Estates

What are estates in land?

Estates in land are an individual’s legal rights or interest in a property.  To be considered an estate in land, the interest must be Estatespossessory or become possessory at some point in time.  In other words, an easement, which is non-possessory is not an estate in land.  Nor is a licenseAdditionally, in an estate in land ownership is measured concerning duration.

Are there different types of estates in land?

Yes, there are.  There are two different types, and the determining feature is related to the ownership of the real estate.  Does the person with the right own the real estate, or are they merely leasing it?  If they own the real estate, they would have a freehold estate.  If they are leasing the real estate, they would be considered to have a leasehold estate.

Can freehold estates be classified further?

Sure, there are two main types of freehold estates.  Remember, a freehold estate is the interest or rights in the owned real estate that the owner has.  They are fee estates and life estates.  The main difference between the two types of freehold estates is that one has no time limit (fee estate) and another does (life estate).

So, how does a fee estate work?

Well, first off, since nothing can be made easy in the world of real estate, several fee estates exist, as follows:

  1. Fee simple:  You will probably have a test question related to this one on your exam.  It would most likely relate to the fact that the fee simple freehold estate is the most complete form of ownership.  Additionally, you must also know that a fee simple estate goes by the names indefeasible fee, or fee simple absolute.  I know, it never ends.
  2. Fee simple qualified:  In a fee simple qualified, which is also known as fee simple defeasible, we are taking fee simple ownership and adding conditions.  Specifically, there are three different forms:
  • Fee simple determinable:  Includes a condition related to the real estate ownership, that when violated causes the real estate to revert to the prior owner.  For example, you give a family member a home but tell them there can be no alcohol on the property, or else you will take back ownership.  You have created a fee simple determinable estate.  If your family member takes alcohol onto the property, it would automatically revert to you without you having to take any action.
  • Fee simple condition subsequent:  In this case, the original owner (grantor) reserves the right to retake ownership of the real estate upon the occurrence of a specified condition.  In this case, though, reversion is not automatic.  The grantor must take steps to exercise their right of entry usually by filing a lawsuit.  The right of the grantor to regain the property is known as the right of reentry.
  • Fee simple condition precedent:  In this case, it is stated by the grantor that ownership of the land will not convey until a particular condition is met.

How does a life estate work?

Say you want to give someone else your property, but not forever.  Well, a life estate would be what you use.  A life estate gives someone else possession and limited ownership of real estate for either their life or the life of another person.  The individual who owns the life estate is called the life tenant.

What are the types of life estates?

In this case, there are two options available as follows:

  1. Conventional life estates:  These are created by the grantor using of a will, deed or trust.  If the life estate is based on the life tenant’s life, it is known as an ordinary life estate.  Once the owner dies, the estate terminates.  If the estate is based on a life other than the life tenant, it is known as a pur autre vie life estate, which means for another’s life.

Since life estates are not indefinite, you need to know where the ownership goes when the life estate is terminated.  If there is a remainder interest listed in the deed, the ownership will pass to a third party.  This is known as a nonpossessory, future interest in the property.  If there is no remainder interest listed in the deed, ownership of the real estate will revert to the original owner.  This is known as a reversion interest.

Think about this though, since in a pur autre vie life estate, ownership is based on a third party’s life, what if the life tenant dies before the third party?  Well, the estate would pass to their heirs until the third party died.

2. Legal life estates:  While conventional life estates are created by the actions of a grantor, legal life estates are created automatically by law.  Originally they were intended to protect the interest of a non-owning spouse upon the death of an owning spouse.

Terms you need to know:

Dower:  The wife’s life estate in real estate of her deceased husband’s property.

Curtesy:  Curtesy is the husband’s life estate in the real estate of his deceased wife’s property.

Homestead:  Protects a portion of the value of a property owner’s principal residence from certain judgments for debts.

What are leasehold estates?

Keep in mind; leasehold estates are granted to tenants.  They provide some rights to the tenant, such as the right to occupy the property, but the owner retains some rights as well, such as ownership and the right to sell the property.

There are a few different types of leasehold estates.  In each of the following, the word tenancy can be substituted for the word estate.

Periodic estates

Also known as a period to period or a periodic tenancy, a periodic estate occurs when there is no definite period specified in the original agreement.  The best example of a periodic estate is a month to month lease.  There is no specified end date.  Most residential leases are written in this manner.  If a property is sold, the new owner can terminate this estate by refusing to accept rent.  Generally, notice of termination is required in advance by at least one period.  Such as one month notice of cancellation in a month to month lease.

Estate for years

A lease agreement with a set starting and ending date.  Funny enough, an estate for years could be for a period of less than one year, which could mess you up on your licensing exam.  Once the lease expires, the tenant must vacate the property.  No notification of termination need be given, and no automatic renewal is available.  This type of lease would continue beyond the sale of a property or the death of the property owner.

Estate at will

An estate at will occurs when a landlord allows a tenant to occupy a property with no definite period of time listed in the agreement.  It can be terminated by either party with proper advance notice but will end if either the tenant or property owner dies.

Estate at sufferance

They seem to like this one on the exam for some reason.  Who is suffering here?  The property owner.  An estate at sufferance is created when a tenant won’t leave.  Initially, they had the legal right to occupy the property, sure, but that is now over, and they won’t move.  In this case, the legal term of the tenant is a holdover tenant.  The property owner has legal rights to seek eviction.  However, on the exam, they may ask what happens to an estate at sufferance if the holdover tenant pays rent and the property owner accepts it.  The answer is, it turns into a periodic estate.

What else can help me prepare to pass my real estate licensing exam on my first attempt?

Other tips to help you pass your real estate licensing exam on your first attempt:

Real Estate Test Taking Tips

How to Pass the Real Estate Exam

Real Estate Exam Math Made Easy

Also, check out our question of the day videos on our YouTube channel:

PassMasters Real Estate Exam Prep YouTube Channel