Home ownership comes in many shapes and sizes. To own real estate you must hold title. The way you hold title affects all sorts of things from how you can transfer ownership to how the property can be financed, or improved – and it all has tax implications.
You can hold title in your name, in the name of a trust, or in the name of a company. Also, your ownership doesn’t necessarily limit others’ use of your property depending on easements, mineral rights, and other considerations. Finally, you may own the property now, but someone else may automatically gain ownership upon your death.
It’s a lot, I know. Over the years, I’ve written about all these topics. You can find the blogs at selzerrealty.com under How’s the Market.
Regardless of how you hold title, easements can grant other people access to your property, either for a short time or in perpetuity. Common easements include access to roads, utilities, waterlines, wells or springs. More esoteric easements include buying access to a view or sunlight. For example, if you have solar panels that provide the bulk of your household energy, you may need a sunlight easement that doesn’t allow neighbors to build anything or plant tall trees that prevent the sun from reaching your solar panels.
A prescriptive easement is a way people can gain legal access to your property without your consent. A prescriptive easement occurs when a property has been used uninterrupted for five or more years in a way that is “open and notorious” (that’s the legalese) and against the will of the owner. For instance, this happens on the coast when abalone divers create a footpath to get to the ocean across someone’s property without their permission. Ironically, if you give permission, you can take it away later. If you don’t give permission, you lose the right to take it away.
Easements are outlined in a property’s title report, so be sure to read it! As I’ve said before: the big print giveth and the small print taketh away. In Ukiah, there are properties with borrow easements that allow the Army Corps of Engineers to remove several layers of topsoil should they ever decide to raise Coyote Dam. If you build a house on those properties, the Army Corps of Engineers is within their legal right to remove your house to get access to the soil.
Ownership of other properties lets you keep your topsoil, but not the minerals buried underneath. There are several areas in Mendocino County where someone already owns the mineral rights, so even if you buy the house (with the landscaping and everything for 10 feet down), you don’t own the mineral rights.
Clearly, this is not normally a significant issue. The likelihood of a gold mine or oil reserve in downtown Ukiah is vanishingly small. However, if someone with mineral rights to your property wanted to excavate under your house or build an oil derrick, they’d have that right (subject to deed restrictions on extraction methods, of course).
When it comes to easements, mineral rights or even eminent domain (when the government decides to take your property), you still own your house. Sometimes, you can jack it up and take it elsewhere. For example, when governments expand a freeway through a residential neighborhood, they sometimes move houses to other locations.
Another interesting idea associated with property ownership is the idea of owning an estate-in-remainder. This means that when the current owner dies, a specific person (the remainderman) becomes the owner. The current owner can do almost whatever they want with the property, short of committing waste, but as soon as they pass away, the remainderman takes ownership.
The value of an estate-in-remainder is tied to the condition of the property plus the age and health of the current owner and remainderman. If the current owner (life-estate owner) is 90 years old and the remainderman is 25, the estate-in-remainder is of significant value.
The bottom line is this: you need to understand what rights you’re getting when you buy property. Read the title report and if you have questions, ask your Realtor and/or lawyer to weigh in. I’d say 99% of the time, you’re buying a fee-simple interest in the property, meaning you own all the rights now and in the future until you sell.
If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery. To see previous articles, visit www.selzerrealty.com and click on “How’s the Market”.
Dick Selzer is a real estate broker who has been in the business for more than 45 years.
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