Chapter 4 Estates and Interests

I. Introduction to Property Rights

Real estate ownership is often described as a Bundle of Rights. When you purchase property, you aren't just buying "dirt"; you are buying a set of legal privileges.

The Bundle of Rights includes:

• Possession: The right to occupy the property.

• Control: The right to determine how the property is used (within the law).

• Exclusion: The right to keep others from entering or using the property.

• Enjoyment: The right to use the property in any legal manner.

• Disposition: The right to sell, will, or transfer the property.

Key Definitions:

• Land: The surface, everything stuck to it (trees), and everything below (subsurface) and above (air rights).

• Real Estate: Land plus all man-made improvements (houses, fences).

• Real Property: Real estate plus the Bundle of Rights.

• Personal Property (Chattel): Anything that is movable and not permanently attached to the land (e.g., a refrigerator or a couch).

II. Freehold Estates (Ownership)

A Freehold Estate is an ownership interest that lasts for an indeterminable period of time.

• Fee Simple Absolute: The highest form of ownership recognized by law. It is indefeasible (cannot be defeated) and lasts forever.

• Qualified Fee (Defeasible Fee): Ownership that can be lost if a specific condition is violated (e.g., "so long as the land is used as a park").

• Life Estate: Ownership limited to the duration of a specific person's life.

• Life Tenant: The person holding the life estate.

• Remainder Interest: A third party who receives the property after the life tenant dies.

• Reversionary Interest: The property returns to the original grantor after the life tenant dies.

III. Leasehold Estates (Rental)

A Leasehold Estate is a "less than freehold" interest. You have the right of possession but not title.

• Estate for Years: A lease with a definite beginning and end date. No notice is required to terminate because the end date is already set (e.g., a 1-year lease).

• Periodic Estate: A lease that automatically renews (e.g., month-to-month). Notice is required to terminate.

• Estate at Will: An informal arrangement where either party can terminate at any time.

• Estate at Sufferance: Occurs when a tenant "holds over" after their lease has expired without the landlord's consent. The landlord is "suffering."

IV. Forms of Ownership

• Ownership in Severalty: Ownership by one person or one entity (like a corporation). The root word is "severed" from others.

• Tenancy in Common: Ownership by two or more people. They can have unequal shares. There is no right of survivorship—if one owner dies, their share goes to their heirs, not the other owners.

• Joint Tenancy: Ownership by two or more people with equal shares. It includes the Right of Survivorship—if one owner dies, their share automatically passes to the surviving owners.

• Tenancy by the Entirety: A special form of joint tenancy reserved only for married couples. It includes the right of survivorship and prevents one spouse from selling the property without the other's consent.

• Community Property: Note: New York is NOT a community property state. NY is an "Equitable Distribution" state.

[Image comparing Tenancy in Common vs Joint Tenancy vs Tenancy by the Entirety]

V. Business and Special Ownership

• Corporations: Own property in severalty.

• Trusts: A three-party arrangement where a Trustor gives property to a Trustee to hold for the benefit of a Beneficiary.

• Condominium: You own your individual unit in fee simple (including a deed) and an undivided interest in "common elements" (hallways, pools).

• Cooperative (Co-op): You do not own real estate. You own shares of stock in a corporation and receive a Proprietary Lease to live in a specific unit.

⚠️ EXAM ALERT: QUICK FACTS

• The "Right of Survivorship" Trap: On the exam, if you see "Joint Tenancy," think Survivorship. If you see "Tenancy in Common," think Inheritance.

• Automatic Tenancy: In NY, if a deed is silent on how two unmarried people own a property, the law presumes they are Tenants in Common.

• Partition: If co-owners cannot agree on what to do with a property, they can file a Partition Suit in court to legally dissolve the co-ownership.

• Co-op vs Condo: Remember, a Condo owner gets a Deed (Real Property), while a Co-op owner gets Shares and a Proprietary Lease (Personal Property).

KEY TERMS

Act of Waste: Abuse or destructive use of property by a person in rightful possession (such as a life tenant) that results in a decrease in the property's value for the person who holds the future interest.

Air Rights: The right to use, control, or occupy the space above a particular parcel of land.

Beneficiary: The person for whose benefit a trust is created and who receives the benefits of the trust assets.

Bundle of Rights: A concept describing all the legal rights that attach to the ownership of real property, including the right to sell, lease, encumber, use, enjoy, exclude, and will.

Chattel: Another name for personal property; items that are movable and not annexed to the real estate.

Curtesy/Dower: Legal life estates (largely abolished in New York) where a husband (curtesy) or wife (dower) has an interest in the real estate owned by their deceased spouse.

Escheat: The revision of property to the state or county when a person dies intestate (without a will) and with no heirs.

Estate for Years: A leasehold estate that continues for a definite period of time with a specific start and end date.

Fee Simple Estate: The highest interest in real estate recognized by law; the holder is entitled to all rights to the property by law and it is of unlimited duration.

Fixture/Trade Fixture: A Fixture is an item of personal property that has been so attached to land or a building that it becomes part of the real property. A Trade Fixture is an article installed by a tenant for business use that remains personal property and can be removed by the tenant before the lease expires.

Homestead: Land that is owned and occupied as the family home; in many states, a portion of the value of this land is protected or exempt from judgments for debts.

Illiquidity: The state of an asset that cannot be easily or quickly converted into cash without a significant loss in value.

Joint Tenancy: Ownership of real estate by two or more people who have been named in one conveyance; it includes the right of survivorship.

Joint Venture: A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task or investment.

Life Estate: An interest in real or personal property that is limited in duration to the lifetime of its owner or some other designated person.

Littoral Rights: The rights of a landowner whose land borders large, navigable lakes and oceans.

Partition: The legal manner in which a court or mutually consenting parties can divide interests in real property owned by more than one person.

Personal Property: Also called chattels or personalty; property that is movable and not permanently attached to the land or buildings.

Real Estate/Real Property: Real estate is the land and everything permanently attached to it; Real property includes the land, attachments, and the bundle of rights.

Remainder Interests/Remainderman: A future interest in real estate that is created at the same time and by the same instrument as another estate, and which becomes effective upon the termination of the prior estate (e.g., after a life estate).

Reversionary Interest: The remnant of an estate that the grantor holds after granting a limited estate (like a life estate) to another; it "reverts" back to the grantor upon the grantee's death.

Right of Survivorship: A characteristic of joint tenancy and tenancy by the entirety where, upon the death of one owner, their interest automatically passes to the surviving owner(s).

Riparian Rights: The rights of a landowner whose land borders a flowing body of water, such as a river or stream.

Severalty: Ownership of real property by one person only; also known as sole ownership.

Special Purpose Real Estate: Property that is appropriate for one type of use or a limited number of uses, such as a church, school, or library.

Subsurface Rights: The rights to the natural resources below the earth's surface.

Tenancy by the Entirety: A special form of joint ownership for married couples; it carries the right of survivorship and cannot be partitioned without the consent of both parties.

Tenancy in Common: A form of co-ownership where each owner holds an undivided interest in the property; unlike joint tenancy, there is no right of survivorship.

Trustee/Trustor: The Trustor is the person who creates a trust; the Trustee is the person or entity that holds legal title to the assets for the benefit of the beneficiary.

Undivided Interest: The interest of co-owners in which individual owners do not own a specific portion of the property, but rather a share of the whole.
Unities of Interest, Possession, Time, and Title: These are the four legal requirements (often called the "four unities") necessary to create a joint tenancy.

• Unity of Interest: All owners must hold an equal ownership interest (e.g., if there are two owners, each must own exactly 50%).

• Unity of Possession: All owners must have an equal right to possess and use the entire property.

• Unity of Time: All owners must acquire their interests in the property at the same time.

• Unity of Title: All owners must acquire their interests through the same legal document, such as a single deed.