Chapter 1: Real Estate Investment:

Basic Legal Concepts

• Property Rights and Estates

• Interests, Encumbrances, and

Easements

• Assurance of Title
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Chapter 1: Real Estate Investment:
Basic Legal Concepts

• Methods of Title Assurance

• Recording Acts

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 Property Rights and Estates

• Real Estate

 Things that are not moveable.

 Land, Improvements.

 Permanently attached to land.

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 Property Rights and Estates

• Ownership Rights

 Property Rights
• Rights exercised by the property owner.
• Possession, use, enjoyment, control.

 Real Property
• Permanently affixed.
• Land, buildings, sidewalks, fixtures.

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 Property Rights and Estates

• Ownership Rights

 Personal Property
• Tangibles and / or moveable things
• Automobiles, furniture.

 Property Ownership
• Written contract, legal description, survey, deeds,
wills, public notice.
• Lease agreements, mortgage liens, etc.

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 Property Rights and Estates

• Definition of Estate

 All that a person owns.

 The extent to which rights and interest in

real estate are owned.

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Property Rights and Estates

 Estates in Possession
• A present estate in land.
• Entitles its owner to immediate
enjoyment of the rights to that estate.

 Estate Not in Possession

• A future estate in land.
• Does not convey the rights of the estate
until some time in the future, if at all.

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Property Rights and Estates

 Freehold
• Last for an indefinite period of time.
• No date on which the estate end.

 Leasehold Estates
• Expires on a definite date.

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Property Rights and Estates

 Fee Simple Estate

• Freehold estate that represents the most
complete form of ownership of real estate.

• The owner has the right to sell, lease, or borrow

against the estate.

• Subject to government restrictions, no special

conditions, limitations, or restrictions are place on
the owner.

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Property Rights and Estates

 Life Estates
• Freehold estate that lasts only as long as
the life of the owner of the estate.

• Upon death, the property reverts back to

the original grantor or its
representatives.

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Interests, Encumbrances, and
Easements
 Interest
• A right or claim on real property, its revenues, or
products.

 Encumbrances
• A claim against (as a mortgage) property.

 Easement
• The right to use someone else’s land for a specific
purpose.

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 Assurance of Title

 Title Assurance
• Allows buyers of real estate to:

 Learn in advance whether the seller has and

can convey the quality of title they claim to
possess.

 Receive compensation if the title, after

transfer, turns out to be misrepresented.

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 Assurance of Title

 Title
• Represents all of the documents, records,
that prove ownership.

• Establishes the rights in real estate being

conveyed from seller to buyer.

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 Assurance of Title

 Deed
• A written legal instrument, which has
been signed and delivered, by which one
individual, the seller, conveys title to real
property to another individual, the buyer.

• A conveyance of land or property from

one individual to another.

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Methods of Assurance of Title

 Seller provides warranty as part of the deed.

 Search of relevant recorded documents to

determine whether there is reason to
question the quality of the title.

 Title insurance may be purchased to cover

unexpected problems with the title.

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Methods of Assurance of Title
 General Warranty Deed
• Covenant that the seller has good (legally valid)
title to the property.

• Covenant that the seller has the right to convey

the property.

• Covenant to compensate the buyer for loss of

property.

• Covenant against encumbrances on the property

other than specifically stated in the deed.
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Methods of Assurance of Title
 Special Warranty Deed

• Makes the same warranties as the General

Warranty Deed, EXCEPT for the following:

 Limited to defects and encumbrances that

occurred only while the seller held title to the
property.

 Does not apply to title problems caused or

created by previous owners.

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Methods of Assurance of Title

 Bargain and Sale Deed

• No warranties are added.

• Sold “As Is”

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Methods of Assurance of Title

 Quitclaim Deed
• Offers the buyer the least protection.

• Conveys to the buyer whatever rights, interests,

and title the seller may have in the property.

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 Flowchart:
Ownership of Real Property
• Ownership
• Proof of Ownership
• Title
• Assurance of Title
• General Warranty Deed
• Qualified Warranty Deed
• Evidence to the nature and quality of title
being conveyed
• Attorney’s Opinion
• Title Insurance
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 Recording Acts
 General provide a publicly accessible
system for establishing claim or interest in
real estate as against all other parties.
Instruments typically recorded are:
• Deeds
• Mortgages
• Leases
• Easements
• Court Orders

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 Recording Acts

 Mechanics’ Liens is a cloud on the title.

• Gives unpaid contractors, workers, and material

suppliers the right to attach a lien on the real estate to
which they added their labor or materials.

• Recorded after the fact and generally gives contractors,

laborers, or suppliers a certain period of time to file their
lien.

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