Real Estate Basics
Buying a house is a traumatic experience. Confusion with terms isn’t helpful either. Before starting this exhausting quest, you may wish to learn the real estate basics. Many terms circulate as synonyms, while, in fact, they stand for completely different things. So let’s start from the beginning.
Land is the ground with all natural objects within it. Everything growing on top of it is defined as land. Note the word natural. If oil is found on your piece of land, it technically doesn’t belong to you.
Real estate is land with improvements: buildings, sidewalks and everything else attached to the land.
Fixtures are artificial improvements to the land or land’s improvements. Fixtures may become properties if the owners treat them so. For example, if you’re selling your real estate, the sales agreement should define the issue of fixtures. Carpets, furniture, satellite dishes and other appliances may be treated as fixtures and as property.
Trade fixtures are artificial improvements to the land or land’s improvements in business conduct. Trade fixtures are personal property of the business owner. Trade fixtures that remain in rented offices after the business owner has left become parts of the real estate.
Personal property or chattel includes all that is movable. Note that chattels apply to emblements (e.g. annual crops planted) as well as to personal belongings. If the tree remains and the planter is gone, he still has the right to the fruits. However, perennials are considered part of the land.
Real property or realty is the real estate and the legal rights (appurtenance) associated with it. Any subsequent owner gets both the real estate and the appurtenance. Rights of the real property owners are the same as the rights of personal property owners: the right to possess, control, enjoy and exclude the real property from others.
Real Estate Encumbrances
Encumbrance is a claim of liability against the real estate, held by a person other than the fee owner of the property. There are four types of encumbrances: liens, deed restrictions (covenants), easements and encroachments.
Lien is a claim against the property, collateral for a debt. The lien holder may sell the property if the debt hasn’t been paid, real estate taxes and mortgage payments included. A worker on the property may file a mechanic’s lien against the property if he hasn’t been paid. The worker is either paid when the real estate is sold or the new owner becomes liable for the debt.
Deed restrictions are private agreements that restrict the use of the real estate. Restrictions are listed in the deed.
Easement is the right to use a parcel of land for some purpose by other person than the owner. Usually it is the right to cross the property. There are two types of easements: appurtenant easement (appurtenance) and easement in gross. Appurtenance is the right to use adjoining property. Easement in gross is the right to use the land for personal and organizational benefit. An example is utility easement, which allows utilities to operate electric wires and pipelines.
Real Estate Ownership Forms
There are two general types of ownership forms: ownership in severalty (tenancy in severalty) and co-ownership. The latter includes following forms: tenancy in common, joint tenancy, tenancy by the entirety, separate property, and community property.
Ownership in severalty is the form where a person or a legal entity is the owner of the real estate.
Tenancy in common is when the concurrent owners own property’s fractional interests. Interests are usually divided equally.
Joint tenancy is a form of joint tenancy where joint tenants own undivided interests with rights of survivorship. When a joint tenant dies, the right of survivorship is divided among other tenants equally.
Tenancy by the entirety is a form of joint tenancy with rights of survivorship. There may be only two tenants who are married. Their interests cannot be conveyed without signatures of both tenants.
Separate property is the property owned by one spouse, including property acquired before marriage, property acquired by gift or will and incomes from separate property.
Community property is property acquired during marriage other than separate property.