Ownership, Estates, Rights, and Interests

This section explains how ownership is held, how property interests are created, and how rights can be shared or limited. These concepts appear frequently on the national exam.

The Bundle of Rights

Bundle of rights - The legal rights of property ownership, including possession, control, enjoyment, exclusion, and disposition.

These rights can be limited by law, agreements, or encumbrances. For example, an easement limits the right of exclusion and a lease limits the right of possession.

Forms of Ownership

Table: Ownership Forms

Joint tenancy requires the four unities to be created. If one unity is broken, the ownership converts to tenancy in common. The most common way to break a joint tenancy is when one owner sells or conveys their interest.

Exam Tip: Tenancy in common has no right of survivorship.

Freehold Estates

Freehold estate - Ownership interest in land of uncertain duration.

• Fee simple absolute - Maximum ownership interest; most common.
• Fee simple defeasible - Ownership that can be lost if a condition is violated.
  • Determinable ends automatically when a condition is broken.
  • Condition subsequent requires action to end the estate.
• Life estate - Ownership for the life of a person.
  • Remainder goes to a named party after the life tenant dies.
  • Reversion returns to the original owner if no remainder exists.

Life Estate Example

Owner grants a life estate to Alex with the remainder to Jordan. Alex can use the property during Alex's lifetime, but cannot will it to someone else. When Alex dies, the property transfers to Jordan automatically.

Leasehold Estates

Leasehold estate - Tenant's right of possession for a period of time.

• Estate for years - Fixed term with a definite end date.
• Periodic estate - Automatically renews until proper notice is given.
• Estate at will - Continues until terminated by either party.
• Estate at sufferance - Tenant remains after lease ends without permission.

Lease Types

Table: Lease Types

Liens and Lien Priority

A lien is a legal claim on property to secure a debt. Liens can be voluntary or involuntary.

• Voluntary: mortgage or deed of trust
• Involuntary: tax liens, judgment liens, mechanics liens

Priority is generally first in time, first in right, but property tax liens are typically superior. Some mechanics liens can relate back to the date work began, which may give them higher priority than later-recorded liens.

Subordination and Priority

Subordination is when a lien holder agrees to take a lower priority position. This is common in construction loans and refinancing.

Air, Surface, and Subsurface Rights

Ownership can be split by rights to the air above, the surface, or minerals below. Mineral rights are often separated from surface rights and can be sold independently. Air rights are common in dense urban areas and can allow building above rail lines or highways.

Exam Tip: Property tax liens usually have the highest priority.

Comparing Tenancy in Common and Joint Tenancy

These two ownership forms are often tested together.

• Tenancy in common allows unequal ownership shares. Each owner can sell their interest without consent.
• Joint tenancy requires equal interests and the four unities. If one owner sells, the joint tenancy is broken.

If a question mentions "right of survivorship," choose joint tenancy or tenancy by the entirety. If it mentions "undivided interest" without survivorship, choose tenancy in common.

Partition and Co-Owner Disputes

When co-owners cannot agree, a partition action can force a sale or division. Partition by sale is most common because it is hard to divide property evenly.

Life Estate Responsibilities

A life tenant has the right to use the property but must avoid waste. Waste includes failing to maintain the property or allowing serious damage. The life tenant usually pays property taxes, insurance, and normal upkeep.

Leasehold Rights and Duties

Leasehold estates give tenants the right of possession but not ownership. Tenants must pay rent and follow lease terms. Landlords must provide habitable property and honor lease rights. If a tenant stays after the lease ends, it becomes a holdover tenancy, which is an estate at sufferance.

Lien Priority Example

If a mortgage is recorded on January 1 and a judgment lien is recorded on February 1, the mortgage has priority. However, property tax liens often come ahead of both. This is why title searches check lien dates and tax status.

Ownership in Practice

In real transactions, co-owners must coordinate decisions such as selling, refinancing, or leasing. If one co-owner refuses, the other may seek a partition. This is why many investors use written agreements to define how decisions will be made and how profits will be shared.

Exam Application Check

• If one owner wants to transfer their share without permission, it is allowed in tenancy in common.
• If the question emphasizes equal ownership and survivorship, it is joint tenancy.