Fall 2024 FINC 3250 - Chapter 2 Class Notes

Fall 2024 FINC 3250 - Chapter 2 Class Notes Definitions A. Real Property – land and anything intended to be permanently attached to the land. You will hear and see the terms “real estate” and “realty” used interchangeably with this term. Technically, real estate refers to intangible items that go along with real property ownership, like the right to mortgage the property, but no one makes this distinction. B. Personal Property – anything else. Other terms used here include “personalty” and “chattel property.” C. Improvement – things added to the real property. For example, a house, a retail shop, or a fence. D. Fixture – 4 tests 1. Manner of attachment 2. Adaptation of the object 3. Existence of an agreement 4. Relationship of the parties – this has to do with trade fixtures. These are personal property items added to a leased space to aid in conducting a business and may be removed by the tenant at the end of the lease, as long as the tenant repairs any damage caused by their removal. For example, the bookshelves installed by a tenant intending to operate a space as a bookstore. E. Appurtenance – anything that “runs with the land” can be said to be appurtenant to the land. Common examples would include any buildings that have been constructed on the land, although these are rarely referred to by this term any more. Another common example is an easement appurtenant, which we will define in Chapter 3. Basically, ownership of an appurtenance transfers with ownership of the land. II. Water Rights A. Riparian – Right to flowing water (owning property next to a river) B. Littoral Rights – Right to standing water (ie. owning property next to a lake or ocean) B. Doctrine of Prior Appropriation - Water rights are determined by priority of beneficial use. This means that the first person to use water or divert water for a beneficial use or purpose can acquire individual rights to the water. III. Estates in Land – Ownership (Freehold Estates) A. Fee Simple – 100% ownership. The largest estate in land. If one owns the property in fee simple with no encumbrances, then one has every right not reserved by the government. B. Qualified Fee 1. Fee Simple Determinable – the length of the ownership can be determined from the granting document lOMoARcPSD|14985576 2. Fee Simple Subject to Condition Subsequent – ownership is granted as long as some condition(s) is met. If the condition is no longer being met, the property either reverts back to the owner (a reversionary interest) or goes to some third party (a remainder interest). 3. Fee Simple Subject to Condition Precedent – some condition must be met before ownership actually transfers. C. Life Estate - examples: - the property is granted to Person A for the duration of Person A’s life, at which time it goes back to the grantor, who holds a reversionary interest in the property. - the property is granted to Person A for the duration of Person B’s life, at which time it goes back to the grantor, who holds a reversionary interest in the property. - the property is granted to Person A for the duration of Person A’s life, at which time it goes to a third party (not the grantor), who holds a remainder interest in the property. - the property is granted to Person A for the duration of Person B’s life, at which time it goes to a third party (not the grantor), who holds a remainder interest in the property. D. Future Interest – These come at the end of a life estate, or after some qualified fee ends 1. Reversion – Property reverts back to the original grantor 2. Remainder – Property goes to a third person E. Statutory Estates – Don’t go into these much. Mostly obsolete 1. Dower – no longer exists in Alabama (as of January 1, 1983). In states where it is still recognized, this refers to a wife’s interest in her deceased husband’s property. Upon his death, the wife would have an interest in any real property owned by the husband unless special steps had been taken to circumvent this happening. The special steps are more special than leaving the property to someone in a will, because a will cannot be used to defeat dower rights. Joint tenancy can be used (see below under “Joint Tenancy”). 2. Curtesy – no longer exists in Alabama, but this was roughly the male equivalent of dower rights. Some states still recognize this type of estate. The big difference is that a will can be used to defeat curtesy rights. 3. Community Property – not recognized in Alabama. See below under “Community Property. IV. Estates in Land – Non-ownership (Leasehold Estates) A. Estate for Years (or Estate for a Fixed Period) – don’t let the name fool you, this doesn’t have to be for any number of years. It could very well be for shorter than a year. The key factor here is that there is a specified starting and ending date for the tenancy.