Types of Rights
The concept of “real property” refers to land and all things attached to the land. Items that are not land, but are attached or “affixed” to the land are called “fixtures. Common fixtures include buildings, foundations, wells, and the like. Things that are permanently attached to these items are also considered fixtures, so that the permanent plumbing and electrical wiring in a house are considered fixtures. Easily removable items are not considered fixtures.
The distinction between fixtures and nonfixtures is often important in residential real estate transactions. If the buyer wants the seller to leave behind a window treatment or an ornamental lighting fixture, it is better to include these items as additional personal property in the purchase agreement than to assume they are included in the sale as fixtures to the property. When in doubt, items that are included or excluded from the sale should be specifically described.
Real-property ownership is actually several different rights. These rights, or incidents of ownership, include the rights of
Not every form of real-property ownership involves all these rights. The law recognizes several type of ownership of real property based on which real-property rights the owner possesses. The major types of real-property ownership are ownership in fee simple, life estates, concurrent ownership interests, and future interests.
Fee Simple Ownership
Fee simple ownership is the highest form of real-property ownership. The owner of a fee simple interest in real property can exercise all of the incidents of ownership, subject to the regulatory powers of the local, state, and federal governments. An owner of real property in fee simple may develop the land for a strip mall or allow the land to remain in its natural state. The owner of a fee simple interest in land may give or sell a part of the ownership interest to another. The right of possession may be transferred to a renter in exchange for monthly payments. The right to use the property may be transferred by means of an easement that allows a neighbor to use a portion of the land as a driveway. The property can be encumbered, or subjected to the interest of another, if the owner chooses to use the property to secure a mortgage. The owner of a fee simple interest can dispose of the property on death by transferring ownership interest to an heir, devisee, or trustee.
A life estate is an ownership interest that lasts only as long as a designated person is alive. The designated person need not be the owner of the property. An interest in land can be transferred “to Joe for his life.” This type of life estate conveys a property interest to Joe that ends when Joe dies. If, however, the transfer is “to Joe for the life of Jim,” Jim has no interest in the property. He is simply the “measuring life.” The property interest acquired by Joe does not end when Joe dies if his death occurs before the death of Jim. Joe's heirs have a continuing interest in the property that does not terminate until Jim dies.
Even though a life estate is a limited interest in land, the owner may exercise many of the incidents of ownership. A life estate can be transferred or encumbered, or the property can be rented for the length of the life estate. These interests are not as valuable as the interests granted by a person with fee simple interests, but they do have some value. The life estate is sometimes used as a means of avoiding probate — the parent sells the property to an heir, but retains a life estate interest. When the seller dies, the life estate ends and the full ownership interest in the property transfers to the heir.
Can I use a life estate to prevent the government from taking my house to pay for my medical care?
The answer to this complicated question depends primarily on the nature and timing of the transfer. A transfer for fair market value is less suspect than a gift and the transfer must be made well in advance of the need for medical assistance. In addition, remember that a life estate has some value that may prevent eligibility to some programs.
Interests A concurrent ownership interest exists when more than one person has an ownership interest in the property. Concurrent owners share the ownership rights in the property. In most cases, the exercise of any of the incidents of ownership requires the consent of all concurrent owners. The primary forms of concurrent ownership are joint tenancy and tenancy in common. The distinction between these forms of concurrent ownership is discussed in Chapter 12.
Future interests in real property are created when the transfer of ownership is conditional or for a limited amount of time. The property interest that arises after the condition or the expiration of time is called the
Future interests are transferable. A person with a future interest cannot interfere with the rights of current ownership. The owner of a future interest does, however, have the right to prevent the owner of a current interest from damaging the land or doing anything that unreasonably affects the future value of the land.