Real estate law governs the land and any structure on it. It affects anyone using real property, including landlords, renters, home sellers, and home buyers. This area of law is quite diverse and operates at both the federal and state levels. While some federal laws universally apply to real estate across the country, it is state law that primarily affects real estate. Statutes and regulations vary from state to state. Lawyers specializing in this field have to be familiar with the unique codes that affect real estate in their area.
Contrary to what many people think, real estate law doesn't just apply to the actual sale of properties or financial contracts. It governs the use of structures on land and materials below the earth. This makes it one of the most complex areas of law, and the fact that most people don't consider it when engaging in real estate transactions doesn't help.
Aspects of Real Estate Law
Estates in Land
The term estate, in this case, refers to the extent of one's interest in a property. There are different types of interests in land including;
Fee ownership
Fee ownership refers to complete ownership of real estate property. A person who claims this type of ownership of property is called the fee owner. This ownership doesn't come with any limitations. The fee owner can use the property as they like as long as they are within the confines of the law.
An Easement
An easement is a right acquired by an individual to use the land for a particular purpose. It may be for a limited period or permanent depending on the terms of the easement. There are many reasons for creating easements, including pole lines, drainage, access, tunnels, or pipelines.
Life Estates
Life estates are created either by deed or will. This is a right in real property that entitles the recipient to use of a particular piece of land for the duration of their lifetime. The title, interest, and rights that come with the life estate pass on to the survivor when the life tenant dies.
Leasehold
A leasehold is a condition of title that allows the tenant to occupy the property of the fee owner for a specified period. The duration is usually specified in the contract and is called an estate for years or leasehold estate. By virtue of a lease, the tenant becomes the owner of an interest in the property.
license
A license is a permit that gives a person entry to a piece of land for a specified purpose and limited time. Entry by unauthorized persons constitutes trespassing and could make them liable for any damages. On the other hand, entry by an authorized party relieves them of liability in case of damages.
Transfer of Titles
- Escrow, as stated, is a third-party that holds on to property during a sale. Most transactions between buyers and sellers of real estate property in the US are consummated through escrow. This is an agreement between a buyer and seller through an escrow holder that dictates when to complete a transaction and under what circumstances. The escrow holder obtains and holds the deed for the seller as well as relevant documents and down payment from the buyer. If the title conforms to the escrow conditions and all deposits have been made, the escrow holder releases the money to the seller and records the deed.
- A grant deed, also known as a warranty deed, a grant deed is a document that implies the grantor hasn't conveyed the property to someone else. It guarantees that the conveyed property is free from any defects that could hinder the transfer of title. Some jurisdictions classify the grant deed as a special warranty deed or general warranty deed.
- Conveyance is a written instrument that is used to transfer interest in real property. Deeds are the most common conveyances in the US.
- A quitclaim deed is a legal instrument that conveys the title a grantor has at a given time. It is often used to clear ownership interest one may have in a property.
- A patent is an instrument used by national or state government to grant public land to an individual. While more common in US law, it applies to any situation where ownership of public domain transfers to a private entity.
- A deed of bargain and sale is a type of deed that specifies the right of ownership, sale, or resale or property. It implies that a grantor holds the title to a property but doesn't provide any guarantees that someone else doesn't have a claim to the same property. A deed of bargain and sale is used in estate sales, tax sales, and foreclosure actions.
- A mortgage and deed of trust, in a home loan transaction, is often a required conveyance of a security interest in a property. A contract where the borrower gives the lender certain rights to the property is called a mortgage. It creates real interest in the property, and in most states, gives the lender legal title to land. On the other hand, a deed of trust provides conveyance of title to a trustee until the debt is paid off. The trustee holds legal title to the property during the duration of payment, but the borrower keeps the equitable title.
- Contracts of sale are legally binding documents where the seller indicates the desire to sell the property and the buyer to purchase the property for a specified sum.
Types of Ownership
There are different forms of ownership in real estate law. Let's look at them:
- Single ownership is where one person is the sole owner of a property.
- Joint tenancy is a type of joint ownership where two or more persons hold an estate jointly. If one person dies, their title interest ceases. Joint tenancy allows right of survivorship and doesn't regard the laws of inheritance. Not all states acknowledge joint tenancy.
- Tenancy by entirety is a joint tenancy that treats married couples as one person. If one dies, the survivor is entitled to the whole Tenancy by entirety only applies in situations where a couple was actively married when they bought the property.
- Dower refers to the interest in a husband's real estate that a widow receives for support. Most jurisdictions consider a dower to be a life estate. Some states extend this right (curtesy) to widowers when their wives die.
- Tenancy in common is a type of ownership where co-owners own undivided interests in land. In case one of the co-owners dies, their interest passes by inheritance or will to their heirs. There is no right of survivorship.
Appurtenant Rights
In the legal context, appurtenance is something that's attached or belongs to a piece of land such that it's part of the property. It's usually physical in nature and less valuable than the actual piece of property. Good examples include yards, in-ground swimming pool, landscaping improvements, septic tanks, and barns. Ownership of an appurtenance passes to the new owner after transfer or sale of the property.
Accretion and riparian rights are considered appurtenant rights. The latter affect lands where a stream or river flows. For instance, upstream landowners shouldn't diminish water flow and deprive those downstream of its use. Accretion applies to pieces of land adjacent to a body of water. If the natural flow of water deposits soil on adjoining land, the property is said to be accreted and automatically passes the title to accretion. A landowner who acquires property by accretion loses it if the soil is carried away by the natural action of the river and deposited elsewhere.
Covenants, Conditions, and Restrictions
In the past, property owners could use their land without care. That's no longer the case as many restrictions are in place to regular property use. Property sellers have to adhere to governmental control like zoning, covenants, conditions, and restrictions that touch on the size, cost, height, and number of improvements they can make.
A covenant is an agreement to do or not do certain things and is usually in favor of the individual it's designed to benefit. A condition is a qualification imposed on real estate that restricts the use and further conveyance. It's always enforced by the grantor and the heirs.
Covenants and conditions are restrictions placed during the subdivision of the property into residential lots. Anyone who buys the lots agrees to maintain them in conformity with the provisions of the set conditions and restrictions.
Important Real Estate Law Terms
- A deed is an official document that confers a person the right to property. It grants land ownership rights. The document outlines the type of ownership and includes a clear description of the property. In some cases, the deed specifies that the owner has a valid title to the property (warranty deed). Every state has specific laws governing the creation, execution, and recording of a deed. There are many types of deeds, and each is crucial to the type of purchase made when acquiring a property. Real estate lawyers should be able to advise their clients accordingly and recommend the right deed.
- Zoning is one of the restrictions that control the use of a property. There are three main categories of zoning (residential, industrial, and commercial), and each has multiple subcategories with detailed regulations. Control occurs at the local level, and as such, attorneys have to work with zoning boards and local governments to advance their clients' interests.
- Property tenancy and leasing contracts establish terms of a lease are essential for both the property owner and tenant, whether the land is being used for commercial or residential purposes. Real estate lawyers can help negotiate, draft, and clarify the terms of lease agreements.
- Short-term rentals refer to self-contained apartments which tenants lease for a short period, usually on a month-to-month basis or short stays. Such properties are subject to local residential restrictions, which can be controversial.
- Homeowners associations are private or voluntary groups put in place to preserve the character of a neighborhood. With the guidance of a real estate lawyer, they can help resolve disagreements about restrictions, enforcement, and covenants.
- Earnest money is a deposit that assures a seller that the buyer is serious about the transaction. The buyer pays 2% of the asking price, which is refunded if the deal doesn't go through. Should the sale be finalized, the 2% serves as a down payment.
- A contingency is a provision in a purchase contract that dictates something such as an installation or repair must occur before the agreement becomes legally binding.
- Termination clause, otherwise known as an escape clause, allows parties in a sale agreement to back out if one party reneges on the conditions of a contract.
- An assumable mortgage is one where a purchaser takes over a loan from the previous owner.
- A Fixed-rate mortgage is where interest rates are constant throughout the duration of the mortgage. It is ideal for persons with a steady monthly income.
- Foreclosure refers to the process through which a mortgage lender repossesses a property due to non-payment.
- A warranty deed is a legal document that guarantees a property title is unencumbered.
- Closing is the transaction where property ownership moves from one person to another.
- Escrow refers to a third party that holds on to the property.
- A Real estate agent is a licensed professional who negotiates sale and purchase of a property.
Becoming a Real Estate Lawyer
Just like any professional in the field of law, a real estate lawyer has to pursue a degree in law, get sufficient training, and get licensing to practice. Education and training are crucial as they impart the trainee with the knowledge and skills to handle legal matters in real estate.
Education and Training
Anyone who wants to pursue a career in real estate has to earn a bachelor's degree from an accredited law school. Most undergraduate programs last for four years. Though you're not required to complete a specific major, it would be best if you get earning an associate degree in business since real estate law practice involves business transactions. Once you complete your first degree, you have to sit and pass the bar examination.
Next, register and take the Law School Admissions Test (LSAT) at any law school approved by the ABA. It's a half-day exam that has five multiple-choice sections and an unscored essay. These tests measure your reading and verbal reasoning skills. To register, go to the Law School Admission Counsel's website, create an account, then find a test date and exam location near you. LSAT is available four times in a year: February, June, September, and December.
To get a taste of real estate law, you should intern with a real estate attorney in your area. Many lawyers need support staff and clerks to help them with different tasks, including titles, drafting contracts, and closing. Use this opportunity to gain experience and to build your mettle as a practitioner.
Working as a Real Estate Lawyer
After passing your bar exam, you can go into private practice or get hired by a firm. You can work in commercial real estate firms, alongside other lawyers, or get into private practice. Some real estate attorneys end up working for the state in building and zoning departments of counties. Other lawyers work for financial and lending firms, real estate developers. Experience is key. If you have 2-5 years of work experience, you should be able to find a job quickly.
The responsibilities of a real estate lawyer include:
- Interpreting rulings, laws, and regulations for real estate transactions
- Defending municipal code litigation
- Drafting and negotiating real estate transactions
- Monitoring legal risk in documents and advising clients accordingly
- Drafting leases and amendments
- Managing compliance and related regulatory services
- Supporting legal and advisory needs associated with real estate portfolio
- Representing clients in the purchase and sale of property
Compensation in real estate law is quite high. Studies show the highest paid real estate lawyers earn $90/hour while the least paid makes $26.50/hour. The average pay is a little over $56/hour, which is not bad. Real estate lawyers in New York, California, and the District of Columbia are some of the highest-paid in the nation
The US Bureau of Statistics predicts a six percent job growth for lawyers for the next four years. Opportunities depend on the outlook of the real estate sector.
Grow your reputation
As you advance in your career, grab every chance available to raise your profile. Enroll for legal courses, join bar association committees and associations, and attend seminars and events that bring together other professionals.
Seek board certification for real property or commercial law, if your state offers it. To be certified, you have to show that you have spent a significant part of your practice in real estate law and that you have taken advanced courses. Most states require applicants to sit for a written exam.
Final Thoughts
Real estate law is quite encompassing. While there are many articles about it out there, it generally governs the use, purchase, and sale of land. The laws and statutes vary from state to state. Often, real estate lawyers act as the conduit for real estate transactions, providing guidance, and drafting sale agreements. Anyone who wants to pursue a career in real estate law has to complete a four-year bachelor's degree and pass bar examination before they can practice.