Chapter 8 Forms of real estate ownership | Real Estate Finance Fundamentals

Fee simple estate may be held in 3 ways

- In severalty (title held by one individual)
- In co-ownership (title held by 2 or more individuals)
- In trust (third individual holds title for the benefit of another)

Ownership in severalty

property owned by one individual or corporation.title held by one individual. Sole owner is served or cut off from other owners. Owner has sole rights to sell , will, lease or transfer part or all of the ownerships rights to another person In Illinois non

Co-ownership

title held by 2 or more individuals. individuals can co-own property as :
- tenants in common
- joint tenants
- tenants by the entirety
- community property (not in Illinois)
Illinois also recognized co-own property all above + :
- ownership in trust
- pa

Tenancy in common

parcel of real estate owned by 2 or more individuals , each tenant holds an undivided fractional interest in the property. Co-owners have unity of possession (they are entitled to possession of the whole property.
They can sell, convey, mortgage , or tran

Joint tenancy

Typical wording in a deed creating a joint tenancy would be "to A and B as joint tenants and not as tenants in common".
property owned by 2 or more people. different from tenancy in common is unity of ownership and joint tenancy includes the right of surv

Joint tenancy can be created only

by the intentional act of conveying a deed or giving the property by will.

4 Unities to create a joint tenancy

PITT:
-Uniti of Possession (all joint tenants holding an undivided right to possession)
-Uniti of Interest (all joint tenants holding equal ownership interest)
-Uniti of Time (all joint tenants acquiring their interests at the same time)
-Uniti of Title (

4 requirements for joint tenancy unitis

- title is acquired by one deed
- Deed is executed and delivered at one time
- Deed conveys equal interests to all of the parties
- Parties hold undivided possession of the property as joint tenants

Illinois allows a sole owner to execute a deed to herself and others "as joint tenants and not as tenants in common" in order to create a valid joint tenancy

Terminating of join tenancy

joint tenancy destroyed when any one of the 4 unities of join tenancy is terminated

ABC hold title as join tenants . A conveys her interest to D. D now owns interest as a tenant in common with B and C, and B and C continue to own their undivided interest as joint tenants . D interest may be reconveyed or left to D`s heirs

1983 Illinois Supreme Court case Minonk state Bank v. Gassman

joint tenant may unilaterally sever the tenancy by conveying to herself as a tenant in common without consent of co-owners . Any owner in a joint tenancy can become a tenant in common and can will her interest to heirs or sell it

Partition suit (suit to partition)

Termination of Co-ownership. Is legal way to dissolve relationship when parties do not agree to its termination
If Court determines that land can not be divided physically into separate parcels without destroying its value the court will order real estate

Illinois Partition suit

may be filed by 1 ore more owners in the circuit court of the county in which subject located. Property offered for public sale at a price not less than two-third of the value as set by the commissioners.
all co-owners required to pay their proportionate

tenancy by the entirety

special form of co-ownership for husbands and wives for their personal residence. each spouse to have equal, undivided interest in property. Husband and wife who are tenants by the entirety have rights of survivorship. one party cannot convey a one-half i

termination of tenancy by the entirety

-Judgment (to satisfy judgment against husband and wife as joint debtors)
-Sale
- Death (surviving becomes a sole owner)
- Agreement (execution of new deed)
- Divorce (leaves the parties as tenants in common)

Community property laws

any property acquired during a marriage is considered to be obtained by mutual effort
All community property recognized 2 kinds of property:
- separate property
- community property

Separate property

real personal property that was owned solely before marriage. also property by gift or inheritance during marriage, Any income earned from person`s separate property belongs to that individual . property can be mortgaged or conveyed by owning spouse witho

Community property

real and personal property acquired by wife or husband during marriage. Any conveyance or encumbrance of community property requires signatures of both spouses. When one dies , the other owns one-half of the community property, the other half is distribut

Community property does not provide an automatic right of survivorship as do joint tenancy and tenancy by the entirety

Illinois not community property state ,Illinois is marital property state. Illinois break property down into marital property and nonmarital property. Husband and wife acquire joint rights in all property after the date of marriage for the duration of mar

Nonmarital property

property acquired prior to the marriage or by gift at anytime , even during marriage.
If nonmarital property exchanged for other property, if it increase in value or gives income , also would be nonmarital property. if nonmarital property commingled with

Illinois Marriage and Dissolution of Marriage Act

50-50 division unless a prenuptial agreement is in place.

Trust

device by which one person transfers ownership to someone else to hold or manage for the benefit of third party.

Trustor

the person who creates the trust

beneficiary

the person who benefits from the trust

Trustee (FIDUCIARY)

the person who hold legal title to the property. who acts in trust and has special legal relationship with beneficiary. Trustee power limited by the terms of the trust agreement, will, or deed in trust.

Illinois permits real estate to be held in trust as part of a living or testamentary trust or as the sole asset in a land trust

Living trust (inter vivos trust)

by agreement during the property owner lifetime

testamentary trust

established by will after the owner`s death

Land trust

- beneficiary usually is also the trustor
-Trustee often is bank
- Beneficial interest is personal property
- Fully private ownership
- Useful in probate proceedings
land trust continues for a definite time such as 20 years.
If beneficiary does not extend

Deed OF trust

financing document similar to mortgage

Deed IN trust

relates to the creation of a living , testamentary or land trust

Real estate investment trust REIT

does not have to pay corporate income tax as long as 95% of its income is distributed to its shareholders.
the qualify as a real estate investment trust at least 75% of the trust`s income must come from eal estate

partnership

association of 2 ore more persons who carry on a business for profit as co-ownrs.

General partnership

all partners share full liability for business loses and obligations. must be reorganized if 1 partner dies, or gees bankrupt

Limited partnership

consists one ore more general partners as well as limited partners. each can be held liable for business losses only to the extent of her investment.

Corporation

created under the authority of the laws of the states from which it receives charter. managed and operated by its board directors . the charter sets forth the power of the corporation including its right to buy and sell real estate. It can own real estate

S corporation

provides the benefit of corporation as a legal entity but avoids double taxation

Syndicate

is 2 or more people or firms joined together to make and operate a real estate investment. May be organized including co-ownership (tenancy in common , joint tenancy) , partnership, trust, or corporation.

Joint venture

form of partnership in which two or more people or firms carry out a single business project. characterized by a time limitation resulting , not permanent relationship

Limited Liability Company (LLC)

combines the most attractive features of limited partnerships and corporations. limited liability by corporate from ownership and the tax advantage of a partnership

Condominium laws

known as horizontal property act. under this law , the owner of each unit holds a fee simple title to the unit.
individual unit owners own a specific share of the undivided interest in the reminder of the building and land,as tenants in common for Common

Common elements

include land , courtyards , lobbies, exterior structure, hallways, elevators, stairways, roof, pool, golf and tennis courts

declaration of condominium

the owner of an existing building (developer of unimproved property) executes and records a detailed report and description of the property

ILLINOIS has not adopted the UNIFORM Condominium Act. In Illinois creation of condominiums is governed by the ILLINOIS CONDOMINIUM PROPERTY ACT

Homeowners association

association of unit owners that administered condominium property. Expenses of maintaining and operating are paid by unit owners in the form of fees and assessments

In Illinois property can be removed from condominium status any time by unanimous consent of all owners and lienholders. and owners would be tenants in common

Cooperative ownership

cooperation holds title to the land and building. Corporation offers shares of stocks to prospective tenants. Cooperative tenant -owners do not own real estate they own interest in corporation , because stock its personal property

Proprietary lease

in cooperative ownership, when purchaser becomes a shareholder in corporation he receives Proprietary lease to the apartment for the life of corporation.

Operation and management of cooperative ownership

by corporation`s bylaws. they elect officers and directors who are responsible for operating corporation. and individual shareholders obligated to abide by the corporation`s bylaws

town house

any type of housing connected by common walls, has 2 floors and is located on a small lot. The rights to use of the common areas pass with title

time share ownership

permits multiple purchasers to buy interests in real estate usually a resort property. each owner have right to use the facilities for a certain period of time

Time-share estate

fee simple interest, owners occupancy and use of the property are limited to the contractual period purchased. lies in the interest transferred to ann owner by the developer of the project. includes a real property interest in condominium ownership

Time -share use

its a contract right in which a third party retains ownership of the real estate.consist of the right to occupy and use the facilities for a certain number of years.

Illinois Estate Time-Share Act 1999

strictly regulate the promotion or sale of all time-share units. Applies to both in-state and out-of state time-share sales. ALL developers and their agents must register with the IDFPR and hold a real estate license unless the licensee sells less than 8

public offering statement

(info about time periods, percentage of common expenses for each unit, restrictions and total number of units, tax , info about developer and property management)

membership camping

similar to time-share use. owner purchases right to use developer`s facilities such as camper, trailer hookups and restrooms) Use is limited only by weather and access.

tenancy in common is an inheritable estate and joint tenancy is characterize by the right of survivorship

Survivor becomes a severalty owner

in joint tenancy and tenancy by the entirety

Names of beneficiaries of a land trust must be revealed by the trustee to

any Illinois agency when applying for license or permit affecting the entrusted real estate.

title to land in Illinois may be held and conveyed

In the name of a partnership