Real Estate Salesperson Exam (PSI)

An estate is the degree, quantity, nature, and extent of interest a person has in real property. Estates are classified by duration.

Freehold estates are ownership estates of indefinite duration. The owner has title to the property.

Fee simple absolute is the highest form of ownership recognized by law. It includes the complete bundle of rights with unlimited duration. The owner can use, sell, lease, encumber, or will the property without restriction (subject to government powers). Fee simple estates are inheritable and pass to heirs if the owner dies intestate.

Fee simple defeasible estates are ownership estates that can be lost if a specified condition occurs or fails to occur. There are two types:

Fee Simple Determinable: Ownership automatically terminates if a specified event occurs. The deed contains durational language such as "so long as," "while," "during," or "until." Example: "To the School District so long as the property is used for educational purposes." If the condition is violated, ownership automatically reverts to the grantor or the grantor's heirs. The grantor retains a possibility of reverter.

Fee Simple Subject to Condition Subsequent: Ownership may be terminated by the grantor if a specified condition is violated. The deed contains conditional language such as "provided that," "on condition that," or "but if." Example: "To the Church, provided that no alcohol is sold on the premises." If the condition is violated, ownership does not automatically terminate. The grantor must take legal action to reclaim the property. The grantor retains a right of re-entry (also called power of termination).

A life estate is an ownership interest that lasts for the lifetime of a specified person (the measuring life). The life estate holder (life tenant) has the right to use and possess the property during the measuring life.

Life Estate Based on Own Life (Ordinary Life Estate): The estate duration is measured by the life tenant's own life. Example: "To Mary for her life."

Life Estate Pur Autre Vie: The estate duration is measured by someone else's life. Example: "To John for the life of Mary."

Life tenants have the right to all ordinary uses and profits from the property. They must maintain the property in reasonable condition and pay property taxes, mortgage interest (not principal), and ordinary maintenance expenses.

Life tenants cannot commit waste. Waste is any act or omission that permanently damages the property or decreases its value:

When a life estate ends, the property either passes to a designated third party (remainderman) or reverts to the original grantor.

Remainder: A future interest held by a third party. Example: "To Mary for life, then to John." John holds a remainder interest.

Reversion: A future interest retained by the grantor. Example: "To Mary for life." When Mary dies, the property reverts to the grantor or the grantor's heirs.

Leasehold estates are possessory interests of definite or determinable duration. The tenant has the right to possess and use the property but does not hold title.

An estate for years has a definite beginning and ending date. It terminates automatically at the end of the stated period without notice. Despite the name, duration can be any specified period (days, weeks, months, or years). Example: A one-year lease from January 1 to December 31.

A periodic estate automatically renews for successive periods until either party gives proper notice. Common periods include month-to-month and year-to-year. Notice requirements vary by state but typically must be given at least one period in advance.

An estate at will has no specified duration. Either party may terminate at any time, though most states require reasonable notice. This tenancy is created when a tenant takes possession with the landlord's consent but without a formal lease agreement.

An estate at sufferance occurs when a tenant remains in possession after the lease expires without the landlord's consent. The tenant (holdover tenant) is not a trespasser because original possession was lawful. The landlord may evict the tenant or accept rent and create a new periodic tenancy.