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Real estate law involves rights in the ownership and
possession of land and buildings attached to land. Real
estate law often is referred to as the law of real
property--the land and buildings upon land--to
distinguish it from the law of personal property, which
includes all other property. A stumbling block for many
consumers entering the real estate market is the number
of unfamiliar terms frequently used by real estate
professionals. Because real estate is one of the oldest
areas of the law, it uses many old terms and concepts,
but many rights and responsibilities regarding real
estate have evolved and been updated as society has
changed.
Encumbrances
An encumbrance is a legal interest in property held
by someone other than the owner of the property. An
encumbrance is not an ownership interest in real
property, but it creates some kind of obligation for the
owner of the property. Encumbrances attach to property,
not the property owners, so the property may be bought
and sold even though there is an encumbrance attached. A
person who buys property with an encumbrance is bound by
the encumbrance. Encumbrances include easements, deed
restrictions, liens, assessments, and taxes.
Easement
An easement is a nonpossessory interest in real
property that gives the holder of the easement the right
to use another person's land for a particular purpose.
There are many forms of easements. Public utility
companies frequently have utility easements that permit
them to run gas, water, or electrical lines through the
property of others. The owner of property near a lake
might buy from the owner of lakeshore property an
easement to cross his or her property to access the
lake. A person who owns property that is landlocked may
receive an easement from an adjacent land owner to have
access in and out of the property. This is called a
right of way.
Deed Restriction
Deed restrictions also may be known as covenants,
conditions, or restrictions. Deed restrictions, which
usually are included in the seller's deed to the buyer,
generally are imposed to maintain certain standards.
Restrictions may limit the color one may paint a house,
the kind of trees one may plant, or the size of home
that may be built on the property.
Lien
A lien is a charge against property that provides
security for a debt or obligation of the property owner.
The lien holder does not own the property. Some liens
are voluntary, such as when the owner of property takes
out a mortgage. Other liens may be imposed. For example,
a lien may be imposed on property for nonpayment of
taxes. One of the most common liens is the mechanics
lien. A mechanics lien arises when someone furnishes
labor or materials to improve a piece of property. A
worker or supplier who is not paid may establish a lien
by filing an affidavit with the county clerk of the
county in which the property is located and sending a
copy of the affidavit by registered or certified mail to
the property owner. A mechanics lien may be foreclosed
only by a judgment of a court ordering the sale of the
property subject to the lien.
Assessment
An assessment is a tax levied on real property by a
local taxing authority. Real estate taxes are calculated
by multiplying the taxable value of a piece of property
by the tax rate. Taxable value is calculated by
subtracting any allowable exemptions from the appraised
value of property to determine net appraised value,
multiplying the net appraised value by the assessment
ratio to determine assessed value, and then subtracting
any allowable exemptions from the assessed value to
determine taxable value. Most properties are reappraised
periodically, and a property's taxable value may not be
the same as its actual market value. A special
assessment is a tax levied on a piece of property to pay
for improvements that benefit the particular property,
such as streets, sidewalks, and street lighting. Special
assessments are liens on the property until they are
paid.
Zoning
Zoning regulations are a particular type of land use
control. Their purpose is to control and regulate
development and growth of a community in a way that is
best for the general public. They attempt to accomplish
this task by dividing a community into areas (zones)
that can be used only for certain purposes.
Zones generally are divided into several basic
categories--residential, business, industrial, and other
purposes. Most cities further divide property into much
more intricate specifications, such as single-family
houses within a residential area, or zones that allow
for the building of condominiums or apartments.
Furthermore, an industrial section of a city might be
split between areas zoned for light-industrial and
heavy-industrial operations. In Texas, in addition to
zoning land for certain purposes, municipalities also
may regulate characteristics such as the height, number
of stories, and size of buildings, and the percentage of
the lot that may be occupied.
It is important to find out exactly how a property
is zoned, for this could have serious consequences on
how the property can be used both at the present time
and in the future. Zoning ordinances are changed through
amendments. Such changes can be sought by an individual
property owner or by local governments. The changes must
be determined to be in the best interest of the
community, and the opinions of persons affected must be
sought through public hearings.
Another way to seek relief from zoning laws is
through the form of a special use permit. Such permits
make exceptions for uses of property that are not
otherwise allowed under the zoning laws. Other ways
around zoning laws include exemptions, which exempt a
certain area of land from certain zoning requirements,
and spot zoning, which rezone a small area or even one
plot of land. These exceptions are allowed only if they
benefit the community.
Real Estate Ownership
Typically, ownership of real estate includes the
right to sell (convey), the right to use the property as
security for loans (encumber), the right to improve the
land or buildings on the land, and the right to use and
possess the property.
Property can be owned by one or more persons. The
two common ways in which parties co-own a piece of
property are joint tenancy and tenancy in common. In
Texas, spouses also can own community property.
Joint Tenancy
Although joint tenancy is a popular way for a
husband and wife to own property, there is no
requirement that joint tenants be married or that there
only be two joint tenants. Each individual owner in
joint tenancy has a right to sell, encumber, and possess
the entire property. Unlike many states, Texas does not
allow joint tenants to automatically enjoy a right of
survivorship. Under Texas law, if one joint tenant dies
before the tenancy is severed, the interest owned by the
deceased joint tenant does not survive to the remaining
joint tenants, but instead passes by will or intestacy.
Joint tenants may agree in writing, however, that the
interest of any joint owner who dies will pass to the
surviving joint tenants, but no such agreement is
inferred from the fact that the property is held in
joint ownership.
Tenants in Common
Tenants in common, like joint tenants, share the
right to possess, sell, and encumber the property. Upon
the death of one tenant in common, his or her ownership
interest passes to his or her heirs as part of the
estate.
Community Property and Separate Property
In Texas, spouses have separate property and
community property. Separate property consists of
property owned or claimed by a spouse before marriage;
property acquired by a spouse during marriage by gift,
devise, or descent; and damages for personal injuries
received by a spouse during marriage, except any
recovery for loss of earning capacity during the
marriage. Community property consists of all property
other than separate property acquired by either spouse
during marriage. Property possessed by either spouse
during or on dissolution of a marriage is presumed to be
community property unless a spouse can establish by
clear and convincing evidence that the property is
separate property.
Each spouse has the sole management, control, and
disposition of his or her separate property. In
addition, each spouse has the sole management, control,
and disposition of the community property that he or she
would have owned if single. Any other community
property, such as mixed or combined community property
(which neither spouse would have owned if single), is
subject to the joint management, control, and
disposition of the husband and wife. Spouses can provide
otherwise by power of attorney in writing or other
agreement.
At any time, spouses may partition or exchange
between themselves any part of their community property.
Property transferred to a spouse by partition or
exchange agreement becomes his or her separate property.
A partition or exchange agreement must be in writing and
signed by both parties. Separate property then can be
transferred to both spouses in joint tenancy, discussed
above.
Advantages and Disadvantages of Co-Ownership
Although there are advantages to co-owning property,
there are drawbacks as well. If co-owners cannot agree
on use, sale, or possession of a piece of property, they
may have to go to court to resolve the matter in a
partition action. In a partition action a joint tenant
or tenant in common asks the court to split the property
in a fair and just manner. A partition action dissolves
the co-tenancy, but does not change the title to the
property. Each person will be given a specific share of
the property to be used to the exclusion of any other
co-tenant, who previously had equal possession rights.
Residential Real Estate
The most common consumer real estate transaction
involves the sale of a home. Unlike years past, today a
home buyer has a variety of options in deciding the type
of dwelling to buy. Single family houses are still the
most common selections for home buyers. Single family
homes provide the maximum amount of privacy and freedom
to their owners, but they also may be the most expensive
option and require the most upkeep.
Condominiums and townhouses may be an option for
some purchasers. Both give their owners many of the
advantages of home ownership, such as tax deductibility
of mortgage interest, without some of the
responsibilities some people consider to be
disadvantages, such as lawn care and exterior upkeep.
Residents usually pay association fees to cover
maintenance.
A homestead is not a particular type of dwelling;
instead, it is a tax classification that can
dramatically lower what a homeowner pays in real estate
taxes. People who live in the property they own are
taxed at a much lower rate than if they rent out that
property to others. If a person buys property that
currently is rental property, he or she must fill out an
application to change the property's tax status;
otherwise, the person could end up paying non-homestead
taxes for the first year of ownership. An application
for homestead status is due before May 1. The chief
appraiser may extend the deadline by written order for a
single period not to exceed 60 days. The chief appraiser
also must accept and either approve or deny an
application for a homestead exemption after the deadline
for filing has passed if it is filed not later than one
year after the date the taxes on the homestead were paid
or became delinquent, whichever is earlier.
Title
Title to real estate is the ownership of the property.
Title may refer to the actual ownership or to the
documentary evidence of that ownership. Title is what
gives the owner the right to the property. In order to
sell a piece of property, all title matters must be
cleared. Usually, this is accomplished through a title
search. A title search is a diligent search of all
records relating to the property to determine whether
the owner is authorized to sell the property and whether
there are any claims against it. If any defects in title
are discovered during the title search, the seller
usually has time to cure the defect.
Often people have title insurance to protect them
against any hidden defects in the title. There are two
types of title insurance. One type protects the lender's
interest in the property and the other protects the home
owner's interest.
Deeds
A deed is a written instrument that transfers the title
of property from one person to another. There are many
different types of deeds. Generally, in Texas, title is
transferred by a general warranty deed. A general
warranty deed provides the greatest protection to the
purchaser because the seller pledges or warrants that he
or she legally owns the property and that there are no
outstanding liens, mortgages, or other encumbrances
against it. A warranty deed is also a guaranty of title,
which means that the seller may be held liable for
damages if the buyer discovers that the title is
defective. A warranty deed is no substitute for title
insurance, however, because a warranty from a seller who
later dies or goes bankrupt may have little value. Texas
provides a statutory form for use as a general warranty
deed, but any form is acceptable as long as it conforms
to the law.
Another type of deed used is a quitclaim deed. A
quitclaim deed relinquishes whatever interest, if any,
the seller may have in the property to the buyer. A
quitclaim deed gives the buyer the least protection of
any deed. If the seller is the sole owner of the
property, the quitclaim deed is enough to transfer
title, but the buyer takes a risk by accepting a
quitclaim deed because it offers the buyer no guarantee
that the title is valid. Quitclaim deeds customarily are
used during the property settlement phase of a marriage
dissolution.
Recording
In Texas, real estate owners and parties with real
estate interests may file with the county all documents
affecting their interest in property in order to give
public notice of the interest. Although valid title
passes without recording any documents, a buyer could
later lose the property to a subsequent buyer who
purchases the property without notice of the earlier
buyer's interest. To prevent such an occurrence, it
always is wise to file all documents relating to
property ownership or interest. In Texas, titles are
transferred under the abstract system. Abstract records
go back hundreds of years and an abstract of title is a
record of all the entries for that property.
Buying or Selling a Home
Because Texas has many programs to help people buy
homes, home ownership is a possibility for people at all
income levels. Buying a home may be both rewarding and
stressful. Every home purchase involves a number of
complex legal issues, unfamiliar terminology, and lots
of paperwork. Knowing how the process works may reduce
much of the headache.
Real Estate Brokers
One of the first decisions for someone interested in
buying or selling a home is whether to use the services
of a real estate broker. Real estate brokers are hired
to help buyers and sellers meet to complete the sale of
a house. Home buyers and sellers may choose to work with
a broker exclusively or non-exclusively.
A person who decides to work with a broker will sign
several contracts to clarify the relationship between
the consumer and the broker. These contracts may include
provisions regarding dual agency. This term refers to
the arrangement in which a broker represents both the
buyer and the seller of the house. It may be difficult
for one broker to represent both a buyer and a seller
fairly. When the broker finds a buyer for a house that
the broker has listed, the broker's dual loyalties
become apparent. The seller wants the highest price
possible while the buyer wants to pay the lowest price.
The contracts state what the broker may share with the
other party and which information must remain
confidential.
Seller Disclosures
In Texas, on or before the effective date of a
contract binding the buyer to purchase the property, the
seller must deliver to the buyer a disclosure notice.
This document must disclose to the buyer any material
defects that are known hazards; or problems with the
structure; or problems with the heating, plumbing,
mechanical, or electrical systems. Just because problems
are listed on this statement does not mean that the
seller must repair the problems, but the buyer may
request either repair or a price break because of the
problem. If a contract to purchase a home is entered
before the seller provides this disclosure notice, the
buyer may cancel the contract for any reason within
seven days after receiving the notice.
Foreclosure
Nobody in the process of buying a house wants to
think about the possibility of falling behind in house
payments to the extent that the bank or mortgage company
will foreclose on the loan and claim possession of the
house. Nevertheless, it is wise for a consumer to
understand why a lender forecloses on a piece of
property, so the consumer can minimize the possibility
of losing a house.
Up to a point, a lender typically will work with a
homeowner who falls behind in making payments because
the lender does not want to go through the hassle and
expense of foreclosing on a property. Homeowners should
communicate with their lenders as soon as financial
difficulties arise that make paying the mortgage
difficult. It can take months for a lender to begin a
foreclosure, and more months before it is completed, so
usually there is time to get the money needed to assure
a lender that there will not be a default. After a
lender has foreclosed on a property, a homeowner may be
able to set aside the foreclosure sale, or "redeem" the
property, by paying the purchase price at the
foreclosure sale plus any taxes or assessments.
Under certain circumstances, a Texas lender may
accept the deed to the property instead of foreclosing.
The property owner loses the property, but if he or she
truly has no other way to avoid foreclosure, offering
the deed as a way to satisfy the debt can prevent his or
her credit rating from being severely damaged by a
foreclosure. However, because lenders generally want
cash and not real estate, there is no guarantee that a
lender will accept a deed offered in lieu of
foreclosure.
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