Texas Real Estate Contracts 4 th Edition © 2015 OnCourse Learning

Chapter 8: Basic Real Estate Law for Contracts © 2015 OnCourse Learning

Land, Real Estate, and Real Property Land is the ground, soil, or earth. Real estate is the land and anything permanently affixed to the land, such as buildings, fences, and those things attached to the buildings, which would be personal property (movable property) if not attached. “Real estate” and “real property” are generally used synonymously. © 2015 OnCourse Learning

Forms of Real Estate Ownership Individual Ownership Community Property Co-Ownership © 2015 OnCourse Learning

Individual Ownership of Property Real property owned by one individual. © 2015 OnCourse Learning

Community Property Ownership and Informal Marriages Community property is property owned in common between spouses, each having a one-half undivided interest in the property by virtue of their marital status. In Texas, all property owned during marriage is presumed to be community property. © 2015 OnCourse Learning

Separate Property Separate property, in Texas, includes (1) all property owned before marriage; (2) property gained through gift, devise, or descent; (3) personal injury recoveries except for lost wages; and (4) property made separate by agreement. © 2015 OnCourse Learning

Inception of Title Doctrine Property is considered either separate or community at the beginning of title. © 2015 OnCourse Learning

Informal Marriages The alleged spouse must prove that there was an agreement. He or she must establish that there was cohabitation with the other spouse. The alleged spouse must establish that the couple represented themselves as a married couple. © 2015 OnCourse Learning

Co-Ownership Co-ownership is ownership of real or personal property by two or more persons. The type of co-ownership between unmarried persons recognized in Texas is called the tenancy in common. The tenant in common holds an undivided interest in the property, and there is no automatic right of survivorship between the parties. © 2015 OnCourse Learning

Joint Tenancy Another type of co-ownership, which is not recognized in Texas, is the joint tenancy. The joint tenant has an automatic right of survivorship. A document in Texas that refers to the parties as “joint tenants” is presumed to create a tenancy in common, but without automatic rights of survivorship. © 2015 OnCourse Learning

Ownership by Business Entities Sole Proprietorship General Partnership Limited Partnership Limited Liability Partnership Corporations Limited Liability Company © 2015 OnCourse Learning

Sole Proprietorship The most common type of business entity is a sole proprietorship. Seen typically when one person creates an assumed name in the local county clerk’s office. © 2015 OnCourse Learning

Partnerships A partnership in Texas is defined as an association of two or more persons to carry on a business for profit. © 2015 OnCourse Learning

General Partnership An entity similar to the sole proprietorship, but with the involvement of two or more persons is a general partnership. © 2015 OnCourse Learning

Limited Partnership (L.P.) The limited partnership is similar to the general partnership because it involves two or more persons; however, the partners involved can have a different role as either general partners or limited partners. © 2015 OnCourse Learning

Limited Liability Partnership (L.L.P.) A limited liability partnership is similar to a general partnership because it involves two or more persons, but the partners involved are not responsible for each other’s misconduct. © 2015 OnCourse Learning

Corporations The corporation is considered a separate entity from that of the underlying owners © 2015 OnCourse Learning

Estates in Land Dividing Ownership Based on Time of Possession Dividing Ownership Based on the Portion of Property Conveyed © 2015 OnCourse Learning

Dividing Ownership Based on Time of Possession Freehold estates are estates of indefinite duration and are ownership rights that can be conveyed voluntarily by deed or by will. – Present Freehold Estates – Future Freehold Estates © 2015 OnCourse Learning

--Present Freehold Estates Present freehold estates are simply freehold estates that have a present right of possession. © 2015 OnCourse Learning

----Fee Simple Absolute The fee simple absolute is the largest estate that may be conveyed. This estate is considered the default estate in Texas and is the estate conveyed by default in the Texas Real Estate Commission promulgated real estate sales contracts. © 2015 OnCourse Learning

----Fee Simple Determinable The fee simple determinable is an estate that will terminate upon the happening of some event. The future estate held by the grantor is a possibility of reverter. Oil and gas leases in Texas are not true leases, but instead are fee simple determinable estates. © 2015 OnCourse Learning

----Fee Simple Subject to a Condition Subsequent This fee is an estate that will terminate upon the happening of some event. The future estate held by the grantor is a right of entry. © 2015 OnCourse Learning

----Fee Simple Subject to an Executory Interest This fee is an estate that will terminate upon the happening of some event; however, the future estate is held by a third party rather than the original grantor. © 2015 OnCourse Learning

----Life Estate A life estate is an estate measured by a life or lives in being. © 2015 OnCourse Learning

--Future Freehold Estates A future freehold estate is a freehold estate that has a future right of possession. © 2015 OnCourse Learning

----Reversion A reversion refers to a future estate that returns to the original grantor after the termination of the present freehold estate. Typically follows from a life estate. © 2015 OnCourse Learning

----Possibility of Reverter Exists as the future estate of the fee simple determinable estate that goes back to the grantor © 2015 OnCourse Learning

----Right of Entry exists as the future estate of the fee simple subject to a condition subsequent estate which goes back to the grantor © 2015 OnCourse Learning

----Remainder A remainder is a future estate that transfers to a third party, not the original grantor, after the termination of the present estate. © 2015 OnCourse Learning

----Indefeasibly Vested Remainder Indefeasibly vested remainders simply terminate in a third party. © 2015 OnCourse Learning

----Vested Remainder Subject to Total Divestment Vested remainders subject to total divestment are remainders that terminate in a third party, but which can be divested. © 2015 OnCourse Learning

----Vested Remainder Subject to Open Vested remainders subject to open terminate in an open class of individuals. © 2015 OnCourse Learning

----Contingent Remainder The contingent remainder, in contrast to the vested remainders, requires some condition precedent be satisfied before the interest will pass. © 2015 OnCourse Learning

Dividing Ownership Based on the Portion of Property Conveyed Mineral Groundwater Surface Water © 2015 OnCourse Learning

--Mineral A mineral is oil, gas, uranium, sulphur, lignite, coal, and any other substance that is ordinarily and naturally considered a mineral in this state, regardless of the depth at which [it] is found. © 2015 OnCourse Learning

--Groundwater Ground water is water percolating below the surface of the earth. © 2015 OnCourse Learning

--Surface Water Surface water in Texas includes water of the ordinary flow, underflow, and tides of every flowing river, natural stream, and lake, and of every bay or arm of the Gulf of Mexico, and the storm water, floodwater, and rainwater of every river, natural stream, canyon, ravine, depression, and watershed in the state. © 2015 OnCourse Learning

Easements Easements are nonpossessory interests that can be held in real property. An easement is the right of one person to use another person’s real property for a specific purpose. © 2015 OnCourse Learning

--Easement in Gross An easement in gross is personal and attaches to the individual grantee rather than to a tract of land. © 2015 OnCourse Learning

--Easement Appurtenant An easement appurtenant, on the other hand, is an easement designed to benefit another tract of land, rather than an individual. © 2015 OnCourse Learning

Creation An easement can be created by an express grant, reservation, the purchase of land with reference to a map or plat showing abutting roads or streets, implication, necessity, estoppel, or prescription © 2015 OnCourse Learning

--Easement by Express Grant For an easement created by an express grant, the owner of the property on which the easement is to be created conveys the easement right. © 2015 OnCourse Learning

--Easement by Reservation With an easement by reservation, the owner of the property on which the easement is to be created conveys the underlying property, but reserves in himself or another an easement across the property. © 2015 OnCourse Learning

--Easement by Reference to Plat Easements created by the purchase of land with reference to a map or plat showing abutting roads or streets are often seen in subdivisions. During the subdivision planning, utility easements are indicated on the subdivision plat that is filed in the county records. © 2015 OnCourse Learning

--Easement by Implication An easement by implication is an easement that has already been in use, but the grant was never reduced to writing. © 2015 OnCourse Learning

--Easement by Necessity The easement by necessity may be created when the dominant estate holder has no other means of accessing a roadway. © 2015 OnCourse Learning

--Easement by Estoppel An easement by estoppel is created verbally. © 2015 OnCourse Learning

--Easement by Prescription An easement by prescription is an easement created by adverse possession. © 2015 OnCourse Learning

Homestead Law © 2015 OnCourse Learning

The Homestead Exemption The homestead right exempts the property from forced sale by general creditors. © 2015 OnCourse Learning

Exceptions The property can be sold to satisfy a debt for (1) purchase money on the property, (2) property taxes, (3) permanent and valuable improvements on the property, (4) preexisting debts, (5) federal tax liens, (6) home equity liens, and (7) reverse mortgages. © 2015 OnCourse Learning

Term of Homestead Once a homestead right is established, typically by intent and occupancy, it continues until people die or the homestead is abandoned. © 2015 OnCourse Learning

Extent of Exemption Urban homestead is 10 acres Rural family homestead is 200 acres Rural single adult homestead is 100 acres © 2015 OnCourse Learning

Conveyancing the Homestead According to the Texas Family Code, a husband and wife must join in a conveyance of a family homestead regardless of the nature of title to the property. © 2015 OnCourse Learning