Property Ownership, Valuation, Transfer and Land Use
Property Ownership
Estates, co-ownership, and encumbrances
Property ownership involves estates in land, forms of co-ownership, and encumbrances. Fee simple absolute is the most complete estate; a life estate lasts for a person's lifetime; leaseholds are personal property interests. Co-ownership includes tenancy in common (no right of survivorship), joint tenancy (four unities plus survivorship), and tenancy by the entirety (available to married couples in Rhode Island). Easements can be appurtenant or in gross, and can be created by express grant, implication, necessity, or prescription. Covenants, conditions, and restrictions run with the land if requirements are met. Fixtures are personal property that has become attached to realty; tests include annexation, adaptation, and intent. Adverse possession requires actual, open, notorious, exclusive, hostile, and continuous possession for the statutory period. Traps: assuming joint tenants can have unequal shares; forgetting that tenancy in common has no survivorship; confusing an easement with a license; and treating a fixture as personal property. Worked example: Two friends take title as joint tenants. One dies without a will. The survivor owns the whole property by survivorship, not by inheritance. Rule of thumb: joint tenancy means survivorship; tenancy in common means inheritance.
Valuation
Valuation approaches and rules of thumb
Valuation estimates market value using three approaches. The sales comparison approach adjusts recent comparable sales for differences in location, size, condition, and features; it is most reliable for typical residential properties. The cost approach estimates replacement or reproduction cost minus depreciation plus land value; it is useful for new or unique properties. The income approach converts net operating income into value using a capitalization rate; it is standard for income-producing property. A comparative market analysis is a broker's opinion for listing purposes, not a licensed appraisal. Highest and best use, market conditions, and depreciation (physical, functional, external) affect value. Traps: using the cost approach for an older tract home; applying a cap rate upside down; failing to adjust comps for concessions; and treating a CMA as an appraisal. Worked example: A property produces $24,000 net operating income and the market cap rate is 8%. Value = NOI divided by cap rate = $24,000 divided by 0.08 = $300,000. Rule of thumb: the income approach divides income by rate; sales comparison adjusts comps toward the subject.
Transfer and Land Use
Deeds, recording, and land use
Title transfers by deed. A general warranty deed contains the broadest covenants; a special warranty deed limits them to defects during the grantor's ownership; a bargain and sale deed implies no warranties; a quitclaim deed transfers whatever interest the grantor has with no warranty. A valid deed requires a competent grantor, a grantee, words of grant, a legal description, consideration, and delivery and acceptance. Recording provides constructive notice and protects priority. Title insurance protects against covered defects. Land use is controlled by zoning ordinances; a variance relieves a hardship caused by the ordinance, while a special-use permit allows a use listed as conditional. Subdivision, wetlands, and coastal rules add layers; in Rhode Island, the Coastal Resources Management Council has significant authority over coastal and shoreline projects. Traps: assuming a quitclaim deed is invalid; thinking recording cures a forged deed; confusing a variance with a special exception; and ignoring that delivery, not just signing, makes a deed effective. Worked example: A grantor signs and hands a warranty deed to the grantee, who accepts it. Title passes on delivery and acceptance, even before recording. Rule of thumb: no delivery, no deed.