Study guide
Before a real estate professional can talk about contracts or price, she needs a solid grip on what is actually being bought and sold: a bundle of rights in land, described precisely enough that a court or a surveyor could locate it, and passed from one owner to the next through a chain that a title company can trust. This chapter builds that foundation, moving from the physical and legal nature of property through the estates people can hold in it, the controls that limit it, and the mechanics of transferring and insuring title.
Real vs. Personal Property and the Nature of Land
Real property is land and everything permanently attached to it, plus the legal rights that come with ownership; personal property, sometimes called chattel, is everything else that is movable. A ceiling fan bolted into a junction box is a fixture and transfers with the house; the same fan sitting in a box in the garage is personal property until it is installed. Four tests help decide whether an item is a fixture: the method of attachment, meaning how firmly and permanently it is fixed to the structure; adaptation, meaning whether it was designed for that specific property; the intention of the party who installed it, which courts treat as the most important factor; and any agreement between the parties, since a contract can override the other tests by naming an item as included or excluded. Consider a seller named Priya who installs custom bookshelves built into an alcove. Because they are attached, shaped to fit only that space, and clearly meant to stay, they are a fixture and pass to the buyer unless the purchase contract says otherwise. Land itself has both physical and economic characteristics that the exam expects you to distinguish. Physical characteristics are immobility, indestructibility, and non-homogeneity, meaning no two parcels are ever truly identical. Economic characteristics are scarcity, improvements, permanence of investment, and area preference, often called situs, which is the market's preference for one location over another even when the physical land is similar. A downtown lot and a rural lot may have identical square footage, but situs explains why their values diverge sharply. Ownership rights in land extend in three directions: surface rights to the ground itself, subsurface rights to minerals and resources below, and air rights above, all of which can be sold, leased, or reserved separately from one another.
Legal Descriptions of Land
A street address is not precise enough for a deed, because addresses can change or repeat; real estate uses three formal systems of legal description. The metes-and-bounds method describes a parcel by starting at a clearly identified point of beginning, then tracing the boundary through a series of directions and distances back to that same point, often referencing natural or artificial monuments such as a stream, a fence post, or a survey marker. It is the oldest method and remains common for irregular parcels, especially in the original thirteen colonies. The lot-and-block method, also called the recorded plat method, refers to a specific lot and block number shown on a subdivision plat map that has been filed with the local recording office; once the plat is recorded, later deeds can simply cite the lot and block rather than repeating a lengthy boundary description. The government survey system, also called the rectangular survey system, divides land using a grid of principal meridians running north-south and base lines running east-west. Townships are six-mile squares formed by this grid, and each township is subdivided into 36 sections of one square mile, or 640 acres, numbered in a boustrophedon, or back-and-forth, pattern starting in the northeast corner. Sections can be further divided into halves and quarters, so a description reading the NE 1/4 of the SW 1/4 of Section 12 identifies a specific 40-acre parcel. A buyer named Desmond purchasing a rural quarter-section can calculate its exact acreage from the description alone, without ever consulting a map, because the system is built entirely on consistent fractions of a known unit.
Public and Private Land Use Controls
Government limits what an owner may do with land through several powers. Zoning ordinances, adopted under a state's police power, divide a community into districts such as residential, commercial, industrial, and agricultural, and regulate density, height, and use within each. A property that lawfully existed before a zoning change but no longer conforms to the new rule is called a nonconforming use and is typically allowed to continue under a grandfather clause, though it usually cannot be rebuilt or expanded if destroyed. Eminent domain is the government's power to take private property for public use, such as a road or utility corridor, through the formal process of condemnation, provided the owner receives just compensation, generally understood as fair market value. Escheat is the reversion of property to the state when an owner dies without a will and without any locatable heirs, ensuring land is never truly ownerless. Private controls work alongside public ones. An easement gives one party a limited right to use another's land for a specific purpose, such as a shared driveway or a utility line; an easement appurtenant runs with the land and benefits an adjoining parcel, while an easement in gross benefits a person or company, such as a utility, rather than another parcel. Covenants, conditions, and restrictions, commonly called CC&Rs, are private rules recorded against a subdivision, often enforced by a homeowners association, or HOA, that collects dues and maintains common areas. An encroachment occurs when a structure, such as a fence or overhanging roofline, extends onto a neighboring lot without permission, while a license is a personal, revocable permission to use land, such as a ticket to a ballgame, that does not run with the property.
Estates in Land, Liens, and Voluntary and Involuntary Transfer
An estate describes the degree, quantity, and duration of an interest in land. Freehold estates last for an indeterminate period. Fee simple absolute is the most complete form of ownership, with no conditions on its duration. A fee simple defeasible is conditional: a fee simple determinable ends automatically upon a stated event, using words like so long as, while a fee simple subject to condition subsequent gives the grantor the right, but not the automatic result, to retake the property if a condition is broken. A life estate lasts only for the duration of a named person's life, called the measuring life; when it ends, the property passes to a remainderman if one was named, or reverts to the original grantor if not. Leasehold estates, by contrast, give a tenant a possessory but non-ownership interest for a defined or renewable term, ranging from an estate for years with a fixed end date to a periodic tenancy that renews automatically, an estate at will with no fixed term, and an estate at sufferance, where a tenant remains after the lease ends without the landlord's consent. Liens are claims against property for a debt, and their priority generally follows the order recorded, though property tax liens typically hold superior priority regardless of recording date. A mechanic's lien, filed by a contractor or supplier who was not paid for work on the property, is a common example. Title can change hands voluntarily, as with a sale or gift, or involuntarily, as through foreclosure, adverse possession, or the escheat process described above. Adverse possession lets a trespasser eventually claim title if their possession is open, notorious, hostile, exclusive, and continuous for a period set by state law, which varies and is not tested on the national exam.
Deeds, Recording, and Title Assurance
A deed is the legal instrument that conveys title, and to be valid it generally must be in writing, name a competent grantor and an identifiable grantee, contain a legally sufficient description of the property, include words of conveyance called the granting clause, state consideration, and be signed by the grantor and delivered to and accepted by the grantee. Several deed types offer different levels of protection. A general warranty deed provides the broadest guarantees, warranting against title defects arising at any time, even before the grantor owned the property. A special warranty deed limits those warranties to the period the grantor held title. A quitclaim deed conveys whatever interest the grantor has, if any, with no warranties at all, and is often used to clear a cloud on title or transfer property between family members. Recording a deed at the county recorder's office provides constructive notice to the world of the new owner's interest, protecting the buyer against later claims, whereas actual notice means someone genuinely knew of the interest regardless of recording. The chain of title is the recorded history of ownership transfers for a parcel, and a title search reviews that chain to confirm marketable title, meaning title reasonably free of defects that a prudent buyer would accept without objection. A cloud on title is any claim, lien, or defect that impairs marketability, such as an old unreleased mortgage or a missing heir's potential claim, and it often must be cleared through a quitclaim deed or a quiet title lawsuit before closing. Title insurance protects against losses from title defects that a search failed to uncover; an owner's policy protects the buyer for as long as they or their heirs hold an interest, while a lender's policy protects only the mortgage holder up to the loan balance.
Key terms
- Fixture
- — An item of personal property that has become permanently attached to real property and transfers with it, determined by attachment, adaptation, intent, and agreement.
- Situs
- — The economic characteristic of land describing market preference for a particular location, independent of the land's physical qualities.
- Metes and bounds
- — A legal description that traces a parcel's boundary by directions and distances from a point of beginning back to that same point.
- Government survey system
- — A rectangular grid of principal meridians and base lines dividing land into townships and one-square-mile sections of 640 acres.
- Nonconforming use
- — A property use that was legal when established but no longer complies with current zoning, typically permitted to continue under a grandfather clause.
- Eminent domain
- — The government's power to take private property for public use through condemnation, provided the owner receives just compensation.
- Easement appurtenant
- — A nonpossessory right to use another's land that benefits an adjoining parcel and transfers automatically with that parcel.
- Fee simple absolute
- — The most complete form of land ownership, with no conditions or limitations on its duration.
- Life estate
- — An estate that lasts only for the duration of a named person's life, after which the property passes to a remainderman or reverts to the grantor.
- General warranty deed
- — A deed offering the broadest protection, warranting against title defects arising at any time, including before the grantor's ownership.
- Marketable title
- — Title reasonably free of defects, liens, or encumbrances that a reasonably prudent buyer would accept without objection.
- Cloud on title
- — Any claim, lien, or irregularity in the record that impairs the marketability of title until it is resolved or cleared.
Exam tips
- When a question describes an item and asks whether it stays with the house, run through attachment, adaptation, and intent in that order; intent is usually the deciding factor.
- Memorize the government survey math: one township equals 36 sections, one section equals one square mile equals 640 acres, so a quarter-quarter section equals 40 acres.
- Distinguish fee simple determinable from fee simple subject to condition subsequent by the wording: 'so long as' or 'while' signals automatic reversion; 'but if' or 'provided that' signals the grantor must act to retake title.
- Recording gives constructive notice; it does not itself transfer ownership. A deed transfers title upon valid delivery and acceptance, whether or not it is later recorded.
- A quitclaim deed conveys only whatever interest the grantor currently holds, with zero warranties, which is exactly why it is the standard tool for clearing a cloud on title.