Real Estate Definition

I INTRODUCTION

Real Estate, in broad definition, land and everything built on it, and the nature and extent of one’s interest therein. Though chiefly an American usage, the term has the advantage of distinguishing between such landed property and the broader classes of property in general, unlike the common British usage. The word “real”, as it relates to property, means land as distinguished from personal property; and “estate” is defined as the interest one has in property.

Real estate may be acquired, owned, and conveyed (or transferred) by individuals; business corporations; charitable, religious, educational, and various other non-profit corporations; fiduciaries, such as trustees and executors; partnerships; and generally by any legal entity as determined and defined by the law. Limitations are established in connection with sales of real estate by children, incompetents, and certain types of corporations, and generally in cases involving some form of legal disability or lack of capacity. In such instances, it is necessary in some jurisdictions to make application to the courts for permission to sell; in other jurisdictions such transfers are governed by statute.

Real property is generally acquired by purchase, by descent and devise (the bequest of such property in a will), or by gift. When acquired by purchase, a deed is given by the seller, or grantor, to the purchaser, or grantee. The deed contains a legal description of the property conveyed; it must be drawn, executed, and acknowledged in proper form to be effective, and usually the change of ownership has to be registered or recorded with the relevant authority. It is customary for the seller and the purchaser to enter into a contract, at which time the purchaser makes a deposit on account of the purchase price. The purchaser engages a specialist (usually a lawyer) to search the title to the property to ensure that the seller can convey clear title and to find out other material information about the property. The transaction is then completed or closed; that is, the property title is transferred and the balance of the purchase price is paid.

When an owner of real property has died intestate, or without leaving a will, title to the property is said to pass by descent to the heirs; when he or she has died testate, or leaving a will, the property passes to the person or persons designated in the will.

Transfer of real property by gift, as, for instance, to Churches or educational institutions, is easily accomplished merely by the execution and delivery of a deed.

The greatest and most extensive interest that may be acquired in realty is described in law as a freehold, a term that implies a proprietary ownership, free and clear of conditions. There is also leasehold ownership, the commonest form of ownership for those owning part of a larger property, where the owners purchase a lease on the property from the freeholder, acquiring ownership of it for a designated period of time and within certain restrictions. However, precise terms and legal norms vary between countries.

II MULTIPLE OWNERSHIP

Multiple ownership, which has been widely adopted under the leasehold system, implies separate ownership of individual apartments or units in a multi-unit building. The purchaser becomes the owner of a particular unit and of a proportionate share in the common elements and facilities. The unit may be separately mortgaged; the owner pays taxes and a fixed monthly sum to maintain the common elements. In the sale of a unit, the seller executes and delivers to the buyer a deed conveying all right, title, and interest in and to the share of the whole as well as the particular unit.

III COOPERATIVE OWNERSHIP

Cooperative ownership, which on the surface seems similar to multiple ownership, is in fact quite different. In cooperative ownership, title to the multi-unit building usually is vested in a corporation. The purchaser of an apartment or a unit actually buys stock of the corporation; in addition to a stock certificate, a cooperative member receives a lease to the apartment, in which he or she is named lessee.

As a holder of stock, each cooperative member has an ownership interest in the corporation, which in turn owns all the units and common areas. Each tenant pays to the corporation a fixed rent, which is applied to the payment of a single blanket mortgage and real-estate taxes covering the entire building, and to the payment of insurance premiums and maintenance costs for the upkeep of the common areas and facilities, which each tenant uses in common with all other unit owners. In the sale of a cooperative unit, the seller surrenders his or her stock and lease to the corporation, which in turn issues a new stock certificate and lease to the purchaser. The form and structure of cooperatives vary, and in some countries are regulated by law. This form of property ownership, however, is not common in the United Kingdom.

Apart from actual ownership, an interest in real estate may consist of a lease, a mortgage, a lien, or other encumbrance on the property.

 

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