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Types of Ownership – Freehold Estates

Freehold estates involve ownership, Non-freehold estates include tenants.

Less than freehold means you are leasing or renting.

Freehold OWN

Estate for an indeterminable time.

Real property ownership is for an indefinite duration. (e.g., fee simple, life estate)

A Freehold estate of real property is when the owner has immediate rights (bundle of rights) to the property for an undefined amount of time.


One’s a legal interest in the property – either freehold or non-freehold.


 Bundle of Rights

The rights of ownership are associated with real property, including the right to use, enjoy, encumber, exclude, and alienate, whether by deed, lease, or devise by will.


Fee simple absolute is the highest form of ownership. 

People may call it Fee Simple, Fee Simple Estate, or Fee Simple Absolute.

Fee Simple Estate / Fee Simple Absolute

The most complete and absolute ownership of real property. It is freely transferable, has an indefinite duration, and may be left to heirs. All other estates are created from a fee simple estate.

Can be inherited.

Highest interest in ownership.

The highest form of ownership in real estate.

Fee simple defeasible means the highest form of ownership with a condition. An example would be a hospital that is given Property to keep as long as they remain a nonprofit or a zoo that receives Property by deed and is allowed to keep it as long as they don’t charge an admission fee.

Fee Simple Defeasible and Determinable

Also, called a Qualified Fee. Ownership estate in which fee simple title may be “defeated” by either

  1. a) “determinable” (so long as the specific use in the deed continues) or

b). a condition subsequent (so long as a certain condition in the deed is not violated.)

The highest form of ownership with a condition.

If the condition is violated the property will revert back to the original grantor.


Condition Subsequent

A requirement of a defeasible fee whereby the grantee’s title depends on a specific condition. If the condition is not met, the grantor must make a statement to this effect and retake the property within a reasonable time period. The estate does not automatically terminate upon violation of the condition of ownership, the owner must go through the court to assert this right.

Fee Simple Determinable

An estate that may be “defeated” by the failure of a condition determined in the deed, whereupon title automatically reverts to the grantor.

Contingent Remainder

A known future interest in real property, provided some condition specified in the deed occurs.


Forms of Ownership



Ownership in severalty

One individual holds the title.

Sole rights to ownership.

Sole discretion to transfer part or all ownership rights to another person.

Maybe a single individual or an artificial person, such as a corporation.

Ownership in Severalty/ Sole Ownership

One individual holds the title.

Sole rights to ownership.

Sole discretion to transfer part or all ownership rights to another person.

Maybe a single individual or an artificial person, such as a corporation.

Ownership by a sole person (individual, corporation, partnership).

Severalty – to own to the exclusion of anyone else. Own it by yourself.


Co-ownership, title held by two or more individuals.



Undivided Interest

An ownership interest in a percentage of a property, including use/possession of the total property

You can will your interest in real estate if you own as Tenancy in Common

Tenancy in Common  has possession as a common component.

A husband and wife own property, and when the husband died, one-third of his interest went to each of his children, and one-third went to his wife. What form of ownership did he and his wife most likely have? In Common. (unequal interests)  It appears the property was transferred to the heirs because the husband had no will.

Tenancy in Common – Tenants in Common

Each tenant holds an undivided fractional interest.

Co-owners have unity of possession and the right to occupy.

Each interest can be sold, conveyed, mortgaged, or transferred;

interest passes by will when a co-owner dies.

Tenancy in common is a form of concurrent estate in which each owner, referred to as a tenant in common, is regarded by the law as owning separate and distinct shares of the same property.

Tenancy in Common owners own percentages in an undivided property rather than particular units or apartments, and their deeds show only their ownership percentages.

This form of ownership is most common where the co-owners are not married or have contributed different amounts to purchasing the property.

Tenants in common have no right of survivorship, meaning that if one tenant in common dies, that tenant’s interest in the property will be part of their estate and pass by to that owner’s devisees heirs, either by intestate succession or will.

Also, as each tenant in common has an interest in the property, they may, in the absence of any restriction agreed to between all the tenants in common, sell or otherwise deal with the interest in the property (e.g., mortgage it) during their lifetime, like any other property interest.





Joint tenancy

Four unities (PITT):

  1. possession

  2. interest

  3. time

  4. title—the same document

A co-ownership in which one fee simple title is undivided and shared equally among two or more owners with an automatic right-of-survivorship. Four unities–time, title, interest, and possession–are required to create a joint tenancy.

The type of co-ownership does not affect co-owners’ right to sell their fractional interest in the property to others during their lifetimes. Still, it does affect their power to the property upon their death to their devices. However, any joint tenant can change this by severing the joint tenancy. This occurs whenever a joint tenant transfers his or her fractional interest in the property.

A joint tenancy or joint tenancy with right of survivorship JTWROS

is a type of concurrent estate in which co-owners have a right of survivorship, meaning that if one owner dies, that owner’s interest in the property will pass to the surviving owner or owners by operation of law, and avoiding probate. The deceased owner’s interest in the property evaporates and cannot be inherited by their heirs. Under this type of ownership, the last owner living owns all the property, and on his or her death, the property will form part of their estate.  Unlike a tenancy in common, where co-owners may have unequal interests in a property, joint co-owners have an equal share in the property.

It is important to note, however, that claims against the deceased owner’s estate may, under certain circumstances, be satisfied by the portion of ownership previously owned by the deceased but now owned by the survivor or survivors. In other words, the deceased’s liabilities can sometimes remain attached to the property.

This form of ownership is common between spouses, parents, and children, and in any other situation where parties want ownership to pass immediately and automatically to the survivor.  For bank and brokerage accounts held in this fashion, the acronym JTWROS is commonly appended to the account name as evidence of the owners’ intent.

JTWROS– Joint tenancy with the right of survivorship.

The four unities of joint tenancy are time, title, interest, and possession. The only unity for Tenancy In Common is possession.

A husband and wife took the title as joint tenants so that when one passes away, the title to the real estate will avoid probate.

Joint tenancy: Time, title, possession, and interest are common components.

A husband and wife own property as Joint Tenants.

The husband will give his interest in his property to his son. Upon his passing, how is the title held?

The wife owns the property In Severalty.

The last surviving person owns the property by himself or herself. JTWROS 


Partition in Kind

is the physical division of the land. 

The court decides how to split up the land between co-tenants, so each receives a portion equal to their share.  If the court cannot equitably split up the land, then partition by the sale will be used. In order to terminate a joint tenancy, one of the four unities must be destroyed.  (PARTITION) You may do this by conveying your joint tenancy interest to any third person.  This can be done through gift or sale.  Upon termination, a tenancy in common is formed between the third person and the remaining co-tenant(s).  A joint tenant may transfer their interest unilaterally and without the knowledge or consent of the co-tenant(s).

In partition by sale, the court forces the sale of the property, and each co-tenant receives their share of the profits.

Any party to a tenancy in common wishes to terminate (usually termed “destroy”) the interest. He or she may obtain a partition of the property. This division of the land into distinctly owned lots if such division is legally permitted under zoning and other local land-use restrictions. Where such division is not permitted, a forced sale of the property is the only alternative, followed by a division of the proceeds.




Tenancy by the entirety

Some states

Husband and Wife only

Rights of survivorship


Death of either spouse; survivor becomes an owner in severalty.

Agreement between both parties (new deed).

Court-ordered sale.

Right of Survivorship

A key feature of a joint tenancy whereby the deceased joint tenant’s ownership rights automatically pass to the surviving joint tenant(s).

A husband and wife own their property as Tenants by the Entirety.  They decided to list the property.  The husband has a large amount of unpaid debt.  The wife suggested that she will sign the listing agreement without him.  Will the absence of the husband signature protect the wife’s interest in the sales proceeds?

They own the property as one person.  The husband interest will be seperated.  Tenancy by the Entirety gives protection to the other spouse’s debts. When a husband and wife own property as Tenant by the Entirety, they both need to sign the listing agreement even if one spouse has a large amount of unpaid debt.

In Tenancy by the Entirety, each spouse is one half a person.  It takes at least one person to sign a listing

A Tenancy by the Entirety cannot be partitioned.

When there is a Tenants by the Entirety ownership, a broker should get both husband and wife to sign the listing.



Spanish Common Law is usually found in the western states.

Property a couple acquires after marriage is the property of both husband and wife. (Does not include inheritance)



The life estate interest of a wife in the real property of her deceased husband.


The life estate interest of a husband in the real property of his deceased wife.


Life Estates

Pur Autrie Vie Remainderman Reversion

Remainder– remainderman– in a life estate. The person who gets the Property after the life estate holder dies.

Reversion in a life estate. An example would be, “Bob gave a life estate to Sal. When Sal dies, the Property will revert back to Bob.”

One cannot will a life estate. 


Pur Autre Vie means “for the life of another.” It’s a life estate based on another’s life.  

Carol had a life estate. She rented the Property to Tom for five years. In year three, Carol died.

What is the status of Tom’s lease?

The lease is now void. It was only valid during the term of the life of Carol.

Mary was granted a life estate for her life. Upon her passing, the Property will pass to her child. The type of ownership the child has is remainder. (Remainder man)


Real Estate Held in Trust

Inter Vivos Trust

A trust under which a living trustor transfers property to a trustee with instructions for managing assets and distribution of income.

Differs from a testamentary trust created by will and effective upon death.

Trust property is typically tied into an estate planning strategy used to facilitate the transfer of assets and reduce tax liability. Some trusts can also protect assets in the event of a bankruptcy or lawsuit.

The trustee must manage the trust property by the trustor’s wishes and in the beneficiary’s best interests.

A trustee can be an individual or a financial institution such as a bank. A trustor sometimes called a “settlor” or “grantor,” can also serve as a trustee managing assets for the benefit of another individual, such as a son or daughter.

Regardless of the role a trustee plays, the individual or organization must abide by specific rules and laws that govern the functioning of whichever type of trust is established.

What Are the Benefits of a Trust?

While there are many different kinds of trusts with unique features and benefits for each, some of the common benefits of a trust include reduced estate taxes, allocation of assets into the desired hands, avoiding court fees and probate, protection from creditors, or even protection of assets among family members themselves (for conflicts or underage recipients).

Parts of a Trust

A Trust is composed of three parties

  • the trustor
  • trustee
  • beneficiary

But what are these three parts, and how do they operate?

  1. Trustor

The trustor is the person who grants the trustee control over their assets, estate, or property and who creates the agreement.

  1. Trustee

The trustee is responsible for managing the trust that the grantor (trustor) has appointed them over. They are the person who is in charge of managing the property or assets the trustor gives them to keep, and are titled in the agreement.

  1. Beneficiary

The beneficiary or beneficiaries are the people who received the benefits of the trust agreement. According to the terms of the agreement, they are given the property or assets by the trustee from the trustor.

Trusts are often used to manage property, assets, or estates being held for a minor or person incapable of being financially accountable until that person be deemed able to manage the assets themselves.

Administrator’s Deed

Used to transfer title of real property by the personal representative of a deceased owner

Main Types of Trusts

While the basic structure of trust remains pretty much the same, there are several different types of trusts with different purposes and specifics.

Living Trust

A living trust, sometimes known as an inter-vivos trust, is one made by a trustor (grantor) during his or her lifetime, with assets or property intended for the individual’s use during their lifetime. This type of trust allows the trustor to benefit from the trust while alive but passes the assets and property on to a beneficiary (using a trustee) upon their death. 

Testamentary Trust

A testamentary trust often called a will trust, is an agreement made for a beneficiary’s benefit once the trustor has died and details how the assets must be endowed after their death. This type of trust is often instituted by an executor, who will manage the trust after their will and testament have been created. And, a testamentary trust is irrevocable (cannot be changed or altered).

Revocable Trust

A revocable trust is a trust that can be changed, terminated, or otherwise altered during the trustor’s lifetime by the trustor themselves. It is often set up to transfer assets outside of probate. In this case, all three parts of the arrangement (the trustor, trustee, and beneficiary) are often the same person who can manage their own assets but will be given over to a successor trustee and other beneficiaries upon the original trustor’s death.

Irrevocable Trust

On the contrary, an irrevocable trust is one that a trustor (grantor) cannot change or alter during his or her lifetime or be revoked after his or her death. Because this type of trust contains assets that cannot be moved back into the possession of the trustor, irrevocable trusts are often more tax-efficient – with little to no estate taxes at all. For this reason, irrevocable trusts are often the most popular as they transfer assets completely out of the trustor’s name and into the next generation or beneficiary’s name. However, a living trust can be either revocable or irrevocable based on its specifications. 

Funded or Unfunded Trust

In the case of a funded trust, it means that property has been put inside for the trust. An unfunded trust is simply the trust.

Credit Shelter Trust

A credit shelter trust, also known as a bypass trust or a family trust, is a trust fund that allows the trustor to grant the recipients several assets or funds to the estate-tax exemption. Basically, this allows the trustor to give a spouse or family member the remainder of the estate tax-free. These kinds of trusts are often prevalent because the estate remains tax-free forever, even if it grows.

Insurance Trust

An insurance trust allows the trustor to combine their life insurance policy within the trust, keeping it free from taxation on the estate itself. This kind of trust is irrevocable and doesn’t allow the trustor to change or borrow against the life policy itself but allows the life policy to help pay for post-death expenses on the estate.

A Charitable Trust

is a trust that has a charity or non-profit organization as the beneficiary. In normal cases, this type of trust would be built up during the trustor’s lifetime and, upon their passing, be doled out to a charity or organization of the trustor’s choosing, avoiding or reducing estate taxes or gift taxes. A charitable trust could also be part of a normal trust. The trustor’s children or inheritors would receive part of the trust upon their passing, with the estate’s remainder going to the charity.

Blind Trust

A blind trust is a trust that is handled solely by the trustees without the beneficiaries’ knowledge. These trusts are often used to avoid any conflicts between the trustees and beneficiaries or between beneficiaries.

Land Trusts: 

Additionally, trusts can be used for privacy (to keep wills private) or a good way to hide ownership)

A land trust is a nonprofit organization that actively works to conserve land by undertaking or assisting in land or conservation easement acquisition or by its stewardship of such land or easements. Land trusts work with landowners and the community to conserve land by accepting land donations, purchasing land, negotiating private, voluntary conservation agreements on land, and stewarding conserved land through the generations to come. A distinguishing characteristic of owning property by the land trust is that the legal owner’s identity is kept confidential.

One of the main benefits of setting up a trust remains the avoidance of high estate taxes or gift taxes.

  1.  Why would a person(s) set up a land trust?

Answer: To hide the identity(s) of the person(s)

2. An older couple owns real estate as Tenants in Common in a property that the wife inherited 40 years ago. The wife set up a charitable trust, giving the land that has been in the wife’s family for several generations to ABC hospital after the passing of the wife. The husband agreed to the terms the wife indicated.

The wife’s children have decided that they do not want the land.

The deed states, “ABC Hospital may own the land in the highest form of land ownership with the condition that they remain a non-profit hospital.

  1. What would happen to the hospital if, after receiving the title, in fifty years, they have become a for-profit hospital?.”

ANSWER  the property would revert to the couple’s heirs

2. What type of deed was the hospital granted?

ANSWER  Fee Simple Defeasible

3. What type of ownership does the wife have?

Answer: Life Estate.

4. What type of estate does the husband have in the ownership as long as the wife is alive?

ANSWER Pur Autrie Vie


Co-Ownership Properties



The owner holds fee simple title to the airspace of a unit as well as an undivided share in the common elements.

Common elements are owned by condominium unit owners as tenants in common.

Condominium units may be mortgaged; default on payment does not affect other unit owners.

It is possible to hold the title as “In Severalty” and “In Common” when owning a condominium. 

An example of a right, improvement, or privilege that belongs to and conveys with a property is an appurtenance

The pool rights, walking rights, parking rights stay with the property.

Common elements in a condominium do not include the owner’s assigned parking spot. 

The assigned parking space is not shared.

In a condominium, the owners own real estate.  

A condominium complex cannot eminent domain the property adjacent to their parking lot to expand the condo’s parking lot.

Only the government can eminent domain.

It is possible to have two deeds when you buy a condo.  One for the unit and another as tenants in common for the common elements.

You also own a portion of the common areas like the pool, elevators, hallways, and entryway. The ownership interest in the common area is appurtenances.


At the close, the buyer will receive additional paperwork when buying a common elements property.  CC&Rs


Coops – cooperative

A corporation owns the real estate and the inhabitant’s own stock in the corporation.

A purchaser of stock becomes a shareholder in the corporation and receives a proprietary lease.

The IRS treats a cooperative the same as real estate for tax purposes.

Personal property but has a real property condition disclosure if there are 4 or less transferring.

In a Cooperative (Co-op) or (stock cooperative), a person owns stock in a corporation that owns the building he lives in. The amount of stock could identify the square footage of his unit. They look very similar to a condo.

A Cooperative is considered personal Property because the residents own the stock and not the building. Stock is chattel.

If a stockholder doesn’t pay his mortgage, the other stockholders will have to pay his shares for the corporation to avoid loan default.

They are given a Proprietary Lease to live in their unit.



Interval Ownership

A timeshare owner owns property along with other owners.

Timeshares are most often a vacation home.

The use of the estate is limited to the timeshare interest.

The title is held as Tenancy in Common.

Time-share ownership permits multiple purchasers to buy interests in real estate, a form of ownership most commonly found with resort property.

Timeshare owners hold the title as Tenants in Common. Several people own one unit.

Ownership in a resort condominium that allows the owner a specific occupancy amount each year is a timeshare.


Townhome/Garden Home

Townhouse – Garden Home

A form of ownership in which houses share common vertical walls.

Titles to individual units include a fractional interest in common areas.

Unit owners own common elements as tenants in common.

Maintenance of common elements is funded by fees charged to each unit owner.

It is possible to hold the title as “In Severalty” and “In Common” when owning a condominium.

Town house – Garden Home

A form of ownership in which houses share common vertical walls.

Titles to individual units  include a fractional interest in common areas.

Common elements are owned by unit owners as tenants  in common.

Maintenance of common elements are funded by fees charged to each  unit owner.

It is possible to hold title as “In Severalty” and “In Common” when owning a condominium


Planned Unit Developments

Typically, common interest communities have:

A Single Developer – one who initially regulates the community

Planned Unit Development – PUD

A community planned with a variety of individual ownership interests such as residential and shared interests of common recreation areas.


One who partitions a large parcel of land for resale as individual lots.

The development of an entire community.  Includes, homes, stores, schools, business, parks and a Home Owners Association.

A Board, Governing Body or Association – When the developer leaves, a board usually takes over and governs the community. The board’s duties include:

Enforcing any covenants or restrictions against the residents

Collects fees for maintaining and improving the common areas of the community

Levy fines if any resident does not follow the regulations of the community

Laws or Regulations – While states do have laws regarding common interest communities, these communities are usually governed by their own documents. You can usually find the common interest community’s regulations in these documents:

The master deed from the developer

The bylaws of the community, which usually include duties and powers of the governing body

The constitution of the association or community


Homestead Rights


Ownership by Business Organizations


A limited partner’s liability is limited to his investment. General partners run the business. 

General Partnership

  • A business organizational form in which all general partners actively participate in ownership and management and are liable for all debt and actions.
  • All partners are general partners who participate in the partnership and share full liability.

Limited Partnership

  • The general partner provides the management.
  • The limited partners are only liable to the extent of their investment.
  • A business organizational form in which general partner(s) are liable for all debts and actions and limited partners carries no liability beyond their investment.

Limited Liability Companies (LLC)

  • Members have the limited liability of a corporation, plus the tax advantages of a partnership.
  • One person can be an LLC.
  • A business organization is treated as a limited partnership from a federal tax point of view and an “S” corporation from a liability point of view.

S corporations

  • Corporations elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.
  • Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates.
  • This allows S corporations to avoid double taxation on corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

Pass Through


  • A legal entity created under state law, consisting of an association of one or more individuals but existing separately from such individuals. Managed by its board of directors, each shareholder’s liability is limited to his/her investment.
  • A legal entity or A person.
  • Exist in perpetuity (forever) until formally dissolved
  • Managed and operated by the board of directors.
  • Provide its shareholders with limited liability.
  • Corporate profits are usually subject to double taxation.

Double Taxation

The disadvantage of a corporation is double taxation. 

  1. When a corporation owns a shopping mall or high-rise or income property, double taxation still exists.

A corporation pays double taxation. An “S Corporation” is considered a pass-thru company. 


Joint Venture


  • A form of business organization in which two or more individuals come together for a business purpose and share in the venture’s profits or losses.
  • It is treated like a partnership for tax purposes.



  • A process for two or more people coming together to operate an investment, such as partnerships, corporations, etc.  It is not a form of ownership.  Mom and pops Shops

Real Estate Investment Trusts (R.E.I.T.S.)

  • Money funds through which small investors participate in large real estate projects through ownership of certificates. REITS are created and managed by brokerage companies.

REIT: A conglomerate of investors who pool their money to buy investments such as residential income property, high rises, malls, commercial buildings.


Courtesy of Jack

A, B, and Z have invested in an office building as joint tenants.  A and B occupy part of the office space but Z does not.  Z wants to retire and needs cash.  Z listed her portion of the office building with a Broker.  W is interested in purchasing Z’s portion of the property.

a          W may purchase Z’s portion and will become a tenant in common with A and B. 📍 📍 📍

b          W may purchase Z’s portion and will become a joint tenant with A and B.

c          W cannot purchase Z’s portion.

d          Z cannot sell her portion but may petition the court to partition the property.


Each of the following may be joint tenants EXCEPT:

a          minors under age 18 or disabled persons

b          married persons

c          a government or a corporation 📍 📍 📍

d          persons who are divorced


Lesson Content
Quizzy Property Ownership