Introduction

In the exciting world of real estate, it is crucial to understand the concepts of “Interests” and “Properties in Real Estate.” These seemingly simple terms are the foundation of all real estate transactions and agreements. In this article, we will delve deeper into “Interests” and the various forms of “Properties in Real Estate” found in the market.

Interests in Real Estate

Let’s start by exploring “Interests.” In the context of real estate, interests can be divided into two main categories: “Possession” and “Non-Possession.”

Interests

Possession / Possessory                             Non-possession / Non-possessory:

• estate in land • private: encumbrance
• public: public interest

Possessory Interests

In this category we find the “Estates in Land”, which confer the right to the possession of the property. Properties in land can be either “Freehold” or “Leasehold”.

Freehold Estates

Freehold properties in land grant the right to possession without a set time limit. Within this category, we have two important subtypes: “Fee Simple” and “Life Estates”.

• Simple Fee: This is the highest type of interest in real estate, and is characterized by absolute ownership. A “Fee Simple Absolute” means that the owner has unrestricted rights and that the interest is not limited by time or subject to particular conditions. However, there are also “Fee Simple Defeasible” interests, which can revert to a previous owner if certain conditions are met. As mentioned above, this is the highest and absolute type of interest in a property.– not limited by one's lifetime – absolute: highest form of ownership interest – defeasible: reverts to previous owner per conditions
• Life Estates: These properties on earth are temporary and are based on a person's life. They can be "Conventional" or "Legal". Life properties conventional Life estates are limited to the life of a tenant or named person, and then pass to another designated beneficiary. Legal life estates, on the other hand, are created by state laws and are often designed to protect family survivors, such as “Homestead” laws. to another on death of named party – remainder: named party to receive estate – reversion: previous owner to receive estate – created by operation of state law as opposed to a property owner's agreement – designed to protect family survivors – homestead: rights to one's main residence:
  – laws protect homestead from creditors
  – family must occupy the homestead
  – cannot be conveyed by one spouse
  – endures over life of head of household
  – interests extinguished if property destroyed

           Conventional life estate

             – limited to lifetime of life tenant/ named party

             – ordinary: estate passes to remainderman or previous owner when life tenant dies

             – pur autre vie: limited to lifetime of another, passes to remainderman or previous owner

           Estates In Land

– include right of possession

– leasehold = limited duration: In these cases, the occupant of the property has possession rights, but only for a limited period of time. This commonly applies to residential and commercial leases.

– freehold: duration is not limited: In contrast, freehold properties do not have a defined time limit. Here we find the “Fee Simple” and lifetime properties.

Freehold (own) Leasehold (lease)

• fee simple • estate for years
– absolute • periodic
– defeasible • estate at will • estate at sufferance

• life estates
– conventional
- legal

Leaseholds: Exploring Different Types of Leases

Within the category of “Estates in Land,” we find a variety of leasehold arrangements that govern the use of a property. Leaseholds represent the right to occupy a property for a specific period, and these arrangements can vary significantly in terms of length and terms.

Estate for years: specific, stated duration, per lease; expires at end of term

Periodic: lease term renews automatically upon acceptance of rent; renews indefinitely if landlord accepts rent

Be at will: for indefinite period subject to rent payment; cancelable with notice

Be at sufferance: tenancy against landlord's will and without an agreement

Estate for Years

An “Estate for Years” is a specific type of lease that is characterized by a specific, set duration that is specified in the lease agreement. This period can be short or long, but the essential thing is that it has a clear end date. Some key aspects of this type of lease include:

• Specific Duration: The lease establishes a specific duration, such as six months, a year or even longer.
• Expires at End of Term: A distinctive feature of this type of lease is that it automatically ends when the expiration date specified in the contract is reached.

Periodic (Periodic Lease)

In the case of a “Periodic Lease”, the lease is automatically renewed at regular intervals as long as the tenant continues to pay rent and the landlord agrees to it. Some important features of this type of lease include:

• Automatic renewal: When a lease period nears the end, it is automatically renewed for an additional period if the tenant continues to pay rent.
• Timeless: Unlike an Estate for Years, a periodic tenancy does not have a predetermined end date, meaning it could last indefinitely.

Estate at Will

A “Tenancy at Will” is a tenancy agreement that does not have a specific duration set. In this case, the tenant occupies the property for an indeterminate period and is subject to paying rent on a regular basis. Some key aspects include:

• Timeless: This type of lease has no predetermined time limit and can continue as long as both parties wish.
• Cancelable with Notice: Despite the lack of a fixed term, this type of lease can usually be canceled with advance notice from both parties. For example, the landlord could notify the tenant that he or she wants to repossess the property with reasonable notice.

Estate at Sufferance

A “Suffering Tenancy” occurs when a tenant continues to occupy a property after their lease has expired and the landlord has not granted a new lease. Some important details of this scenario include:

• Against the Will of the Owner: This type of tenancy occurs against the will of the landlord, as the tenant does not have permission to continue occupying the property.
• Lack of Formal Agreement: There is no lease agreement in place, and the tenant may be illegally occupying the property at this point.
• Possible Eviction: In many cases, the landlord can take legal action to evict the tenant for continued occupancy after the expiration of the lease.

In summary, leaseholds represent a variety of rental arrangements that can significantly affect the length and terms of occupancy of a property. Each type of lease has its own characteristics and legal considerations, and it is essential to understand these differences when entering into a lease agreement.

Non-Possessory Interests

In the category of non-possession interests, we find “Encumbrances” and “Public Interests”.

• Burdens (Encumbrances): These are limitations or rights on the property that affect its use, but do not grant possession. Common examples include easements, liens, mortgages, and use restrictions.
• Public Interests: These are rights or restrictions that benefit the general public, such as zoning restrictions and building regulations.

Conclusion

Understanding “Interests” and the different forms of “Properties in Real Estate” is essential.