of Conduct
General Prohibited Conduct
State and National Fair Housing Laws
Advertising Regulation
Essential Brokerage Disclosures and Notices
Violations and Penalties
Part VI: Escrow and Trust Accounts
Trust Account Definitions
CA Escrow Regulations
CA License Types
Licensing Process
Reciprocity and Nonresident Licensure
Place of Business
Fictitious Names
License Renewal
Continuing Education
License Status
License Violations
Part III: California Agency and Fiduciary Relationships
Law of Agency in California
Definitions and Responsibilities of Principals
Types of Agency and Agency Relationships
Creation and Termination of Agency
Responsibilities of Agent
Agency Disclosures
Liabilities of Principal and Agent
Part IV: Brokerage Activities
Broker-Salesperson Relationships
Commissions and Fees
Compensation Agreements
Place of Business
Brokerage Supervision
License Retention
Branch Offices and Managers
Recordkeeping Requirements
Handling Trust Funds
Part V: Ethics, Fair Housing, and Standards of Conduct
General Prohibited Conduct
State and National Fair Housing Laws
Advertising Regulation
Essential Brokerage Disclosures and Notices
Violations and Penalties
Part VI: Escrow and Trust Accounts
Trust Account Definitions
CA Escrow Regulations
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Trust Accounts
Part VII: Agreements, Contracts and Title Transfers
Broker-Salesperson Agreements
Listing Agreements
Advanced Fee Agreements
Contracts
Title Transfers
Mortgages, Deeds of Trust, Notes
Leases
Tax Aspects
Part VIII: Special Topics
Community Property
Lien v Title Theory
Encumbrances and Land Use Controls
Subdivision Regulations
Financing and Credit Laws
Real Estate Specializations
SECTION III: REAL ESTATE MATH CRAM CARDS
Basic Math
Ownership
Leases
Contracts for Sale
Appraisal & Value
Finance
Investment
Taxation
Commissions
Closing Costs, Prorations
Insurance Coverage
SECTION IV: GENERAL REAL ESTATE PRACTICE TESTS
Test 1: Rights; Interests and Estates; Ownership
Test 2: Encumbrances; Liens; Title Transfer and Recording; Leases
Test 3: Land Use; Legal Descriptions; Contract Law
Test 4: Agency; Listing Agreements
Test 5: Brokerage Business; Sale Contracts
Part VII: Agreements, Contracts and Title Transfers
Broker-Salesperson Agreements
Listing Agreements
Advanced Fee Agreements
Contracts
Title Transfers
Mortgages, Deeds of Trust, Notes
Leases
Tax Aspects
Part VIII: Special Topics
Community Property
Lien v Title Theory
Encumbrances and Land Use Controls
Subdivision Regulations
Financing and Credit Laws
Real Estate Specializations
SECTION III: REAL ESTATE MATH CRAM CARDS
Basic Math
Ownership
Leases
Contracts for Sale
Appraisal & Value
Finance
Investment
Taxation
Commissions
Closing Costs, Prorations
Insurance Coverage
SECTION IV: GENERAL REAL ESTATE PRACTICE TESTS
Test 1: Rights; Interests and Estates; Ownership
Test 2: Encumbrances; Liens; Title Transfer and Recording; Leases
Test 3: Land Use; Legal Descriptions; Contract Law
Test 4: Agency; Listing Agreements
Test 5: Brokerage Business; Sale Contracts
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Test 6: Economics; Appraisal
Test 7: Finance
Test 8: Investments; Taxation; Professional Practices
Test 9: Closings; Risk Management; Property Management
Test 10: Real Estate Math
SECTION V: CALIFORNIA STATE-LEVEL PRACTICE TESTS
Test 11: DRE, Licensing and Regulation
Test 12: Agency, Brokerage, and Ethics
Test 13: Trust Accounts, Contracts and Transfers, and Special Topics
SECTION VI: CALIFORNIA EXAMINATION
Sample Test: California Practice Exam
SECTION VII: ANSWER KEY PRACTICE TESTS AND CALIFORNIA
PRACTICE EXAMINATION
APPENDIX: USEFUL WEBSITES
Test 7: Finance
Test 8: Investments; Taxation; Professional Practices
Test 9: Closings; Risk Management; Property Management
Test 10: Real Estate Math
SECTION V: CALIFORNIA STATE-LEVEL PRACTICE TESTS
Test 11: DRE, Licensing and Regulation
Test 12: Agency, Brokerage, and Ethics
Test 13: Trust Accounts, Contracts and Transfers, and Special Topics
SECTION VI: CALIFORNIA EXAMINATION
Sample Test: California Practice Exam
SECTION VII: ANSWER KEY PRACTICE TESTS AND CALIFORNIA
PRACTICE EXAMINATION
APPENDIX: USEFUL WEBSITES
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Introduction
Welcome licensee candidates and future real estate professionals!
We know you have worked hard just to get here – you’ve completed or
nearly completed your prelicense curricula, and now all you have to do is
pass the state license exam. But easier said than done – and that’s where we
come in. We know the state exam can be tough, and very nerve-wracking to
prepare for. That’s why we created the California Real Estate License
Express (CA-RELE) the way we did. Since we have been managing real
estate schools and developing curriculum for forty years, we know how all
this works – or fails to work. Let us assure you – you made the right decision
buying this publication to prepare for your California exam. Here’s why.
First, CA-RELE is comprehensive in that it contains both key content review
and testing practice. And the text review is California-specific – not just
simplistic generic content, but terse, relevant and accurate state laws and
regulations presented in a well-organized set of ‘key point reviews’ which are
ideal for pre-test memorization. Finally, our real estate principles and
practices content, as well as our question selection, is further tailored to the
state testing outline promulgated by the California Department of Real Estate
(DRE). Therefore, the selected legal points and test questions reflect the topic
emphasis of your California license exam.
A word about the test questions… CA-RELE’s testing practice section
consists of ten general practice tests, three California state law tests, and one
state exam simulation test. The questions are direct, to the point, and
designed to test your understanding. When you have completed a given test,
you can check your answers against the answer key in the appendix. To
enhance your learning and preparations, each question’s answer is
accompanied by a brief explanation, or “rationale” underlying the correct
answer.
Your particular study and testing practice strategy using CA-RELE is up to
you. But to fully exploit its comprehensive content coverage, you should try
to review and memorize the key point reviews as much as possible. Then you
should make every effort to take each exam, review your mistakes, and re-
read the key point reviews that cover your weaker areas.
Welcome licensee candidates and future real estate professionals!
We know you have worked hard just to get here – you’ve completed or
nearly completed your prelicense curricula, and now all you have to do is
pass the state license exam. But easier said than done – and that’s where we
come in. We know the state exam can be tough, and very nerve-wracking to
prepare for. That’s why we created the California Real Estate License
Express (CA-RELE) the way we did. Since we have been managing real
estate schools and developing curriculum for forty years, we know how all
this works – or fails to work. Let us assure you – you made the right decision
buying this publication to prepare for your California exam. Here’s why.
First, CA-RELE is comprehensive in that it contains both key content review
and testing practice. And the text review is California-specific – not just
simplistic generic content, but terse, relevant and accurate state laws and
regulations presented in a well-organized set of ‘key point reviews’ which are
ideal for pre-test memorization. Finally, our real estate principles and
practices content, as well as our question selection, is further tailored to the
state testing outline promulgated by the California Department of Real Estate
(DRE). Therefore, the selected legal points and test questions reflect the topic
emphasis of your California license exam.
A word about the test questions… CA-RELE’s testing practice section
consists of ten general practice tests, three California state law tests, and one
state exam simulation test. The questions are direct, to the point, and
designed to test your understanding. When you have completed a given test,
you can check your answers against the answer key in the appendix. To
enhance your learning and preparations, each question’s answer is
accompanied by a brief explanation, or “rationale” underlying the correct
answer.
Your particular study and testing practice strategy using CA-RELE is up to
you. But to fully exploit its comprehensive content coverage, you should try
to review and memorize the key point reviews as much as possible. Then you
should make every effort to take each exam, review your mistakes, and re-
read the key point reviews that cover your weaker areas.
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In the end, as you know, it’s all up to you. Unlike other publications, we are
not going to tell you that using this book will guarantee that you pass your
state exam. It still takes hard work and study to pass. But we have done our
best here to get you ready. Following that, the most we can do is wish you the
best of success in taking and passing your state exam. So good luck!!
About the authors
David Cusic, Ph.D., has been a training consultant, author, and Performance
Programs Company partner for over forty years. As an educator with
international real estate training experience, Dr. Cusic has been engaged in
vocation-oriented education since 1966. Specializing in real estate training
since 1983, he has developed numerous real estate training programs for
corporate and institutional clients nationwide. Dr. Cusic is co-author of the
Company’s flagship title, Principles of Real Estate Practice by Mettling and
Cusic, now complemented by over 20 state supplements and 20 exam prep
texts.
For nearly fifty years, Stephen Mettling has been actively engaged in real
estate education. Beginning with Dearborn in 1972, then called Real Estate
Education Company, Mr. Mettling managed the company’s textbook division
and author acquisitions. Subsequently he built up the company’s real estate
school division which eventually became the country’s largest real estate,
insurance and securities school network in the country. In 1978, Mr. Mettling
founded Performance Programs Company, a custom training program
publishing and development company specializing in commercial, industrial,
and corporate real estate. Over time, Performance Programs Company
narrowed its focus to real estate textbook and exam prep publishing.
Currently the Company’s texts and prelicense resources are used in hundreds
of schools in over 48 states. Mr. Mettling has authored over 100 textbooks,
real estate programs and exam prep manuals.
Ryan Mettling, partner and currently publisher of Performance Programs, is
an accomplished online curriculum designer, author and course developer.
His other principal publication is Real Estate Math Express. Mr. Mettling
graduated Valedictorian from the University of Central Florida’s College of
Business Administration.
not going to tell you that using this book will guarantee that you pass your
state exam. It still takes hard work and study to pass. But we have done our
best here to get you ready. Following that, the most we can do is wish you the
best of success in taking and passing your state exam. So good luck!!
About the authors
David Cusic, Ph.D., has been a training consultant, author, and Performance
Programs Company partner for over forty years. As an educator with
international real estate training experience, Dr. Cusic has been engaged in
vocation-oriented education since 1966. Specializing in real estate training
since 1983, he has developed numerous real estate training programs for
corporate and institutional clients nationwide. Dr. Cusic is co-author of the
Company’s flagship title, Principles of Real Estate Practice by Mettling and
Cusic, now complemented by over 20 state supplements and 20 exam prep
texts.
For nearly fifty years, Stephen Mettling has been actively engaged in real
estate education. Beginning with Dearborn in 1972, then called Real Estate
Education Company, Mr. Mettling managed the company’s textbook division
and author acquisitions. Subsequently he built up the company’s real estate
school division which eventually became the country’s largest real estate,
insurance and securities school network in the country. In 1978, Mr. Mettling
founded Performance Programs Company, a custom training program
publishing and development company specializing in commercial, industrial,
and corporate real estate. Over time, Performance Programs Company
narrowed its focus to real estate textbook and exam prep publishing.
Currently the Company’s texts and prelicense resources are used in hundreds
of schools in over 48 states. Mr. Mettling has authored over 100 textbooks,
real estate programs and exam prep manuals.
Ryan Mettling, partner and currently publisher of Performance Programs, is
an accomplished online curriculum designer, author and course developer.
His other principal publication is Real Estate Math Express. Mr. Mettling
graduated Valedictorian from the University of Central Florida’s College of
Business Administration.
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Section I: Real Estate Principles & Law Key Point
Review
Rights
Land / Real Estate / Real Property
Land:
surface, all natural things attached to it, subsurface, and air above the
surface
Real estate:
land + manmade permanent attachments
Real property:
real estate + bundle of rights
Constitution guarantees private ownership of real property.
Physical Characteristics of Real Estate
Physical characteristics
Immobility; indestructibility; heterogeneity.
Immobility
Land cannot be moved from one site to another; its location is forever
fixed
Indestructibility
Land is permanent and cannot be destroyed since by definition it
extends below ground and into the sky
Since land is permanent, it does not depreciate
Only improvements depreciate and are insurable
Review
Rights
Land / Real Estate / Real Property
Land:
surface, all natural things attached to it, subsurface, and air above the
surface
Real estate:
land + manmade permanent attachments
Real property:
real estate + bundle of rights
Constitution guarantees private ownership of real property.
Physical Characteristics of Real Estate
Physical characteristics
Immobility; indestructibility; heterogeneity.
Immobility
Land cannot be moved from one site to another; its location is forever
fixed
Indestructibility
Land is permanent and cannot be destroyed since by definition it
extends below ground and into the sky
Since land is permanent, it does not depreciate
Only improvements depreciate and are insurable
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Non-homogeneity
Land is non-homogeneous; no two parcels of land are exactly the
same since they have a different location
Land versus Real Estate
Real Estate as Property
The Bundle of Rights:
"PUTEE":
P ossess
U se
T ransfer
E xclude
E ncumber
Legal Title v. Equitable title
Land is non-homogeneous; no two parcels of land are exactly the
same since they have a different location
Land versus Real Estate
Real Estate as Property
The Bundle of Rights:
"PUTEE":
P ossess
U se
T ransfer
E xclude
E ncumber
Legal Title v. Equitable title
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Legal title
Full legal ownership of property and the bundle of rights as they
apply to it. Contrasts with equitable title.
Equitable title
An interest that gives a lienholder or buyer the right to acquire legal
title to a property if certain contractual conditions occur
Property characteristics:
property is either real or personal
property is either tangible or intangible
Real Property Rights
Airspace = air rights
Surface (of the earth) = surface rights
Subsurface = subsurface or mineral rights
Water rights:
Doctrine of Prior Appropriation
State controls water usage
State grants usage permits
Riparian Rights (Rivers and Streams)
applies to rivers and streams
if waterway is navigable: owners own land to water's edge
if waterway is not navigable: owners own land to midpoint of
waterway
Littoral Rights (Lakes and Seas)
applies to seas and lakes
abutting property owners own to high water mark
state owns underlying land
Memory Tip:
Full legal ownership of property and the bundle of rights as they
apply to it. Contrasts with equitable title.
Equitable title
An interest that gives a lienholder or buyer the right to acquire legal
title to a property if certain contractual conditions occur
Property characteristics:
property is either real or personal
property is either tangible or intangible
Real Property Rights
Airspace = air rights
Surface (of the earth) = surface rights
Subsurface = subsurface or mineral rights
Water rights:
Doctrine of Prior Appropriation
State controls water usage
State grants usage permits
Riparian Rights (Rivers and Streams)
applies to rivers and streams
if waterway is navigable: owners own land to water's edge
if waterway is not navigable: owners own land to midpoint of
waterway
Littoral Rights (Lakes and Seas)
applies to seas and lakes
abutting property owners own to high water mark
state owns underlying land
Memory Tip:
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R: River Riparian
L: Lake Littoral
Real Property versus Personal Property
Real Property:
land
fixtures
attachments
Personal Property:
chattels
trade fixtures
emblements
Differentiation criteria: item is real or personal property depending on
why, how item is attached to the real estate. Depends on the owners'
intention; adaptation; functionality; relationship of parties; contract
provisions
Trade fixtures:
personal property items temporarily attached to real estate in order to
conduct business
Emblements:
plants or crops that are considered personal property despite being
attached to land
Conversion:
real to personal property referred to as severance
personal to real property referred to as affixing
Factory-built housing – mobile homes and manufactured homes
Units are real or personal property:
Real property if permanently affixed to ground; otherwise it is
personal property
L: Lake Littoral
Real Property versus Personal Property
Real Property:
land
fixtures
attachments
Personal Property:
chattels
trade fixtures
emblements
Differentiation criteria: item is real or personal property depending on
why, how item is attached to the real estate. Depends on the owners'
intention; adaptation; functionality; relationship of parties; contract
provisions
Trade fixtures:
personal property items temporarily attached to real estate in order to
conduct business
Emblements:
plants or crops that are considered personal property despite being
attached to land
Conversion:
real to personal property referred to as severance
personal to real property referred to as affixing
Factory-built housing – mobile homes and manufactured homes
Units are real or personal property:
Real property if permanently affixed to ground; otherwise it is
personal property
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Regulation of real property interests
Federal regulation
Grants rights of ownership
Controls broad land usage standards
Regulates anti-discrimination laws
Examples: land grants; federal flood zones; fair housing laws;
FHA; EPA
State regulation
Governs real estate business
Sets regional usage standards
Examples: license laws; water rights; development regulation
Local regulation
Levies real estate taxes
Controls specific usage
Examples: property assessing; zoning; building permits; tax
levies
Judicial regulation
Applies case law and common law to disputes
Contrasts with statutory law
Interests & Estates
Interests and Estates in Land
Interests:
Possession / Possessory
Estate in land
Non-possession / Non-possessory
Private: Encumbrance
Public: public interest
Federal regulation
Grants rights of ownership
Controls broad land usage standards
Regulates anti-discrimination laws
Examples: land grants; federal flood zones; fair housing laws;
FHA; EPA
State regulation
Governs real estate business
Sets regional usage standards
Examples: license laws; water rights; development regulation
Local regulation
Levies real estate taxes
Controls specific usage
Examples: property assessing; zoning; building permits; tax
levies
Judicial regulation
Applies case law and common law to disputes
Contrasts with statutory law
Interests & Estates
Interests and Estates in Land
Interests:
Possession / Possessory
Estate in land
Non-possession / Non-possessory
Private: Encumbrance
Public: public interest
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Estates in Land
Include right of possession
Leaseholds = limited duration
Freeholds: duration is not limited
Freehold (Own)
Fee simple
Absolute
Defeasible
Life Estates
Conventional
Legal
Leasehold (Lease)
Estate for years
Periodic
Estate at Will
Estate at Sufferance
Freeholds
Fee simple
not limited by one's lifetime
absolute: highest form of ownership interest
defeasible: reverts to previous owner per conditions
Life estate
passes to another upon death of a named party
remainder: named party to receive estate
reversion: previous owner to receive estate
Conventional life estate
limited to lifetime of life tenant or named party
ordinary: estate passes to remainderman or previous owner when life
tenant dies
pur autre vie: limited to lifetime of another, passes to remainderman
or previous owner
Include right of possession
Leaseholds = limited duration
Freeholds: duration is not limited
Freehold (Own)
Fee simple
Absolute
Defeasible
Life Estates
Conventional
Legal
Leasehold (Lease)
Estate for years
Periodic
Estate at Will
Estate at Sufferance
Freeholds
Fee simple
not limited by one's lifetime
absolute: highest form of ownership interest
defeasible: reverts to previous owner per conditions
Life estate
passes to another upon death of a named party
remainder: named party to receive estate
reversion: previous owner to receive estate
Conventional life estate
limited to lifetime of life tenant or named party
ordinary: estate passes to remainderman or previous owner when life
tenant dies
pur autre vie: limited to lifetime of another, passes to remainderman
or previous owner
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Legal life estate
created by operation of state law as opposed to a property owner’s
agreement
designed to protect family survivors
Homestead:
rights to one's principal residence
laws protect homestead from creditors
family must occupy the homestead
cannot be conveyed by one spouse
endures over life of head of household
interests extinguished if property destroyed
Leaseholds
Estate for years
specific, stated duration, per lease; expires at end of term
Periodic
lease term renews automatically upon acceptance of rent
Estate at Will
for indefinite period subject to rent payment; cancelable with notice
Estate at Sufferance
tenancy against landlord's will and without an agreement
Ownership
Forms of Ownership
Tenancy in severalty
sole ownership of a freehold estate; passes to heirs
Tenancy in common
co-tenants individually own undivided interests
any ownership share possible
created by operation of state law as opposed to a property owner’s
agreement
designed to protect family survivors
Homestead:
rights to one's principal residence
laws protect homestead from creditors
family must occupy the homestead
cannot be conveyed by one spouse
endures over life of head of household
interests extinguished if property destroyed
Leaseholds
Estate for years
specific, stated duration, per lease; expires at end of term
Periodic
lease term renews automatically upon acceptance of rent
Estate at Will
for indefinite period subject to rent payment; cancelable with notice
Estate at Sufferance
tenancy against landlord's will and without an agreement
Ownership
Forms of Ownership
Tenancy in severalty
sole ownership of a freehold estate; passes to heirs
Tenancy in common
co-tenants individually own undivided interests
any ownership share possible
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no survivorship
can convey to outside parties
Joint tenancy
equal undivided interest jointly owned
survivorship (may require express provision)
requires four unities to create: time, title, interest, possession
Tenancy by the entireties
husband and wife own equal undivided interest
Now applies to same-sex couples in some states
Community property
joint property ownership by spouses as opposed to separate property
Joint Tenancy & Four Unities
Unity of ownership
owners hold single title jointly
Equal ownership
owners always hold equal shares
Transfer
may transfer to new owner as a tenancy in common interest with
remaining joint tenants
Survivorship
on death, interests and rights pass to other joint tenants
Creation
requires "four unities," PITT:
1. Possession: acquire same possessory rights
2. Interest: acquire equal, undivided interests
3. Time: acquire interests at same time
4. Title: acquire interests with same deed
can convey to outside parties
Joint tenancy
equal undivided interest jointly owned
survivorship (may require express provision)
requires four unities to create: time, title, interest, possession
Tenancy by the entireties
husband and wife own equal undivided interest
Now applies to same-sex couples in some states
Community property
joint property ownership by spouses as opposed to separate property
Joint Tenancy & Four Unities
Unity of ownership
owners hold single title jointly
Equal ownership
owners always hold equal shares
Transfer
may transfer to new owner as a tenancy in common interest with
remaining joint tenants
Survivorship
on death, interests and rights pass to other joint tenants
Creation
requires "four unities," PITT:
1. Possession: acquire same possessory rights
2. Interest: acquire equal, undivided interests
3. Time: acquire interests at same time
4. Title: acquire interests with same deed
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Community Property
Separate
acquired before marriage
acquired by gift or inheritance
acquired with separate-property funds
income derived from separate property
Community
all other property earned or acquired during the marriage
Estates in Trust
Trustor gives title, deed, trust agreement to trustee
Trustee renders fiduciary duties to trustor and beneficiary
Beneficiary receives ownership benefits
Living / testamentary trust - conveyance of real, personal property
during one's lifetime
Land trust - grantor and beneficiary are same party; beneficiary uses,
controls property but does not appear on public records
Condominiums
ownership of a unit of airspace plus an undivided interest in
the common elements as tenant in common with other owners
may be sold, encumbered or foreclosed without affecting other unit
owners
creation: by developer's declaration
individually taxed
managed by condo association
owners share common area expenses
Cooperatives
ownership of
shares in owning corporation
proprietary lease in a unit
corporation has sole, undivided ownership
Separate
acquired before marriage
acquired by gift or inheritance
acquired with separate-property funds
income derived from separate property
Community
all other property earned or acquired during the marriage
Estates in Trust
Trustor gives title, deed, trust agreement to trustee
Trustee renders fiduciary duties to trustor and beneficiary
Beneficiary receives ownership benefits
Living / testamentary trust - conveyance of real, personal property
during one's lifetime
Land trust - grantor and beneficiary are same party; beneficiary uses,
controls property but does not appear on public records
Condominiums
ownership of a unit of airspace plus an undivided interest in
the common elements as tenant in common with other owners
may be sold, encumbered or foreclosed without affecting other unit
owners
creation: by developer's declaration
individually taxed
managed by condo association
owners share common area expenses
Cooperatives
ownership of
shares in owning corporation
proprietary lease in a unit
corporation has sole, undivided ownership
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owners potentially liable for expenses of entire co-op; creditors may
foreclose on entire property
Time shares
lease or ownership interest in property for periodic use on a scheduled
basis
lease: tenant leases property per the lease’s schedule
freehold: tenants in common own undivided interests, pay expenses
per separate agreement
Encumbrances & Liens
Encumbrances
Non-possessory interests limiting legal owner’s rights
Do not include possession
Two types:
encumbrances that affect use
encumbrances that affect ownership, value, transfer
Encumbrances affecting use: easements, encroachments, licenses,
deed restrictions
Encumbrances affecting ownership, value, transfer: liens, deed
conditions
Easements
Characteristics
Rights to use portions of another’s property
affirmative easement: allows a use
negative easement: prohibits a use
Appurtenant
attaches to the estate
dominant tenement's right to use or restrict
adjacent servient tenement
foreclose on entire property
Time shares
lease or ownership interest in property for periodic use on a scheduled
basis
lease: tenant leases property per the lease’s schedule
freehold: tenants in common own undivided interests, pay expenses
per separate agreement
Encumbrances & Liens
Encumbrances
Non-possessory interests limiting legal owner’s rights
Do not include possession
Two types:
encumbrances that affect use
encumbrances that affect ownership, value, transfer
Encumbrances affecting use: easements, encroachments, licenses,
deed restrictions
Encumbrances affecting ownership, value, transfer: liens, deed
conditions
Easements
Characteristics
Rights to use portions of another’s property
affirmative easement: allows a use
negative easement: prohibits a use
Appurtenant
attaches to the estate
dominant tenement's right to use or restrict
adjacent servient tenement
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by necessity, to landlocked owners
party wall easement in a shared structure: to not damage or destroy
in Gross
does not attach to the estate
Personal-- not transferrable, ends upon death of easement holder
Commercial-- transferrable, granted to a business
by Prescription
property used without permission; can come to exist regardless of
owner's consent
obtainable through continuous, open, adverse use over a period
License
personal right to use a property
does not attach
non-transferrable
revocable
ceases upon death of owner
Encroachments
Unauthorized intrusions of one owner’s real property onto another’s
May require survey to detect
May become prescriptive easements if not remedied over prescription
period
Deed restrictions
Conditions, covenants imposed on property by deed or subdivision
plat
Goes with the property upon transfer
Established to control quality, standards of a subdivision
Apply to land use, type of structure, setbacks, minimum house size,
etc.
Deed conditions
Created upon property transfer
If violated, ownership may revert to previous owner
party wall easement in a shared structure: to not damage or destroy
in Gross
does not attach to the estate
Personal-- not transferrable, ends upon death of easement holder
Commercial-- transferrable, granted to a business
by Prescription
property used without permission; can come to exist regardless of
owner's consent
obtainable through continuous, open, adverse use over a period
License
personal right to use a property
does not attach
non-transferrable
revocable
ceases upon death of owner
Encroachments
Unauthorized intrusions of one owner’s real property onto another’s
May require survey to detect
May become prescriptive easements if not remedied over prescription
period
Deed restrictions
Conditions, covenants imposed on property by deed or subdivision
plat
Goes with the property upon transfer
Established to control quality, standards of a subdivision
Apply to land use, type of structure, setbacks, minimum house size,
etc.
Deed conditions
Created upon property transfer
If violated, ownership may revert to previous owner
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Deed covenants
Created by mutual agreement
Enforceable by injunction
Liens
Claims attaching to real and personal property as security for debt
Recorded on title effectively reducing equity in the amount of the lien
Does not convey ownership unless a mortgage in a title theory state
Lien attaches to the property
Property can be encumbered by multiple liens
Lien terminates upon payment, recording satisfaction
Lien Types and characteristics
voluntary / involuntary:
example:
mortgage lien / tax lien
general / specific:
example:
against any & all assets / against car or house
superior / junior:
example:
paid before juniors / paid after superiors by date of recording
Lien vs. Title Theory State
lien theory state – lender of mortgaged property holds equitable title
rather than legal title; borrower holds legal title.
title theory state – lender holds legal title to the mortgaged property
until the mortgagor satisfies the terms and obligations of the loan.
Lien Priority
Order in which liens against a property are satisfied
Determined by superior v junior class and by date of recordation
The highest priority lien is paid by foreclosure proceeds before any
Created by mutual agreement
Enforceable by injunction
Liens
Claims attaching to real and personal property as security for debt
Recorded on title effectively reducing equity in the amount of the lien
Does not convey ownership unless a mortgage in a title theory state
Lien attaches to the property
Property can be encumbered by multiple liens
Lien terminates upon payment, recording satisfaction
Lien Types and characteristics
voluntary / involuntary:
example:
mortgage lien / tax lien
general / specific:
example:
against any & all assets / against car or house
superior / junior:
example:
paid before juniors / paid after superiors by date of recording
Lien vs. Title Theory State
lien theory state – lender of mortgaged property holds equitable title
rather than legal title; borrower holds legal title.
title theory state – lender holds legal title to the mortgaged property
until the mortgagor satisfies the terms and obligations of the loan.
Lien Priority
Order in which liens against a property are satisfied
Determined by superior v junior class and by date of recordation
The highest priority lien is paid by foreclosure proceeds before any
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other lien
Superior Liens by rank (not by date of recordation; paid before
junior liens)
Real estate tax liens
Special assessment liens
Federal estate tax liens
State inheritance tax liens
Junior Liens by date of recording (by date of recording)
Federal income tax liens
Judgment liens
Mortgage liens
Vendor's liens
Mechanic's liens (priority by date work performed)
Foreclosure
Liquidation or transfer of collateral property by judicial, non-judicial,
or strict foreclosure
Mortgage lien foreclosure:
liquidation of collateral property by judicial, non-judicial, or strict
foreclosure
Judicial foreclosure:
lawsuit by creditor and court-ordered public sale to enforce
lien; deficiency judgments, redemption rights
Deficiency judgments
judgment by court on borrower to forfeit other property to payoff any
shortfalls from foreclosure
Redemption rights
borrower’s right to reclaim property before or after foreclosure sale
Non-judicial foreclosure:
"power of sale" granted to lender; no suit; no deficiency
Superior Liens by rank (not by date of recordation; paid before
junior liens)
Real estate tax liens
Special assessment liens
Federal estate tax liens
State inheritance tax liens
Junior Liens by date of recording (by date of recording)
Federal income tax liens
Judgment liens
Mortgage liens
Vendor's liens
Mechanic's liens (priority by date work performed)
Foreclosure
Liquidation or transfer of collateral property by judicial, non-judicial,
or strict foreclosure
Mortgage lien foreclosure:
liquidation of collateral property by judicial, non-judicial, or strict
foreclosure
Judicial foreclosure:
lawsuit by creditor and court-ordered public sale to enforce
lien; deficiency judgments, redemption rights
Deficiency judgments
judgment by court on borrower to forfeit other property to payoff any
shortfalls from foreclosure
Redemption rights
borrower’s right to reclaim property before or after foreclosure sale
Non-judicial foreclosure:
"power of sale" granted to lender; no suit; no deficiency
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judgment; no redemption period after sale
Strict foreclosure:
court orders legal transfer of title directly to lender without public
sale
Deed in lieu of foreclosure:
defaulted borrower deeds property to lender to avoid foreclosure
Transferring & Recording Title
Legal v Equitable Title
Legal title: owner enjoys full bundle of rights
Equitable title: party can obtain legal title subject to agreements with
creditors
Notice
Notice:
how ownership is evidenced to the public
Actual notice:
knowledge acquired directly through demonstrable evidence, e.g.,
presenting or inspecting a deed, visiting a party in possession
Constructive notice:
knowledge one could have obtained, as presumed by law; imparted
by recording in public records "for all to see"
Voluntary / Involuntary
Voluntary transfer
deed
will
public grant
Strict foreclosure:
court orders legal transfer of title directly to lender without public
sale
Deed in lieu of foreclosure:
defaulted borrower deeds property to lender to avoid foreclosure
Transferring & Recording Title
Legal v Equitable Title
Legal title: owner enjoys full bundle of rights
Equitable title: party can obtain legal title subject to agreements with
creditors
Notice
Notice:
how ownership is evidenced to the public
Actual notice:
knowledge acquired directly through demonstrable evidence, e.g.,
presenting or inspecting a deed, visiting a party in possession
Constructive notice:
knowledge one could have obtained, as presumed by law; imparted
by recording in public records "for all to see"
Voluntary / Involuntary
Voluntary transfer
deed
will
public grant
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Involuntary transfer
descent (without will, with heirs)
escheat (without will nor heirs)
foreclosure (loan default)
eminent domain (public good)
adverse possession (hostile, open use)
Deeds of Conveyance
Key characteristics
grantor grants deed to grantee
legal title transfers upon intentional delivery and grantee’s acceptance
Deed Validity
Requirements:
1. grantor
2. grantee
3. in writing
4. legal description
5. granting clause
6. consideration
7. grantor's signature
8. acknowledgement
9. delivery and acceptance
Deed Clauses
Premises: granting
Habendum: type of estate
Reddendum: restrictions
Tenendum: other property included
Deed Types
Bargain and sale: "I own but won't defend"
descent (without will, with heirs)
escheat (without will nor heirs)
foreclosure (loan default)
eminent domain (public good)
adverse possession (hostile, open use)
Deeds of Conveyance
Key characteristics
grantor grants deed to grantee
legal title transfers upon intentional delivery and grantee’s acceptance
Deed Validity
Requirements:
1. grantor
2. grantee
3. in writing
4. legal description
5. granting clause
6. consideration
7. grantor's signature
8. acknowledgement
9. delivery and acceptance
Deed Clauses
Premises: granting
Habendum: type of estate
Reddendum: restrictions
Tenendum: other property included
Deed Types
Bargain and sale: "I own but won't defend"
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General warranty: "I own and will defend"
Special warranty: "I own and warrant myself only"
Quitclaim: "I may or may not own, and won't defend"
Special purpose deeds: Used for different purposes, interests conveyed,
or by different parties
Deed Restrictions
Deed restriction
single-property use restriction as stipulated in a deed; may not be
discriminatory
examples: minimum area of a residence; setbacks; limits on other
structures; conducting commercial activities
Declaration restriction
use restriction in multiple-property declarations; enforced by court
injunction
Deed condition
usage restriction that can trigger repossession by a previous owner if
violated
Transfer Tax
Documentary stamp tax: tax on conveyance of real property based
on price of property conveyed
Facilitates ad valorem assessment
Payment evidenced on deed
Wills
Key characteristics
will transfers estate to heirs upon death
maker= owner; devisor or testator
heir = beneficiary or devisee
Types of wills
Special warranty: "I own and warrant myself only"
Quitclaim: "I may or may not own, and won't defend"
Special purpose deeds: Used for different purposes, interests conveyed,
or by different parties
Deed Restrictions
Deed restriction
single-property use restriction as stipulated in a deed; may not be
discriminatory
examples: minimum area of a residence; setbacks; limits on other
structures; conducting commercial activities
Declaration restriction
use restriction in multiple-property declarations; enforced by court
injunction
Deed condition
usage restriction that can trigger repossession by a previous owner if
violated
Transfer Tax
Documentary stamp tax: tax on conveyance of real property based
on price of property conveyed
Facilitates ad valorem assessment
Payment evidenced on deed
Wills
Key characteristics
will transfers estate to heirs upon death
maker= owner; devisor or testator
heir = beneficiary or devisee
Types of wills
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witnessed: in writing and two witnesses
holographic: will in testator’s handwriting
nuncupative: oral will written by witnesses; generally not valid for
property transfer
Validity of will
legal age; mentally competent; entitled “last will & testament;”
signed, witnessed, voluntary
Testate / Intestate
Dies testate with heirs:
Order of Title Transfer
first to creditors
then to homestead
then to heirs by will
Dies intestate with heirs:
Order of Title Transfer
first to creditors
then to homestead
then to heirs by laws of descent
Dies intestate, no heirs:
Order of Title Transfer
first to creditors
then to state by escheat
Involuntary title transfer
Adverse possession
“unwanted owner” may claim ownership to a property
must show “claim of right” as reason
must be notorious possession (unconcealed)
must be hostile (possessor claims ownership)
must be continuous for a statutory period of time
holographic: will in testator’s handwriting
nuncupative: oral will written by witnesses; generally not valid for
property transfer
Validity of will
legal age; mentally competent; entitled “last will & testament;”
signed, witnessed, voluntary
Testate / Intestate
Dies testate with heirs:
Order of Title Transfer
first to creditors
then to homestead
then to heirs by will
Dies intestate with heirs:
Order of Title Transfer
first to creditors
then to homestead
then to heirs by laws of descent
Dies intestate, no heirs:
Order of Title Transfer
first to creditors
then to state by escheat
Involuntary title transfer
Adverse possession
“unwanted owner” may claim ownership to a property
must show “claim of right” as reason
must be notorious possession (unconcealed)
must be hostile (possessor claims ownership)
must be continuous for a statutory period of time
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Title Records
Features
Instruments affecting title must be recorded
Gives public notice of ownership, condition of title
Determines property marketability
Protects lienholders; establishes chronology for lien priority
Key Terms
chain of title – successive property owners from original grant to
present
cloud on title – unrecorded claims
suit to quiet title – lawsuit to settle claims
abstract of title: written chronology of recorded owners, transfers,
encumbrances
Evidence of Title
title insurance (best form of evidence)
attorney's opinion of abstract
title certificates
Torrens registration
Leases
Key characteristics
lease is both an instrument of conveyance and contract of covenants
between tenant and landlord
lease conveys temporary, exclusive use of premises in exchange for
rent and right of reversion
Tenant rights and obligations
rights: use, possession, quiet enjoyment, profits
tenant obligations: pay rent; maintain premises; follow rules
Landlord rights and obligations
Features
Instruments affecting title must be recorded
Gives public notice of ownership, condition of title
Determines property marketability
Protects lienholders; establishes chronology for lien priority
Key Terms
chain of title – successive property owners from original grant to
present
cloud on title – unrecorded claims
suit to quiet title – lawsuit to settle claims
abstract of title: written chronology of recorded owners, transfers,
encumbrances
Evidence of Title
title insurance (best form of evidence)
attorney's opinion of abstract
title certificates
Torrens registration
Leases
Key characteristics
lease is both an instrument of conveyance and contract of covenants
between tenant and landlord
lease conveys temporary, exclusive use of premises in exchange for
rent and right of reversion
Tenant rights and obligations
rights: use, possession, quiet enjoyment, profits
tenant obligations: pay rent; maintain premises; follow rules
Landlord rights and obligations
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rights: receive rent; repossess upon expiration; monitor tenant
compliance
obligations: property condition, habitability, support services
Estate Types
Gross lease
landlord pays expenses; tenant pays higher rent than net
Net lease
tenant pays some or all expenses; rent is less than gross
Percentage lease
landlord receives rent minimum plus percentage of retailer's sales
Residential lease
gross lease hybrid; short term; uniform terms reflect landlord-tenant
standards
Ground lease
landlord owns and leases ground but does not own improvements
Proprietary lease
for cooperative unit owners; indefinite term; assigned to new unit
owner on sale
Leasing of rights
leasehold transfer of rights for limited use; examples: air, mineral,
water rights
Lease Termination
Causes
default
notice
property destruction
death
term expiration
compliance
obligations: property condition, habitability, support services
Estate Types
Gross lease
landlord pays expenses; tenant pays higher rent than net
Net lease
tenant pays some or all expenses; rent is less than gross
Percentage lease
landlord receives rent minimum plus percentage of retailer's sales
Residential lease
gross lease hybrid; short term; uniform terms reflect landlord-tenant
standards
Ground lease
landlord owns and leases ground but does not own improvements
Proprietary lease
for cooperative unit owners; indefinite term; assigned to new unit
owner on sale
Leasing of rights
leasehold transfer of rights for limited use; examples: air, mineral,
water rights
Lease Termination
Causes
default
notice
property destruction
death
term expiration
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voluntary agreement
condemnation
abandonment under certain conditions
Uniform Residential Landlord and Tenant Act
Purposes
balance landlord and tenant rights
standardize leases
have uniform eviction procedures
protect tenants
serve as model for state legislation
Leases:
clear lease terms
fair market rent
cannot waive rights
Deposits:
limits on amounts
tenant's right to interest
rules and deadlines for returning
Landlord Obligations:
bargain in good faith
provide maintenance and repairs
comply with building codes
provide safety and access
procedure for delivery of notices
Tenant Obligations:
maintain condition
abide by rules and regulations
no damage or abuse
abide by approved uses
no disturbance of other tenants
condemnation
abandonment under certain conditions
Uniform Residential Landlord and Tenant Act
Purposes
balance landlord and tenant rights
standardize leases
have uniform eviction procedures
protect tenants
serve as model for state legislation
Leases:
clear lease terms
fair market rent
cannot waive rights
Deposits:
limits on amounts
tenant's right to interest
rules and deadlines for returning
Landlord Obligations:
bargain in good faith
provide maintenance and repairs
comply with building codes
provide safety and access
procedure for delivery of notices
Tenant Obligations:
maintain condition
abide by rules and regulations
no damage or abuse
abide by approved uses
no disturbance of other tenants
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Land Use
Planning and Zoning Definitions
Building code: A standard of construction of an improved property
established by local government officials
Certificate of occupancy: A document confirming that a newly constructed
or renovated property has fully complied with all building codes and is
ready for occupancy
Concurrency: A planning policy that requires developers to correct foreseen
negative impacts of a development during the construction period of the
project itself rather than afterwards
Condemnation: 1. A decree that a parcel of private property is to be taken
for public use under the power of eminent domain. 2. A government
order that a is no longer fit for use and must be demolished.
Deed restriction: A provision in a deed that limits or places rules on how the
deeded property may be used or improved
Eminent domain: A power of a government entity to force the sale of
private property for subsequent public use
Land use control: Regulation of how individual owners use property in a
municipality or planning district. Control patterns are in accordance with
a master plan
Master plan: An amalgamated land use plan for a municipality, county, or
region which incorporates community opinion, the results of intensive
research, and the various land use guidelines and regulations of the state.
Acts as a blueprint for subsequent zoning ordinances and rulings
Non-conforming use: A legal or illegal land use that is not consistent with
the current zoning ordinance
Police power: A government's legal authority to create, regulate, tax, and
Planning and Zoning Definitions
Building code: A standard of construction of an improved property
established by local government officials
Certificate of occupancy: A document confirming that a newly constructed
or renovated property has fully complied with all building codes and is
ready for occupancy
Concurrency: A planning policy that requires developers to correct foreseen
negative impacts of a development during the construction period of the
project itself rather than afterwards
Condemnation: 1. A decree that a parcel of private property is to be taken
for public use under the power of eminent domain. 2. A government
order that a is no longer fit for use and must be demolished.
Deed restriction: A provision in a deed that limits or places rules on how the
deeded property may be used or improved
Eminent domain: A power of a government entity to force the sale of
private property for subsequent public use
Land use control: Regulation of how individual owners use property in a
municipality or planning district. Control patterns are in accordance with
a master plan
Master plan: An amalgamated land use plan for a municipality, county, or
region which incorporates community opinion, the results of intensive
research, and the various land use guidelines and regulations of the state.
Acts as a blueprint for subsequent zoning ordinances and rulings
Non-conforming use: A legal or illegal land use that is not consistent with
the current zoning ordinance
Police power: A government's legal authority to create, regulate, tax, and
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