Fee Simple Defeasible Estates
Several freehold estates are known collectively by the term fee simple defeasible or simply as defeasible fees. Each of these, like a life estate, is less than a fee simple. Unlike a life estate, they can be conveyed by will or other testamentary instrument; but, as long as the estate lasts, it is subject to a conditional restriction that makes it worth less than a life estate. If the condition specified in the deed or will that creates the defeasible fee takes place, then the fee interest may be set aside.
Fee Simple Determinable
A fee simple determinable vested a present possessory interest in a grantee with a reversionary interest in the grantor. Depending on the condition included in the grant, the reversionary interest might (or might not) be exercised. The language used phrases, such as “so long as” or “while” the grantee complied with the condition. If the grantee failed to comply with the condition, the estate automatically terminated and reverted to the grantor.
The Marketable Title Act had a significant impact on defeasible estates. It abolished the fee simple determinable estate, the possibility of reverter, and the right of entry following a fee simple on condition subsequent. Any estate that would have been created with any combination of those interests is now a fee simple subject to condition subsequent coupled with a power of termination. [C.C. §885.020].
The Marketable Title Act also requires that owners of some of these future interests, including powers of termination, record a notice of their intent to preserve their interest. Failure to record the notice within a given period of time (typically 30 years from the creation of the interest, or 5 years after the adoption of the Act if the 30 years had already expired) normally terminates the interest.
Ironically, in the Walton v. City of Red Bluff case, the court acknowledged that the plaintiff, Walton, had indeed waited too long after the Act was passed to record a notice of his intention to enforce his ancestor’s possibility of reverter. Nevertheless, it ruled in his favor (finding, among other things, that the City held only a fee simple determinable) merely because the City failed to raise the Act as a defense during the trial court proceedings! Had the City been aware of and raised the Act as a defense early in the case, it is doubtful that Walton would have won.
Fee Simple Subject to Condition Subsequent
Since 1983, a fee simple subject to condition subsequent is any fee estate containing a condition that if violated, could lead to the termination of the estate and give the grantor a right of entry. Language in a fee simple subject to condition subsequent will describe some condition and, if that condition occurs, the grantor can exercise a right of entry. These conditions typically have words like “until,” “unless,” “but if” in the condition, so that its occurrence is more clearly a specific event that triggers the right of entry. Before 1983, the future interest was sometimes called a right of reentry
Life Estates
A life estate is a present possessory interest that gives the grantee a possessory interest for the length of a measuring life. The measuring life is usually the grantee’s life—but it does not have to be. It can even be created on the life of a designated person who has no interest in the property as the measuring life—known as pur autre vie.
The person to whom a life estate is conveyed is known as the life tenant. Since a life estate is a type of freehold, or fee estate, the life tenant has all the rights that go with fee ownership except disposing of the estate by will. Remember, the life estate is tied to a designated life and when that party dies, the estate goes to either the person in reversion or the person in remainder or their heirs.
Life tenants must pay the taxes and maintain the property. They may collect all rents and keep all profits for the duration of the life estate. They may encumber the property or dispose of it in any way except by will. Any interest the life tenants may create in the property—extending beyond the life of the person used to measure the estate—will become invalid when that designated person dies.
Estate in Remainder
Instead of keeping a reversionary interest, the grantor can instead identify someone to receive the property when the life tenant dies. That interest is known as a remainder and the person identified in the instrument creating the interest is known as the remainderman. A remainder is a future interest that takes effect upon the expiration of a life estate when the life tenant dies.
Nonfreehold Estates
A nonfreehold estate is also known as a leasehold, which is a tenant’s possessory estate in land or premises. As with freehold estates, both the law and much of the terminology for such property relationships are still rooted in medieval concepts today. The most obvious example is a person who owns land and rents it to someone else is commonly referred to as a landlord or as a landlady—two terms that expressly conjure up images of feudalism and allegiance to vassals. The modern term for this person (male or female) is lessor. The holder of a leasehold estate was historically known as a tenant. The modern term for the person who rents land and pays for that use is a lessee.
Whether referred to as a tenant or a lessee, the person who hires land usually pays some form of monetary consideration, commonly known as rent. Although rent is usually money, rent can take the form of some kind of non-monetary compensation, such as the tenant making repairs in exchange for the right to live on the property. Although the relationship between the lessor and lessee is a leasehold, it is commonly referred to as a tenancy. During any leasehold, the lessor has a reversionary interest because at the end of the lessee’s term, the property reverts to the lessor.
There are four basic tenancies recognized by the law today. They differ in how they are initiated, how they are terminated, and in the relationship between the lessor and lessee during the term of each tenancy.
Four Types of Leasehold Interests
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Periodic tenancy
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Tenancy for years
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Tenancy at sufferance
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Tenancy at will
Periodic Tenancy
A periodic tenancy (estate from period-to-period) refers to a leasehold interest that is for an indefinite period of time. The duration of the estate is determined by the term or frequency of rent payment. The most common version of a periodic tenancy is the month-to-month tenancy. California law presumes that renting real property, unless the parties have agreed otherwise, is for a period of 30 days. [C.C. §1944].
Financial Encumbrances
Having discussed easements, which affect the use of property, we direct our attention to financial encumbrances, which affect the title to property. The financial encumbrances that create a legal obligation to pay are known as liens. A lien is an interest in real property owned by someone else that secures the payment of a debt or financial obligation. A lien uses real property as security for the payment of a debt.
Liens may be specific or general. A specific lien is one that is placed against a certain property, such as a mechanic’s lien, deed of trust, and property tax lien. A general lien affects all property of the owner, such as a judgment lien or federal or state income tax liens. Additionally, liens are classified as voluntary or involuntary.
Voluntary Liens
An owner may choose to borrow money, using the property as security for the loan, creating a voluntary lien. A voluntary lien does not have to be recorded, but if it is not recorded, then other parties (such as purchasers and lenders) may not be bound by it.
Involuntary Liens
Other kinds of liens are involuntary—they are used to collect money from debtors who have real property among their assets. If an owner fails to pay taxes, assessments, or other debts, a lien may be placed against his or her property without permission, creating an involuntary lien. Typical involuntary liens include judgment liens, tax liens, and mechanic’s liens.
Judgment Liens
A judgment lien is a lien acquired by a judgment creditor, usually the plaintiff, against the judgment debtor. The judgment creditor is the person prevailing in a lawsuit who was awarded money damages. The judgment debtor is the person against whom damages were awarded.
Abstract of Judgment. Once a court judgment for money damages becomes final, the judgment creditor can obtain an abstract of judgment from the court that awarded the damages. The abstract of judgment is a one-page document that contains information about the court judgment. It can be recorded with each county recorder where the judgment debtor owns real property. Once recorded, the abstract of judgment creates a general lien—that applies to all parcels of real property owned by the judgment debtor in that county. [C.C.P. §687.310]. The county recorder will send the judgment debtor a notice of this involuntary lien. In fact, the judgment creditor may record the abstract of judgment in counties where the judgment debtor owns no property.
Involuntary Liens
Other kinds of liens are involuntary—they are used to collect money from debtors who have real property among their assets. If an owner fails to pay taxes, assessments, or other debts, a lien may be placed against his or her property without permission, creating an involuntary lien. Typical involuntary liens include judgment liens, tax liens, and mechanic’s liens.
Judgment Liens
A judgment lien is a lien acquired by a judgment creditor, usually the plaintiff, against the judgment debtor. The judgment creditor is the person prevailing in a lawsuit who was awarded money damages. The judgment debtor is the person against whom damages were awarded.
Abstract of Judgment. Once a court judgment for money damages becomes final, the judgment creditor can obtain an abstract of judgment from the court that awarded the damages. The abstract of judgment is a one-page document that contains information about the court judgment. It can be recorded with each county recorder where the judgment debtor owns real property. Once recorded, the abstract of judgment creates a general lien—that applies to all parcels of real property owned by the judgment debtor in that county. [C.C.P. §687.310]. The county recorder will send the judgment debtor a notice of this involuntary lien. In fact, the judgment creditor may record the abstract of judgment in counties where the judgment debtor owns no property.
Lis Pendens
If title to real property is disputed in a lawsuit, either party can record a lis pendens to put third parties on notice that there is a lawsuit pending. The term lis pendens means, “Lawsuit pending,” and does not give either party any foreclosure rights. Instead, it is a “buyers beware” notice to prospective lenders or buyers that title to the property is disputed. It also does not actually prevent anyone from buying the property, but it warns parties that they could be involved in a lawsuit if they do. Public entities can also file a special kind of lis pendens when they file lawsuits seeking to correct a code violation on a particular property.
Tax Liens
A tax lien is an involuntary, financial encumbrance placed upon property as a claim for payment of a tax liability. Tax liens are levied by local, state, and federal government agencies. Tax liens can attach to any property owned by the taxpayer or acquired after the lien is placed. They continue until the tax liability is satisfied or becomes unenforceable.
Although tax liens may be imposed for failure to pay city, county, estate, income, payroll, property, sales, or school taxes, the most common tax lien is for delinquent property taxes and special assessments. Property taxes and special assessments are specific liens, whereas other government taxes, such as unpaid income taxes, are general liens. This means that if the property owner fails to pay a specific tax lien, it only affects the parcel of land subject to the tax or special assessment; the tax or assessment cannot be collected from any other property owned by the taxpayer.
Non-Financial Encumbrances
A non-financial encumbrance is one that affects the physical use or condition of the property, such as easements, profit-à-prendres, and restrictions.
Easements
An easement is an interest owned by one person in the land of another person. An easement allows its owner to use or, in some cases, to prevent the use of the land burdened by the easement. Easement rights are often created for the benefit of the owner of adjoining land. Easements are created for the benefit of at least one party at the expense of the property owner. The land benefiting from the creation of the easement is the dominant tenement; the land that is subject to the easement is the servient tenement. [CC §803]. Unless the easement is specifically described to be “exclusive,” its creation does not prevent the owner of the land from using the land and the portion covered by the easement in a way that does not interfere with the use of the easement. Unless agreed otherwise, the owner of the dominant tenement has the responsibility to maintain a right-of-way easement.
Elements Required to Create a Prescriptive Easement
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Open use (i.e., some assertion of control, such as crossing the other land);
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Notorious use (i.e., use that a reasonable person would recognize);
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Hostile use (i.e., without the other owner’s permission);
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Adverse to a claim of right (i.e., adverse to the other property owner’s title); and
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Continuous use for a five-year time period.
If the use is done with the other owner’s permission, then it is not adverse or hostile and does not ripen into a prescriptive easement.
The law allows prescriptive rights because if the landowner subjected to what amounts to a trespass does nothing to enforce those property rights, the person making the prescriptive use will eventually come to rely on that use. It is also based on the notion that if someone is using someone else’s land productively, even without permission, land is too valuable to allow someone to restrict that use if the owner has failed to object to the use for a certain period of time.
A prescriptive easement is merely an interest in a certain property—not ownership. Although the method used for acquiring property rights through prescription is similar to adverse possession, adverse possession requires the payment of taxes for five continuous years, while prescription does not. Also, remember one acquires title to property through adverse possession, but only a specified interest in property through prescription.
Termination by Implication
The actions of the property owners, rather than an express agreement, can terminate an easement.
Merger. An easement is an interest in the property of another person. Therefore, an easement is terminated when one person obtains fee ownership of both the benefited property (dominant tenement) and burdened property (servient tenement).
Destruction of the servient tenement. If the easement is for the use of a structure, such as a building or bridge and the structure is destroyed, the easement terminates. Rebuilding the structure does not automatically create a new easement.
Necessity for or purpose of the easement ends. An easement created for a specific purpose or need ends when the purpose ends.
Example: Parcel B is landlocked and an easement by necessity is created over Parcel A for ingress and egress. Four years later, the county extends a road that gives access to Parcel B so that it is no longer landlocked. Therefore, the easement created by necessity is no longer relevant.
Most likely, the owner of the servient tenement would bring an action to quiet title against the owner of the dominant tenement in order to terminate the easement. A lawsuit to establish or settle title to real property is called a quiet title action or an action to quiet title.
Kinds of Restrictions often Imposed by CC&Rs
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Every owner in the subdivision to pay annual dues that support insurance and maintenance of the common areas
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List of approved exterior colors for houses within the subdivision
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Prohibition against outdoor antennas or satellite dishes
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Maintenance standards for outdoor landscaping
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Prohibiting the parking of motor homes on the subdivision’s streets or driveways or restricting how long (e.g., 72 hours) such vehicles can be parked
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Garage doors not be left open for lengthy periods of time
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Prohibiting auto repairs on the subdivision’s streets or driveways
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Requiring that backyards be surrounded by a six-foot solid fence
Homesteads
California and many other states have homestead laws to protect families. There are two homestead statutes in California: Articles 4 and 5 of Chapter 4, Division 2, Title 9, and Part 2 of the California Code of Civil Procedure (Sections 704.710–704.995). Homestead property is the home (primary residence) occupied by a family that is exempt from the claims of, or eviction by, unsecured creditors.
A homestead exemption is in effect a lien that protects a certain amount of equity in a person’s home by limiting the amount of liability for certain debts against which a home can be used to satisfy a judgment. The amount protected varies depending on the age, marital status, and income of the property owner. A homestead exemption does not stop the sale of the property. Its purpose is to ensure that the homeowner receives the amount of the exemption before the creditors are paid from the sale proceeds.
Homestead property can be sold if the sale proceeds are sufficient to:
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pay all existing liens on the property.
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pay off all mortgages and loans secured by the equity in the home.
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pay the costs of selling the home.
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allow the homeowner to keep equity in the amount protected by the homestead exemption.
Because they are subject to the general rule regarding liens that “first in time is first in right,” homestead exemptions are not effective against prior liens, such as a purchase money deed of trust or mortgage. They are also not effective against tax liens, mechanic’s liens, or judgment liens for child, family, or spousal support.
Summary
Interests in real property can be either possessory or nonpossessory. Those that are possessory are usually present interests meaning that they can be exercised today. Nonpossessory interests are those that cannot be exercised today, but normally can be exercised in the future. Therefore, they usually are known as future interests.
Another term for an ownership interest is a freehold estate. The largest freehold estate that one can own in California is the fee simple absolute, which includes all the rights to sell, exclude others, finance, and do any other thing with real property that the law allows. Other freehold estates include the fee simple subject to condition subsequent and the life estate.
Nonfreehold estates are known as leaseholds. A leasehold consists of an interest held by the tenant (or lessee) to reside on the property or to use it and a reversionary interest held by the property owner or lessor.
Non-possessory interests include financial encumbrances, such as liens and non-financial encumbrances, such as easements, profit-à-prendre, and restrictions. A lien is a financial interest in the property of another. Easements may be either appurtenant or in gross.
A property owner can protect his or her property against judgment liens by recording a declaration of homestead before the judgment lien takes effect.
1 Martin purchased a parcel of land on which he intends to build a house. Which of the bundle of rights pertains to this activity? hint The right of use is a right that gives an owner of property the ability to control the use of the property within the boundaries of the law. For example, the right of use allows a person to add an addition to a house. Points: 1
Right of possession
Right of use
Right of transfer
Right to encumber
2 Which of the following is not included in the definition of real property? hint Real property includes the land, anything permanently attached to the land, anything appurtenant to the land, or anything immovable by law. Points: 1
Anything movable by law
Anything immovable by law
Anything appurtenant to the land
Anything permanently attached to the land
3 What are emblements? hint Emblements are annual crops cultivated by tenant farmers. They are the personal property of the tenant farmer even prior to harvest. Points: 0
Anything that enhances the appearance of something without having any functional purpose
Personal property of a tenant farmer, even prior to harvest
Personal property of a tenant farmer, but only after harvest
Real property owned by a tenant farmer
4 Which is not one of the tests used to determine whether property is a fixture or personal property? hint If there is a dispute, the five tests used to determine if property is considered a fixture or personal property are method of attachment, adaptation, relationship of the parties, intent of the parties, and agreement of the parties. Points: 1
Adaptation of the property
Intent of the parties for the particular property
Property’s method of attachment
Time of the attachment
5 Trade fixtures used in a trade or business are: hint Trade fixtures are fixtures that are attached to real estate by a tenant, usually for the purpose of conducting a trade or business from a commercial property. Trade fixtures are considered personal property. Courts normally rule that tenant-owned trade fixtures do not become the property of the landlord, even when attached to the real estate. However, the tenant must remove the trade fixtures, prior to the end of the lease without significant damage to the building. Points: 0
personal property of the tenant.
real property of the landlord.
emblements of the tenant.
fructus industriales.
6 According to California policy, what is the highest use of water? hint California policy is that the use of water for domestic purposes is the highest use of water and that the next highest use is for irrigation. Other beneficial uses include fire protection, mining, watering stock, sprinkling to protect crops from heat or frost damage, recreation, industrial, wildlife protection, and power generation. Points: 1
Domestic purposes
Fire protection
Irrigation
Recreation
7 The rights to natural resources, such as minerals, oil, and gas are part of the: hint Subsurface rights are the rights to the natural resources, such as minerals, oil, and gas below the surface. Points: 0
air rights.
bundle of rights.
subsurface rights.
surface rights.
8 What is the measurement of a tract of land with its boundaries, contents, and location relative to other property? hint A survey is the professional measurement of a tract of land with its boundaries, contents, and location relative to other property. Points: 1
Calculus
Survey
Land speculation
Relationship analysis
9 Landmarks and monuments are used to indicate a boundary of a parcel of land. Which of the following is a landmark? hint A landmark is a geographic feature, such as a large rock, an old tree, a fork in a creek, or the intersection of two roads. Points: 1
Large oak tree growing out of an outcrop of rock
Wooden stake
Iron post in the ground
Any man-made object
10 The following legal description was found in a deed: “Lot 17, Block 5, Citrus Acres, County of Orange, State of California.” This is an example of a(n) __________ description. hint A recorded plat description uses lot and block. Points: 1
metes and bounds
rectangular survey
recorded plat
informal reference
