2

C h a p t e r T w o

Legal Considerations
in Appraisal

■ LEARNING OBJECTIVES
Students will be able to
1. recognize the important legal considerations that affect real estate appraisal.
2. define and understand the differences among real estate, real property, personal
property, and fixtures.
3. identify and understand the limitations on ownership of real estate including police
power, eminent domain, escheat, and taxation.
4. identify and understand private restrictions on real estate including deed restrictions,
easements, leases, mortgages, and liens.
5. define and understand encroachments and adverse possession.
6. understand the concept of fee simple ownership, as well as ownership interests that
are less than fee simple such as life estate, leased fee estate, leasehold estate, air
rights, and surface/subsurface rights.
7. understand the various forms of property ownership including joint tenancy, tenancy
in common, tenancy by the entirety, as well as special forms of ownership such as
condominiums, cooperatives, and timeshares.
8. understand the various forms of legal descriptions and how to identify property
according to the specific form of legal description.
9. understand the types of title transfers including general warranty, special warranty,
and quitclaim deeds.

13
14 Mastering Real Estate Appraisal

■ KEY TERMS
adverse possession general warranty deed personal property
air rights government (rectangular) police power
bundle of rights survey purchase money mort-
condemnation joint tenancy gage
condominium lease quitclaim deed
cooperative leased fee estate real estate
deed restriction leasehold estate real property
easement lien special warranty deed
easement appurtenant life estate surface/subsurface rights
easement in gross limited warranty deed taxation
eminent domain lot-and-block system tenancy
encroachment metes-and-bounds tenancy by the entirety
escheat description tenancy in common
fee simple estate monument system time-share
fixture mortgage

■ INTRODUCTION

Ownership of real estate in the United States of America is a direct function of consti-
tutional guarantees. Our governmental heritage, especially related to the ownership of
real estate, is English in its origin, and legal implications that affect ownership evolved
from this heritage.

This Chapter focuses on the various legal considerations involved in the ownership of
real property that a professional appraiser must understand. Covered in this Chapter are
the following six legal considerations:

1. Fundamental definitions of legal interests

2. Limitations on ownership of real estate
3. Forms of legal interests
4. Property ownership forms
5. Four types of legal descriptions
6. Types of real estate transfers

P A R T O N E Fundamental Definitions of Legal Interests

In understanding the ownership of real estate, a clear distinction must be made between
real estate and real property:
 CHAPTER TWO ❘ Legal Considerations in Appraisal 15

■ REAL ESTATE

Real estate relates to the land and all improvements permanently attached to the land,
either by nature or by people.

As discussed in Chapter 1, real estate has the following five unique characteristics that
distinguish it from other asset types:

1. Unique in location
2. Unique in composition
3. Durable
4. Finite in supply
5. Useful

These five unique characteristics all relate to the physical attributes of land and/or
improvements.

■ REAL PROPERTY

Real property relates to the interests, benefits, and rights inherent in the ownership of
real estate.

Based on this distinction between real estate and real property, those involved in the
valuation of real estate are technically real property appraisers as opposed to real estate
appraisers.

Consistent with the concept of real property is the bundle of rights concept, a view of
real property ownership suggesting that the rights inherent in the ownership of a parcel
of real estate can be compared to a bundle of sticks whereby each stick represents a sep-
arate and distinct right in the ownership of that real estate.

Rights generally inherent in the ownership of real estate include but are not limited to
the following six:

1. The right to sell

2. The right to lease
3. The right to mortgage
4. The right to sell or lease a partial interest
5. The right to build improvements thereon
6. The right not to do any of the above

The bundle of rights can be divided through various instruments including leases, ease-
ments, and mortgages. Through these instruments, one party owns or controls certain
rights whereby another party owns or controls other rights.
16 Mastering Real Estate Appraisal

For example, in a lease arrangement, the person leasing the property (lessee) generally
acquires the right to use and occupy the premises for a certain reason, for a certain
period of time,usually at a specified rental rate.The owner of the property (lessor) retains
the right to receive rent for giving up the use of the property but also retains the right
to the reversion, or the right to get the property back after the lease has ended.

■ PERSONAL PROPERTY

Personal property is an item that is not real property.

It usually falls outside the subject of an appraisal. Three examples of personal proper-
ty that may appear to be related to the real estate are the following:

1. A portable microwave oven

2. A window air-conditioning unit
3. Furniture

■ FIXTURE

A fixture is an item that was once personal property that has become part of the real
estate.

When a dishwasher has been delivered to a construction site and is awaiting installa-
tion, it is personal property. When installed, however, it becomes a fixture and is con-
sidered part of the real estate. Following are four examples of fixtures:

1. Light fixtures
2. Stoves
3. Basketball goals (permanently installed)
4. An irrigation system

In deciding whether or not personal property has become a fixture, there are generally
the following three tests:

1. The manner in which the item is attached

2. The intent of the parties
3. Tradition/character of the item

A builder removes a ceiling fan from the box, installs it on the ceiling, and sells it along
with the house. This item has satisfied all three tests for becoming a fixture. But what
about curtains and other window treatments? In many cases, a purchaser of a home has
been disappointed to find out the curtains he or she assumed would go with the house
 CHAPTER TWO ❘ Legal Considerations in Appraisal 17

have been removed once the premises become vacated. The purchase contract should
specify what the buyer and seller are considering as a fixture or personal property.

Although furniture is generally considered as personal property, motels and hotels are
usually sold with room furnishings included. In this instance, furniture is considered a
fixture and part of the real property.

When confronted with uncertainties as to the treatment of property, the appraiser should
address the problem, consult the client, and agree upon proper treatment.

P A R T T W O Limitations on Ownership of Real Estate

The purest and most complete form of real estate ownership is fee simple. Yet, even
though an individual may own a parcel of real estate in fee simple with no mortgage
encumbrance, he or she does not have exclusive use of that property. There can be pri-
vate restrictions placed on the property by the previous owner. Such restrictions may
require a minimum floor area, architectural controls, and placement of improvements.

There can also be governmental controls. When purchasing real estate, one should rec-
ognize that the purchase is being made subject to these restrictions which are inherent
in the ownership of the property.

■ PUBLIC RESTRICTIONS ON REAL ESTATE OWNERSHIP

There are four public or governmental restrictions known as the four powers of gov-
ernment. These limit the ownership of all real property in the United States. The four
powers are as follows:

1. Police power
2. Eminent domain
3. Escheat
4. Taxation

Police Power

Police power is the right of government to regulate land use for the public good. There
are numerous examples of police power, but the most obvious ones are zoning and
building codes.

Zoning is intended to promote orderly development of land. Zoning may allow com-
mercial development along a major highway but may restrict adjoining land to single-
family residential usage. By promoting orderly development, zoning generally tends to
maximize and maintain an individual parcel’s value.
18 Mastering Real Estate Appraisal

Building codes are intended to protect the consumer from inappropriate or faulty con-
struction. The requirement of sprinkler systems in office buildings over four stories
high may have a significant impact on construction costs and rental rates. The require-
ment to reinforce foundation footings may insure the viability of a residential structure
for years to come whereas the average consumer may be unaware of its importance.

Eminent Domain

Eminent domain is the right of governments to acquire private property for public use,
such as a road widening. The process of acquiring private property for public use is
called condemnation, whereas the right of government to acquire the property is emi-
nent domain. Whether we agree or disagree with this right as individuals, it is inherent
in the United States Constitution.

Laws in many states recognize the power of eminent domain but go on to state that just
compensation must be paid to the owner. Examples in which the power of eminent
domain is employed may include the following:

1. Highway construction
2. Parks
3. Governmental building sites
4. Airport expansion
5. Reservoirs
6. Utility construction

Escheat

Escheat actually means going to the state. If a person dies without a will, that person
is said to have died intestate, and that person’s property transfers to the state.

Taxation

Governments are granted the right of taxation, that is, they are allowed to levy taxes
on properties. In many communities, property taxes are the primary funding basis for
local operations including schools. If property taxes are not paid, governments have the
right to acquire the properties, although proper legal procedures must be followed.

■ PRIVATE RESTRICTIONS ON REAL ESTATE OWNERSHIP

In addition to governmental restrictions, individuals may place private limitations on

property, and these restrictions may or may not transfer with the property when it sells.

Following are five examples of private restrictions:

 CHAPTER TWO ❘ Legal Considerations in Appraisal 19

1. Deed restrictions
2. Easements
3. Leases
4. Mortgages
5. Liens

Deed Restrictions

A deed restriction is a limitation on the use of real estate through a written legal doc-
ument that is usually recorded. The recording document is usually referred to or stated
in the transfer agreement such as a deed. While a zoning restriction usually applies to
many parcels, a deed restriction usually relates to a specific parcel or even a defined
subdivision or planned use development. When deed restrictions are in conflict with
zoning, usually the more restrictive prevails.

One of the most common deed restrictions is a subdivision restrictive covenant. A sub-
division deed restriction may state that the minimum size of a home must be 2,000
square feet, even though zoning may only require a minimum of 1,500 square feet.
Usually deed restrictions have time limitations, but under certain circumstances, they
can be extended.

Easements

An easement conveys the right to use part of the land for a specific purpose. Easements
thus divide the bundle of rights.

Utility companies have to acquire easements to extend utility lines through property. In
order to widen an existing highway, a governmental authority may have to acquire a
temporary easement alongside the highway for construction purposes.

In Figure 2.1, a parcel that would otherwise have no access or be landlocked has
attained access through an access easement across the adjoining property. In Figure 2.1,
the owner of Tract B has given an easement to the owner of Tract D.

An easement typically does not convey ownership of the majority of the rights in the
bundle of rights; easements relate to specifically identified rights usually identifying a
temporary or perpetual use. An easement that runs with the land and can be conveyed
from a seller to a buyer is called an easement appurtenant. An easement that serves only one
person that cannot be conveyed from a seller to a buyer is called an easement in gross.

Leases

A lease is a contractual agreement between a property owner (lessor) and a tenant

(lessee). It specifies the use of a property for an identified period of time. The tenant
acquires the right to occupy and use a property. The owner usually receives the right to
20 Mastering Real Estate Appraisal

FIGURE 2.1 ■ Access Easement Example

collect rent from the tenant and also has the right of reversion, that is, the right to get
the property back at the end of the lease. Usually, sales of property do not nullify leas-
es. This concept is particularly important when valuing properties that are subject to
leases as will be discussed later in Chapter 15.

Mortgages

When real estate is purchased, there are usually some borrowed funds involved as part
of the purchase price. When part or all of this money is borrowed from a lending insti-
tution, a mortgage instrument is usually created.

A mortgage is a loan or promissory note that is secured by the real estate. If the loan
is not paid back according to the agreed upon terms and conditions, the lending insti-
tution providing the funds can acquire title to the property through foreclosure.

Frequently, the seller of real estate takes back a mortgage as part of the purchase price.
This form of seller financing is often referred to as a purchase money mortgage. The
terms and conditions are often more advantageous to the buyer than the terms and con-
ditions available for borrowed funds from traditional lending institutions.

Liens

A charge against a property in which the property is security for payment of a debt is
called a lien. There are many forms of liens such as a mechanic’s lien, materialman’s
lien, or liens which may be placed on a property through a condominium association
for nonpayment of mandatory association fees. All mortgages are liens, but all liens are
not mortgages (mechanic’s lien).
 CHAPTER TWO ❘ Legal Considerations in Appraisal 21

■ RELATED TERMS

Encroachments

An encroachment is a trespass on another’s land. If a fence has been installed over the
property line onto the adjacent property, an encroachment has been created. A house
that extends over a property line is also an example of an encroachment. In most cases,
the person doing the encroaching can be forced to correct the encroachment.

Adverse Possession

Adverse possession is a method of acquiring ownership through possession: If

a person utilizes another person’s property openly for an extended period of
time, that property may be transferred as to ownership. Several requirements
are necessary for one to acquire title through adverse possession. Possession
must involve all of the following:

a. Be apparent (open and visible)

b. Be continuous and uninterrupted for a certain period of time
c. Be exclusive
d. Be claimed, i.e., the person who has the apparent possession must make a claim to
that possession
e. Be hostile with denial or opposition to the original owner’s title

A frequent situation where property is claimed through adverse possession involves

abandoned railway lines. If a rail company abandons a rail line and removes the rail,
and an adjacent property owner fences in the area and utilizes it for agricultural pur-
poses for an extended period of time, that property owner may have claim to the aban-
doned railway line through adverse possession.

P A R T T H R E E Forms of Legal Interest

Several forms of ownership of real property exist, varying from state to state. As
noted previously, because we are technically appraising real property rather than real
estate, we must have a clear understanding of the ownership interest being appraised.

■ FEE SIMPLE ESTATE

The most complete form of ownership is a fee simple estate. Although the purest form
of ownership without any claims by heirs or private restrictions, a fee simple estate is
limited by the aforementioned four powers of government. Usually, an appraisal of any
interest less than fee simple begins with an analysis of the fee simple value.
22 Mastering Real Estate Appraisal

■ PARTIAL INTERESTS

Any interest less than a fee simple interest is known as a partial interest. Several forms
of partial interests are discussed in the following paragraphs.

Life Estate

A life estate is created when an owner of real property grants the right to another to use
the property for his or her life. To illustrate, say a grandmother wants to live in her house
until her death. She could sell the property to another but retain the right to occupy the
house until her death. In this case, all of the bundle of rights have not transferred because
the grandmother will continue to use and occupy the property for some duration.

Leased Fee Estate

A landlord’s (lessor’s) interest in a property when there is a lease encumbering the

property is called a leased fee estate. The lease document itself has divided the bun-
dle of rights.

The landlord usually retains the right to receive rent in exchange for giving up use of
the property for a specified period of time; the landlord also retains the right to get the
property back at the end of the lease (reversion). In such an arrangement, the obliga-
tions accruing to the landlord and the obligations accruing to the tenant are usually
specified by the lease.

For example, either the landlord or the tenant can be contractually obligated to
pay the taxes, insurance, heating and cooling equipment maintenance, structural
maintenance, grounds maintenance, etc.

Leasehold Estate

In contrast to the leased fee estate, the tenant’s (lessee’s) interest in a leased property is
called a leasehold estate. The tenant usually obtains the right to use and occupy the
property but assumes the obligation to pay rent. A leasehold estate can have a positive
value (tenant has an advantage) if the contract rent (rent specified in the lease) is less
than economic or market rent (rent which could be achieved in an open market). A
leasehold interest can have a negative value (tenant is at a disadvantage) if the contract
rent is more than the economic or market rent.

Air Rights

Air rights are particularly important in urban areas. In many cases, buildings are con-
structed within an identified air space.
 CHAPTER TWO ❘ Legal Considerations in Appraisal 23

For example, a highrise office building could be constructed over parking decks.
Usually, air rights also include touch down rights where suitable building supports
can be constructed.

Air rights do not extend indefinitely. There are height limitations imposed by the
Federal Aviation Administration related to air traffic control.

Surface/Subsurface Rights

Surface/subsurface rights also come into play more in urban areas. A government agen-
cy may acquire (through eminent domain) subsurface rights for the construction of an
underground rapid rail system. An owner of a parcel of land may retain the surface rights
for use as parking and sell the air rights for an overhead walkway connecting to adjacent
buildings. Often, a seller may transfer his land but retain the subsurface mineral rights.

P A R T F O U R Property Ownership Forms

As appraisers, we are concerned with the valuation of an ownership interest (real prop-
erty) in specified real estate. The bundle of rights relates to real property and, as dis-
cussed, can be divided. In addition to understanding rights, an appraiser should also
understand the various types of ownership.

■ INDIVIDUAL (SEVERALTY)

This is the most common form of ownership where one person or corporation owns the
entire bundle of rights, still subject to governmental and private restrictions.

■ TENANCIES AND UNDIVIDED INTERESTS

Tenancy is created when the bundle of rights is divided, and in real estate generally has
the following two meanings:

1. The possession of title or other ownership form

2. The right to use and occupy property

As discussed, the second meaning relates to leased property in which the lessee has the
right to use and occupy the property, and the landlord has the right to receive rent and
get the property back at lease termination.

Related to the ownership of real property, there are several important ownership forms
that warrant explanation. They relate to an “undivided interest” in the real property. The
undivided interest concept is difficult for many people to comprehend. What this means
is that the property itself cannot be divided, only the ownership interest.
24 Mastering Real Estate Appraisal

For example, if an individual purchases a 50% undivided interest in 20 acres of land,

his or her ownership relates to a partial interest (50%) in the entire 20 acres, not
exclusive (100%) ownership of 10 acres.

Following are the three most common forms of tenancies related to ownership:

1. Joint tenancy
2. Tenancy in common
3. Tenancy by the entirety

Joint Tenancy

Ownership by joint tenancy occurs when two or more persons have inseparable or
undivided interests in property. Upon the death of one of the owners, title to the
deceased owner’s portion of the property automatically passes to the surviving
owner(s). This is referred to as the right of survivorship.

Tenancy in Common

The tenancy in common form of ownership also relates to two or more persons who
have undivided interests. The undivided interest may or may not be equally distributed
to the estate holders. This form of ownership is different from joint tenancy in that there
is no right of survivorship. In other words, if one owner dies, title would pass to that
owner’s heirs rather than to the surviving owner(s) automatically.

Tenancy by the Entirety

Tenancy by the entirety relates to a husband and wife who own a particular property.
In this case, neither party can sell his or her interest individually; the property can sell
only as a unit. This ownership interest is usually reserved for married couples.

■ SPECIAL FORMS OF OWNERSHIP

The following three special types of ownership evolved in recent years as the bundle of
rights separated in more creative ways:

1. Condominium
2. Cooperative
3. Time-share

Condominium

The term condominium describes a type of ownership, not a type of building. This is
a form of ownership in which an owner has an interest (usually fee simple) in a certain
 CHAPTER TWO ❘ Legal Considerations in Appraisal 25

unit defined such as the space between the interior walls, the ceiling, and the floor of
that unit; the owner also owns a pro-rata share of the common areas (drives, grounds,
recreational amenities, etc.) within the development.

For example, assume Martha owns a condominium within an 80-unit develop-

ment. Martha would own the interior of her unit and ¹⁄₈₀ of the common areas.

Cooperative

A cooperative is a form of ownership in which a corporation owns the land and

improvements, and the residents own stock in the corporation. Then, the corporation
signs an exclusive lease with the tenant-stockholder. Cooperatives are common in cer-
tain regions of the country. This type of ownership allows tenant-stockholders to select
their neighbors, voting on whether to allow or deny a prospective buyer to be allowed
into the corporation, and thus occupancy of a unit in the building.

Time-Share

A time-share is a partial form of ownership in which other time-share owners (tenants

in common) purchase the right of use/occupancy for a specified period of time, say one
week per year. Typically, 50 weeks per year are sold, with the other two weeks reserved
for maintenance. Thus, an owner who buys one week will have a 2 percent ownership
(¹⁄₅₀) in the unit, but his ownership/occupancy may be restricted to a certain period or
week of the year. A Miami time-share week is likely more expensive in January than is
a week in July; hence, a buyer cannot purchase an inexpensive week in July and expect
to use it during a more expensive January week.

P A R T F I V E Forms of Legal Descriptions

Legal descriptions are methods of describing real estate so that each property can be
recognized from all other properties, recognizing its unique characteristics with regard
to location. Because land is a unique commodity in that it is immobile, it must be
described specifically. Following are the four types of legal land descriptions:

1. Metes-and-bounds description
2. Government (rectangular) survey system
3. Lot-and-block system
4. Monuments system
26 Mastering Real Estate Appraisal

■ METES-AND-BOUNDS DESCRIPTION

A metes-and-bounds description begins at a point of beginning (POB), and the terms

metes and bounds relate to distance and direction. From the POB, the reader of the legal
description is walked around the perimeter of the parcel using angles and distances,
eventually returning to the POB. A basic understanding of plane geometry is needed in
this system because of the emphasis on angles and distances.

In addition to defining the geometric shape, a metes-and-bounds description also makes

reference to a specific land lot, within a district, within a county.

Generally, all counties are divided into several districts for identification purposes, with
the districts being subdivided into land lots of 20-acre to 40-acre plots identified by a
predetermined grid system.

Figure 2.2 is an example of a metes and bounds legal description.

■ GOVERNMENT (RECTANGULAR) SURVEY SYSTEM

The government (rectangular) survey description utilizes a predetermined govern-

mental survey of a county. In this system, horizontal and vertical boundary lines have
been surveyed by the federal government and are assumed to be permanently in place.
Townships are six miles square (36 square miles). Each township is divided into 36 sec-
tions (one square mile each). Each section has 640 acres. These predetermined lines
form the basis for describing a parcel of land.

■ LOT-AND-BLOCK SYSTEM

Under the lot-and-block system, a certain plot of land is subdivided. The key is the
recording of the subdivision plat into public records. Within each subdivision, the lots

FIGURE 2.2 ■ Example of Metes-and-Bounds Description

All that parcel of land lying within Land Lot 23 of the 6th District, in Fulton County, Georgia, and more particularly described as beginning at a point
located at the northeast corner of the intersection of Jones Street and Smith Street (POB); running thence north 90 degrees, 0 minutes along the
east right-of-way of Jones Street, 100 feet to a point; thence east 90 degrees, 0 minutes, 200 feet to a point; thence south 90 degrees, 0 minutes, 100
feet to a point along the north side of Smith Street; thence west along the north right-of-way of Smith Street 200 feet to the point of beginning.
 CHAPTER TWO ❘ Legal Considerations in Appraisal 27

and blocks are identified, making reference to the recorded plat. Figure 2.3 shows an
example of a legal description utilizing the lot-and-block system.

■ MONUMENT SYSTEM

The monument system utilizes natural and human-made landmarks to describe land.
It is similar to a metes-and-bounds description; however, the points of reference are
human-made or natural landmarks such as rivers, lakes, or human-placed monuments.
The monument system is generally no longer used.

P A R T S I X Types of Title Transfers

Title is conveyed by deeds. A deed is an instrument that conveys ownership of proper-

ty. Title refers to the right to possess or control property. In real estate title is a concept
rather than a written document. The following are three types of deeds:

1. General warranty deeds

2. Special warranty deeds
3. Quitclaim deeds

FIGURE 2.3 ■ Example of Lot-and-Block System

All that parcel of land being described as Lot 23, Block B, of the Highlands Subdivision, as recorded in Plat Book
23, Page 11, of the Monroe County records.
28 Mastering Real Estate Appraisal

Deeds are recorded in most states for the conveyance to be legal and valid. In some
states, however, the transfer is valid when delivered by the grantor and accepted by the
grantee.

■ GENERAL WARRANTY DEED

The general warranty deed conveys a covenant of warranty in which the seller guar-
antees to the buyer that the title is unclouded, or clean of any prior claims or heirs.

■ SPECIAL WARRANTY DEED

A special warranty deed warrants to the grantee by the grantor that the seller will
defend the buyer against all claims by the actions or omissions of the grantor, but not
any claims that precede the grantor’s ownership; thus, the warranty is limited to the
seller’s ownership period and not prior to the time before the seller obtained title. This
type of deed is also frequently referred to as a limited warranty deed.

■ QUITCLAIM DEED

A quitclaim deed is a conveyance in which the grantor ceases any claim against the
property to the grantee. The grantor relinquishes his or her claim against the property, if
any. In effect, the grantor conveys whatever interest he or she may have in the property.
 C H A P T E R T W O Review Questions

1. Which of the following is NOT one of the three 7. Which of the following is NOT a type of special
tests of when personal property becomes a fix- ownership?
ture and thus part of the real estate? a. Escheat
a. Cost of the item b. Condominium
b. Manner of attachment c. Co-operative
c. Intent of the parties d. Time-share
d. Character of the item
8. Which type of title transfer offers a guarantee of
2. A fee simple interest in a property is an example the title from the seller to the buyer?
of a. Quitclaim
a. real property. b. Title insurance
b. real estate. c. General warranty
c. personal property. d. Adverse possession
d. emblement.
9. Real property is
3. A window air conditioner that is permanently a. the same as real estate.
attached to a home and built-in with caulked, b. different than unreal property.
side/top/bottom molding and screwed to the win- c. an intangible interest in real estate.
dow frame is an example of a(n) d. the bricks and mortar.
a. trade fixture.
b. fixture. 10. Real estate is
c. personal property. a. the tangible bricks and mortar and land.
d. encroachment. b. different than unreal estate.
c. an intangible interest.
4. Which of the following is NOT a form of a pri- d. a microwave sitting on top of a kitchen
vate limitation? counter.
a. Lease
b. Mortgage 11. Which of the following is used in determining
c. Severalty when personal property becomes a fixture?
d. Easement a. Weight of the item
b. Size of the item
5. A tenant or lessee may most likely possess which c. Cost of the item
type of interest? d. Manner of attachment
a. Life estate
b. Leased fee estate 12. A ceiling fan installed in a home is
c. Lien a. personal property.
d. Leasehold estate b. a trade fixture.
c. a fixture that is now part of the real estate.
6. Which of the following is NOT a form of an d. real property.
ownership limitation?
a. Lease
b. Tenancy
c. Mortgage
d. Easement

29
30 Mastering Real Estate Appraisal

13. Building codes and zoning represent which of 17. A leasehold estate is created by a(n)
the four powers of government? a. mortgage.
a. Police power b. lease.
b. Eminent domain c. easement.
c. Escheat d. life estate.
d. Taxation
18. Which is the most common form of ownership?
14. A lease and a mortgage are considered to be a. Severalty
a. deed restrictions. b. Joint tenants
b. powers of government. c. Tenants by the entireties
c. personal property. d. Tenancy in common
d. private restrictions.
19. A condominium is known as
15. A toolshed that is partly on a neighbor’s lot is a. tenancy in common.
known as a(n) b. partial ownership.
a. lien. c. joint tenancy.
b. encroachment. d. a type of special ownership.
c. deed restriction.
d. easement. 20. Which is NOT a form of a legal description?
a. Metes-and-bounds method
16. A leased-fee estate is an interest controlled by b. Special warranty deed
the c. Monument system
a. mortgagee. d. Government survey system
b. management company.
c. landlord.
d. tenant.