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Management 180 - Real Estate Finance and Investment .docx

Course Code
MGMT 180

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Lecture: Week 1 (Mon)
The legal concepts of America is influenced by British common law.
Real Estate: Land and all things Permanently Attached thereto.
Real Property: Ownership Rights associated with Real Estate.
In the real world, real estate and real property are used interchangeably, although they mean different
Personal Property: Movable things and Intangibles.
Fixtures: Are Personal Property until they are Attached to a Building, then they become
Real Property.
When a fixture is hooked to the building, it is real estate. When it is unhooked, it is personal property.
(Eg; lights, speakers)
A Mobile Home: It is personal property (since it is moveable), and not real property or real estate. If the
mobile home is fixed to the ground (water/electricity), the it is real property (as it is now fixed to one
Statute of Frauds: Requires that almost every agreement relating to Real Property be in
Writing in order to be Enforceable (from England 1677).
There has to be a written agreement for a land deal to be valid. The contract must be in writing for it to
be enforceable.
Property Rights and Estates in Real Estate: Ownership, Use and Possessory
rights. The most complete form of ownership is Fee Simple. A Life Estate lasts only for the life of
the named person. A Future Estate can be a Remainder interest or a Reversion interest.
Fee Simple: You have all three rights (you have the right to own, use and possess the house). Very
broad. (contrasted with very narrow property right: lease).
Fee Simple Absolute means you can own the land forever and can do whatever you want to do with it
(well, kind of!).

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Future Estate:
Remainder Interest: I am going to sell you what I have, after I am dead.
Reversion Interest: I can sell my property to you, and say that once that person dies, the property goes
to someone else (someone completely different, or goes back to the original heirs.)
Easements: Non-possessory, Non-ownership rights to Use or access Land owned or
leased by someone else. They are very limited in nature.
Easement: Only the Use Right. Non Possessory and Non Ownership rights. Most narrow of all Property
One person owns it, the other has the easement.
Better to be the owner because the owner has complete control over the land.
Easement: Dependent on the owner.
In real estate, most of us like to be owners because of the lack of controls and restrictions.
Leasehold Estates / Leases: Property Leased by the Landlord/Lessor to the
Tenant/Lessee for a particular purpose for a particular period of time. Leases of more than One
Year must be in Writing to be Enforceable under the Statute of Frauds.
I might own a house but lease it to you. (you have use and possessory rights).
Leasehold is the right to use and possess, not own.
Landlord= Lessor; Tenant= Lessee
Property is leased by landlord to the tenant for a certain period of time. Leases do not go on forever.
Leaseholds have a max time.
Lease for 1 year or less: No need for a written agreement. But can still be enforced orally. This is an
exception to the Statute of Frauds.

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Title: Who Owns the Property.
Deed: Document that conveys Title to Real Property from a Grantor to a Grantee. The
strongest is a General Warranty Deed, the weakest is a Quitclaim Deed. Certain Deed
Restrictions are not enforceable.
Grantor: seller of property
Grantee: recipient/buyer of property
Deed is a document that evidences title. Given by Grantor to Grantee.
General Warranty Deed: Most protection. Seller is saying that deed is good. No problem with the deed,
nothing wrong with the property I am selling/transferring to the buyer. It covers the buyer. It is a broad
Quitclaim Deed: Least protection. Weakest evidence of title.
Many old deed restrictions are not valid anymore. Eg; Discrimination against pregnant women. (A
pregnant woman cannot live in this apartment”). But you can have some valid deed restrictions.
Security Interests: Borrower/Mortgagor/Trustor signs a Mortgage or Deed of Trust
in favor of a Lender/Mortgagee/Beneficiary typically to secure the repayment of a loan.
A security interest doesn’t give the lender any rights unless you default on the loan.
Mortgage (“death pledge”) is a security interest. If the borrower doesn’t make payments, the lender can
foreclose you out. It isn’t use, ownership or possessory interest. It is a security collateral interest only. It
is conditional upon you not performing the terms in the mortgage.
Security Interest: Usually has 2/3 parties involved.
Document used to secure a loan: Mortgage (requires 2 parties) or Deed of Trust (requires 3 parties)
In the real world, a 3 party Deed of Trust is also called a Mortgage.
CA is a Deed of Trust state.
Recording Acts: All states have statutory rules to resolve the Priority of Claims relating to
Real Property and to give the public Constructive Notice.
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