Real Estate Law
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 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.
An encumbrance is an obligation that attaches to a piece of real property. It is a right or interest held by a party who is not 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. An encumbrance attaches to the property, not the property owner, so the property may be bought and sold even though there is an encumbrance attached. There are different types of encumbrances
Easement
An easement is 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 lake shore 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 the house, the kind of trees one may plant, or the size of home one may build 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, but is not paid. The worker or supplier may file a notice of lien with the county recorder and the property owner and collect the amount owed from a subsequent sale of the property.
Assessment
An assessment is a value placed on real property by a local taxing authority for the purpose of levying taxes. Real estate taxes are calculated by multiplying the assessed value of a piece of property by the tax rate. Most properties are reassessed periodically, and a property's assessed 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.
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 two or more parties can co-own a piece of property are joint tenancy and tenancy in common. Husbands and wives can also 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. Owners in joint tenancy have equal interest in the property and have a right to sell, encumber, and possess the entire property. When one joint tenant dies, the remaining joint tenants automatically take the deceased joint tenant's share of the property by right of survivorship. The surviving joint tenants are required to file a death certificate and an affidavit with the county recorder. Joint tenancy allows the surviving joint tenants to avoid probate, transfer and death taxes.
Tenants in Common
Tenants in common, like joint tenants, share the right to possess, sell, and encumber the property. Unlike joint tenants, however, tenants in common do not have a right of survivorship. Upon the death of one tenant in common, his or her ownership interest passes to his or her heirs as part of the estate.
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. Real property may be difficult to divide and partial interests may be difficult to sell, so a court will usually order that the property be sold and proceeds from the sale distributed to the co-owners in relation to their interests.
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 selection 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 are 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
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. The California Code authorizes a simple form for use as a deed. A deed must indicate who is granting the property, to whom it is granted, and what the property is, along with words signifying conveyance. In California, when a grant of real property is made usually it is assumed that the complete property passes unless it appears from the grant that there are restrictions on the estate. A quitclaim deed is a special type of grant that relinquishes whatever interest the seller may have in the property to the buyer. 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. A quitclaim deed does not give rise to the presumption that complete title is intended to be passed. Quitclaim deeds are used frequently during the property settlement phase of a marriage dissolution.
Buying or Selling a Home
Because Connecticut 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 many potential headaches.
Real Estate Agents
One of the first decisions for someone interested in buying or selling a home is whether to use the services of a real estate agent. Real estate agents are hired to help buyers and sellers meet in order to complete the sale of a house. Home buyers and sellers may choose to work with an agent exclusively or non-exclusively.
A person who decides to work with an agent will sign several contracts to clarify the relationship between the person and the agent. These contracts may include provisions regarding dual agency. This term refers to the arrangement in which an agent represents both the buyer and the seller of the house. It may be difficult for one agent to represent both a buyer and a seller fairly. When the agent finds a buyer for a house that the agency has listed, the agent'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 agent may share with the other party and what information must remain confidential.
Seller Disclosures
When a seller signs a standard purchase agreement, he or she is required to disclose certain known problems and hazards to the buyer. In most cases, the seller must provide the buyer with a Real Estate Transfer Disclosure Statement, which supplements the information provided in the purchase agreement. This statement must disclose all known structural defects, as well as problems with or information about the heating, plumbing, mechanical, and electrical systems. The seller also must include potential problems of which he or she is aware such as easements, environmental hazards, landfills, flooding, zoning violations, or noise problems. It is also the duty of the seller's agent to conduct a visual inspection of the home and report all facts that materially affect the value or desirability of the property. These disclosures, while required, are not part of the contract between the buyer and the seller and are not warranties by the seller. Just because problems are listed on this statement does not mean that the seller must repair the problems, but the buyer may request repairs or a price break because of the problems.
When selling a condominium in Connecticut, the seller must give the buyer copies of the homeowners' association bylaws, financial statements, and other documents. The seller also is obligated to disclose any unpaid assessments.
Making an Offer
Once a buyer has found the home he or she would like to buy, the buyer makes a deposit which is called earnest money. This deposit will go toward the downpayment on the house if the seller accepts the offer. The deposit must be submitted along with a written offer on a form called the Real Estate Purchase Contract and Receipt for Deposit, usually referred to a deposit receipt. Upon acceptance by the seller, the deposit receipt becomes a binding contract. Therefore, great care should be taken to ensure that the deposit receipt contains all the important terms of the sale, such as the exact purchase price, the amount of the deposit, and any conditions that allow the buyer to get out of the contract. For example, a buyer may want the option of cancelling the contract if he or she cannot get a loan or if an inspection reveals substantial problems. If a buyer makes an offer before receiving the seller's disclosure statement, the buyer may be able to cancel the contract by acting quickly. An offer can be revoked at any time before it is accepted by the seller.
Inspections
Before buying property, it is a good idea to have the property inspected to see if any problems exist. Most buyers pay for a general home inspection for structural defects, a pest inspection to see if the house has been infested with termites or other pests, and an asbestos inspection. Buyers consider these inspections to be a good investment before actually purchasing the house, even if the inspections reveal defects.
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 begins the foreclosure process, there is a period of time called a redemption period during which a homeowner can stop the foreclosure and redeem the property by paying the purchase price at the foreclosure sale plus any taxes or assessments.