Legal Issues

Exam rule

Land is the earth, the space above it and the rights below it. Real estate means the land and permanent improvements. Real property adds the legal rights that go with ownership. Personal property, also called a chattel, is movable. A fixture begins as personal property but becomes part of the real estate. Courts weigh attachment, adaptation, intent and the parties' relationship. A tenant may usually remove a trade fixture used in business before the tenancy ends. Removal must be lawful and the tenant must repair the damage.

Exam rule

The bundle of rights includes possession, control, enjoyment, exclusion and disposition. Law and private restrictions can limit each right. Land has surface, subsurface and air rights. Riparian rights concern a river or stream. Littoral rights concern a lake, sea or ocean. Gradual soil deposit is accretion, and the added soil is alluvion. Reliction exposes land as water slowly recedes. Avulsion is a sudden change and usually does not move the legal boundary. A parcel may be residential, commercial, industrial, agricultural or special purpose. Land is immobile, durable, unique and usually illiquid. A homestead is an owner's primary home, but its legal protection depends on the governing law.

Exam rule

Fee simple absolute is the broadest private ownership estate. A qualified or defeasible fee can end if a stated event occurs or a condition is broken. A life estate lasts for a measuring life. The future interest is a remainder when it belongs to a third person and a reversion when it returns to the grantor. A life tenant must avoid waste that harms the future interest. Leaseholds are not freeholds. An estate for years has fixed dates. A periodic estate renews by period. A tenancy at will has no fixed end and continues by consent. A tenancy at sufferance is a holdover without the landlord's consent.

Exam rule

Severalty means one legal person owns the whole. Tenants in common have separate undivided interests and no right of survivorship. Joint tenants hold survivorship. The traditional four unities are possession, interest, time and title. In New York, a grant to two or more people usually creates a tenancy in common unless joint tenancy is stated. A grant to spouses usually creates a tenancy by the entirety. A joint tenant can sever that tenant's interest by a qualifying recorded instrument. Partition can divide or sell jointly held property. Community property is a different state-law system. New York is not a community-property state. Dower and curtesy are historical marital interests, not the modern New York ownership forms tested here.

Exam rule

A trustor creates a trust, a trustee holds and manages property, and a beneficiary receives the benefit. A general partnership may leave general partners personally liable. A limited partnership has at least one general partner and one or more limited partners. A joint venture is usually formed for one project. A syndicate is a group investment arrangement, not a deed form. A corporation is a separate legal person and can own land in severalty. Partners may own through the entity or hold title as tenants in common, depending on the legal structure. A condominium buyer gets a deed to a unit and an inseparable interest in common elements. A cooperative buyer gets shares and a proprietary lease. The cooperative corporation owns the real estate.

Exam rule

A lien is a money claim against property and is one type of encumbrance. A general lien may reach several assets of the debtor. Examples include a docketed judgment, some estate debts, certain franchise taxes and a federal tax lien. A specific lien attaches to named property. Property-tax, mortgage and mechanics' liens are common examples. A notice of pendency, often called a lis pendens, gives notice of a lawsuit that may affect title, possession, use or enjoyment. It is not itself a money lien. Estate and inheritance tax questions depend on the law and facts, so the label alone does not prove the reach or priority of a claim.

Exam rule

A voluntary lien is created with the owner's consent. A mortgage is the main example. An involuntary lien arises through law, judgment or government action. Tax, judgment and mechanics' liens are common examples. Voluntary or involuntary tells how the lien began. General or specific tells what property it reaches. An encumbrance is any right or claim that can burden title, value or use. Liens are financial encumbrances. Easements, deed restrictions and encroachments are nonfinancial encumbrances. A possessory interest gives a right to possess, while a nonpossessory interest, such as an easement, gives a narrower right in another person's land.

Exam rule

Priority controls the order in which claims are paid from property value. Recording time often matters, but a statute may give a lien special priority. A subordination agreement moves one claim behind another. Paying a mortgage does not clear the public record by itself. The proper satisfaction or discharge must be recorded. A deed restriction is a private limit written into a deed or another recorded instrument. It can restrict use even though it is not a lien. Title work checks the record for liens, restrictions and proof that paid claims were released.

Exam rule

An easement is a nonpossessory right to use another person's land. An easement appurtenant benefits a dominant parcel and burdens a servient parcel. It usually runs with the land. An easement in gross benefits a person or company rather than another parcel. Easements can arise by grant, reservation, implication, necessity, prescription or condemnation. A right of way is an access easement. Light and air rights need a valid legal source and do not arise merely because a view has existed. An easement may end by written release, merger, expiration, abandonment or the end of its purpose or necessity. Transfer depends on the type and terms.

Exam rule

A license is revocable permission to use land and creates no interest in it. An encroachment is a physical intrusion across a boundary. A party wall sits on or near a boundary and serves structures on both sides. The owners' rights depend on deeds, easements, agreements and law. A prescriptive easement gives a limited use right after qualifying adverse use. Adverse possession seeks title. New York adverse possession requires a claim of right and possession that is adverse, open and notorious, continuous, exclusive and actual for the ten-year period. Permission defeats the adverse element while it continues.

Exam rule

A deed is the written instrument used to convey an interest in real property. It names a competent grantor and an identifiable grantee. The granting clause shows a present act of conveyance. The deed states consideration, even if nominal, and gives a legal description. The habendum clause explains the interest being granted. Reservations, exceptions, limits and subject-to clauses identify rights kept back or burdens that remain. The grantor signs. Delivery with present intent and acceptance make the grant effective. Acknowledgment allows the instrument to be recorded. Recording protects the grantee against later claims, but recording is not a substitute for delivery.

Exam rule

A full covenant and warranty deed gives five main promises. The covenant of seizin says the grantor owns the estate and may convey it. The grantee may quietly enjoy it. The property is free from undisclosed encumbrances. The grantor will provide further assurance. The grantor will warrant and defend title. A bargain and sale deed with a covenant against the grantor promises only that the grantor did not create an encumbrance. Without that covenant, it gives no similar promise. A quitclaim deed passes whatever interest the grantor has, if any. An executor's deed conveys under authority from a will. A referee's deed carries out a court-ordered sale, such as foreclosure or partition. No deed gives the grantee more title than the grantor or authorized transferor can convey.

Exam rule

A legal description must identify the parcel with reasonable certainty. Metes and bounds follows directions and distances from a point of beginning and should return to that point. Monuments are physical reference points and may control a conflicting measurement. A lot-and-block description refers to a recorded subdivision plat. A survey locates boundaries, improvements and possible encroachments. A street address or tax number helps locate land but should not replace the controlling description. Voluntary alienation includes a sale or gift. Involuntary alienation includes foreclosure, condemnation and some court transfers. A public grant or land patent transfers public land. Dedication transfers land or an interest for public use and may be shown by deed or filed plat. Accession can add property through natural or human action.

Exam rule

A person who dies with a valid will is testate. A testator makes the will, a devise is a gift of real property and the devisee receives it. An executor is named in the will and later authorized by the court. Probate proves the will and starts estate administration. A person who dies without a valid will is intestate. New York's descent and distribution law then identifies the distributees or heirs. The court appoints an administrator when there is no executor able to act. Title by descent means real property passes under intestacy law. Escheat is the last resort when no lawful owner or taker exists. An executor's deed may be used when the executor has authority to sell estate property.

Exam rule

Recording places a conveyance in the public land records and helps build the chain of title. Actual notice means a person truly knows a fact. Constructive notice means the law treats the person as knowing a fact because it was properly recorded or otherwise legally available. New York follows a race-notice rule. An unrecorded conveyance can lose to a later good-faith purchaser for value who has no notice and first duly records. A filed notice of pendency also gives constructive notice of an action affecting real property. Recording does not make a forged or otherwise invalid deed valid.

Exam rule

A title search examines public records for ownership, liens and other recorded interests. The chain of title lists the linked transfers over time. An abstract of title summarizes the public-record history but is not insurance. Marketable title is title a reasonable buyer can accept without serious doubt or likely litigation. Title insurance covers specified past title defects, subject to exclusions and exceptions. A lender's policy protects the lender and usually falls with the loan balance. An owner's policy protects the buyer up to its stated coverage and does not normally decline as the mortgage is paid. A survey and off-record inquiry can reveal matters that a record search alone may miss.

Exam rule

A title closing completes the sales contract. The buyer, seller, attorneys, lender, title closer and other needed parties perform assigned tasks. The location can be an attorney's office, lender's office or another agreed place. The seller receives the balance due and existing liens are paid or cleared. The buyer uses personal funds and, when financed, acquisition-mortgage funds. The seller signs and delivers the deed. The buyer signs the note and mortgage. Closing documents, adjustments and funds are checked. The broker or salesperson may attend the final walk-through with the buyer and must account for any money held. The commission is paid as the agreement directs. A lender normally requires homeowners insurance before funding. The deed and mortgage are then sent for recording.

Exam rule

RESPA and Regulation X ban kickbacks for referrals of covered settlement services. They also ban unearned fees and fee splits with no actual service. A seller cannot require a buyer to use a named title insurer in a covered deal. Regulation Z controls the mortgage forms. A creditor generally must deliver or mail the Loan Estimate within three business days after it gets an application. The consumer generally must receive the first Closing Disclosure at least three business days before consummation. A correction starts a new wait only for an inaccurate APR beyond tolerance, a changed loan product or a new prepayment penalty. A true personal financial emergency may support a signed waiver under strict rules.

Exam rule

The closing statement reconciles the money due from and paid to each party. A debit is a charge to the named party. A credit is an amount in that party's favor. Seller costs often include state and local transfer taxes, commission, attorney fees, payoff of liens, documents needed to clear title and some cooperative or condominium fees. Buyer costs often include appraisal and credit fees, inspections, mortgage recording tax, title insurance, attorney and bank fees, recording charges, mortgage insurance and some cooperative or condominium fees. The contract and local law control the final allocation. Adjustments may cover taxes, assessments, insurance, fuel, water, sewer, rent and security deposits. A proration divides an item as of the agreed adjustment date.