Chapter 27 Glossary — Legal Descriptions & Land Measurement +14California · Real Estate · English

The government (rectangular) survey uses base lines (east-west), meridians (north-south), townships, ranges and sections. A township is six miles square containing 36 sections. A section is one mile square containing 640 acres. Correction lines compensate for the earth's curvature every fourth township line (24-mile intervals).

• ✓A section contains 640 acres and is one mile square
• ✓A township is six miles square and contains 36 sections
• ✓Correction lines compensate for the earth's curvature at 24-mile intervals

An acre = 43,560 square feet, 4,840 square yards, or 160 square rods (about 208.71 feet square). A mile = 5,280 feet. A chain = 100 links = 66 feet. A yard = 3 feet. Front foot measures property along its street line.

• ✓One acre equals 43,560 square feet
• ✓One mile equals 5,280 feet and a chain equals 66 feet

Metes and bounds describes boundary lines with terminal points and angles, used for accuracy. A legal description locates property by government surveys or recorded maps. A plat is a surveyor's map showing boundaries and improvements. Monuments and bench marks are fixed reference points.

• ✓Metes and bounds descriptions use distances, angles, and terminal points
• ✓A legal description locates property by reference to surveys or recorded maps

Power of sale is the power of a mortgagee or trustee, when the instrument provides, to sell the secured property without judicial proceedings if the borrower defaults or breaches the mortgage or deed of trust.

• ✓Allows sale without judicial proceedings when provided in the instrument
• ✓Triggered by default in payment or breach of terms

A purchase money mortgage or trust deed is given as part of the purchase consideration. Many states limit deficiency judgments against purchase money borrowers after foreclosure.

• ✓Given as part or all of the purchase consideration
• ✓No deficiency judgment generally allowed on owner-occupied residential property of four units or less
• ✓Can be seller financing or third-party lender financing

A trust deed pledges real property as security for a loan and involves three parties: the trustor (borrower), the trustee (neutral third party holding title), and the beneficiary (lender). It differs from a two-party mortgage.

• ✓Trustor is the borrower who signs the trust deed
• ✓Trustee is the neutral third party holding title as security
• ✓Beneficiary is the lender who benefits from the pledge

When a grantee takes title 'subject to' a mortgage, the grantee is not personally liable to the note holder and can lose only their equity. Under assumption, liability is assumed; the original maker is not released in either case.

• ✓'Subject to' means no personal liability; grantee risks only equity
• ✓Assumption means the grantee assumes personal liability
• ✓Original maker of the note is not released from primary responsibility

Redemption is buying back one's property after a judicial sale. A tax deed is given to a purchaser at a tax sale for nonpayment of taxes. A sheriff's deed is given by court order to satisfy a judgment.

• ✓Redemption means buying back property after a judicial sale
• ✓Tax deed conveys only such title as the defaulting taxpayer had
• ✓Sheriff's deed is given by court order in a judgment sale

A subordination agreement lets an encumbrance holder take an inferior position to other encumbrances. Secondary financing is a loan secured by a junior (second or lower) mortgage or trust deed.

• ✓Subordination places a claim in inferior position to other encumbrances
• ✓Secondary financing is secured by junior liens (second, third, etc.)
• ✓Priority of lien is the order of legal precedence among liens

Since January 1, 1995, no original or renewal license may be issued without a social security number. Under Family Code Section 17520, DRE cannot issue or renew a full-term license for persons on the child support obligor list, but may issue a 150-day temporary license. A $95 fee is assessed when an applicant/licensee appears on the obligor list.

• ✓A social security number is required for original or renewal licenses (effective Jan 1, 1995)
• ✓A 150-day temporary license may be issued to child support obligors; only one may be issued
• ✓A $95 fee is assessed when a name appears on the child support obligor list

A restricted license is a probationary license issued by the Commissioner after a license is suspended, revoked, or denied following a hearing. It contains specific restrictions such as term limits, employment by a particular broker, activity limitations, required reports, or a surety bond.

• ✓A restricted license is a probationary license with specific restrictions
• ✓The Commissioner can restrict by term, broker employment, activity type, reports, or surety bond

By law (Section 10207), fees paid to DRE for licenses, endorsements, and examinations are not refundable. A change of mind, application rejection, exam failure, or failure to appear does not result in a refund. Certain changes (address, employment transfer, name change, dba, branch office) require no fee.

• ✓Fees for licenses, endorsements, and examinations are not refundable (Section 10207)
• ✓No fee is required for address change, employment transfer, name change, dba, or branch office

A salesperson may hold a license in non-working status without a broker but cannot perform licensed acts. DRE no longer issues original mineral/oil/gas broker licenses (since Jan 1, 1994). DRE does not issue partnership licenses, though a partnership may operate if every acting partner is a licensed broker.

• ✓A salesperson may hold a license in non-working status but cannot perform licensed acts
• ✓DRE no longer issues original MOG broker licenses (since January 1, 1994)
• ✓DRE does not issue partnership licenses; every acting partner must be a licensed broker

A simple money judgment does not automatically create a lien. Recording a properly certified abstract of judgment creates a lien on all real property of the debtor in that county, including after-acquired property, lasting ten years from entry. Priority is generally the date the original abstract is recorded.

• ✓A money judgment becomes a lien only when an abstract of judgment is recorded
• ✓The judgment lien covers all real property (including after-acquired) in that county for 10 years
• ✓Abstracts now show only the last four digits of the debtor's social security number

Attachment seizes and holds a defendant's property as security for a judgment the plaintiff hopes to obtain, giving a lien before judgment. It is a harsh remedy, historically confined to claims arising from contracts for the payment of money. Prejudgment attachment of a natural person's property is limited to claims arising from a business, trade, or profession.

• ✓Attachment gives the plaintiff a lien before entry of judgment
• ✓Prejudgment attachment is generally confined to contract claims for money
• ✓Against a natural person, attachment is limited to claims from a business, trade, or profession

Certain property of a natural person is exempt, including property necessary for support, earnings, most real property (except short leaseholds), equipment, inventory, farm products, and limited cash. The homestead is the most important exemption. A proper claim must be made for exemptions to apply.

• ✓The homestead is the most important exemption
• ✓Exemptions apply only to natural persons and require a proper claim
• ✓Community property interests of the defendant ARE subject to attachment

Escrows are completed by full performance and closing, or terminated by mutual consent via cancellation of the escrow and rescission or cancellation of the purchase agreement. Compliance must be achieved within the time limit set forth unless mutually extended. The escrow holder has no authority to enforce or accept performance after the time limit, nor to determine that a principal has not performed. When the time limit expires and a principal has not performed, principals may mutually cancel and each is entitled to return of their property. Clear, precise instructions are necessary.

• ✓Escrow compliance must be achieved within the time limit unless mutually extended by the principals
• ✓The escrow holder has no authority to enforce or accept performance after the time limit
• ✓The escrow holder cannot determine that a principal has not performed

A lease expires automatically at the end of an estate-for-years term without notice. It may be terminated by: notice; destruction; commercial frustration; merger of estates; death of a party; tenant or landlord insolvency/bankruptcy; option to terminate; breach of condition or covenant; illegal use; or abandonment and surrender. A lease may NOT be terminated for reasons against public policy such as retaliatory eviction or discrimination.

• ✓An estate for years ends automatically at term expiration without notice
• ✓A lease cannot be terminated for retaliation or discrimination (against public policy)
• ✓Eleven general grounds for termination include notice, destruction, and breach

A tenancy at will requires not less than 30 days' written notice. Periodic tenancies require notice equal to the term or 30 days, whichever is less (weekly = one week; bi-annual = 30 days). A lease for unspecified term may allow as little as 7 days. In month-to-month, the tenant's notice need not correspond to the rent due date.

• ✓Tenancy at will requires at least 30 days' written notice
• ✓Periodic tenancy notice equals the term or 30 days, whichever is less
• ✓Month-to-month termination notice need not align with the rent due date

If neither party assumes a duty to rebuild, either party may terminate on complete destruction (if not their fault). On partial destruction not caused by the tenant, the tenant may terminate if a substantial or material portion needed for use is damaged. A tenant cannot terminate over damage to property not actually leased. A commercial landlord's unconditional rebuild obligation prevents tenant termination.

• ✓Either party may terminate on complete destruction absent a rebuild duty
• ✓A tenant may terminate on substantial partial destruction of premises needed for use
• ✓An unconditional landlord rebuild obligation prevents the tenant from terminating

Merger occurs when landlord and tenant estates unite (no intervening estate), terminating the lease. A lease terminable at will ends on a party's death after written notice; a fixed-term lease is NOT terminated by death absent a contrary provision. A landlord may not evict a bankrupt tenant without court approval due to the automatic stay; the trustee must accept or reject leases within a set time or they are deemed rejected.

• ✓Merger of the leasehold and fee estates terminates the lease
• ✓A fixed-term lease is not terminated by a party's death absent a contrary provision
• ✓The bankruptcy automatic stay bars eviction without court approval

A condition is a prerequisite; its non-occurrence permits termination. A covenant is a promise; breach generally yields damages, not termination. Courts construe ambiguous provisions as covenants and narrowly construe conditions. Some covenants (habitability, non-assignment, lawful use) are so material their breach justifies forfeiture. Covenants are dependent, but if a tenant fails to pay rent, the landlord must still perform, and vice versa - except this exception does not apply to residential habitability.

• ✓Breach of a condition permits termination; breach of a covenant usually only damages
• ✓Ambiguous provisions are construed as covenants; conditions are narrowly construed
• ✓The dependent-covenant exception does not apply to residential habitability

Occasional illegal use does not justify termination unless the lease specifies; only illegality relating to premises use may justify termination. Surrender occurs by mutual agreement upon actual abandonment and landlord acceptance, merging estates. Surrender may be express or by operation of law - e.g., when a landlord relets after abandonment, the landlord is estopped from denying surrender.

• ✓Occasional illegal use is not grounds for termination unless the lease provides
• ✓Surrender occurs on abandonment plus landlord acceptance
• ✓Reletting after abandonment creates surrender by operation of law and estops the landlord

A tenant generally cannot terminate merely because its purpose is frustrated. Termination requires COMPLETE frustration - extreme hardship. Significant or material frustration (more difficult or less profitable) is insufficient. The tenant must not have assumed the risk, and the event must have been unforeseeable and uncontrollable.

• ✓Frustration must be complete, not merely significant or material
• ✓The event must be unforeseeable, unassumed as risk, and uncontrollable
• ✓A more difficult or less profitable purpose does not justify termination

A civil action or administrative proceeding that could be brought against a creditor may be maintained against an assignee only if the violation is apparent on the face of the required disclosure statement (except involuntary assignments). A violation is apparent if it can be determined incomplete/inaccurate from the disclosure/documents, or does not use required terms.

• ✓Assignee liable only if violation is apparent on the face of the disclosure statement
• ✓Exception: assignee remains liable where assignment was involuntary
• ✓Apparent violations include incomplete/inaccurate disclosures or use of non-required terms

Written acknowledgement of receipt of a required disclosure is conclusive proof of delivery and compliance for subsequent assignees without contrary knowledge (except under 1635(c)). Any borrower with the right to rescind may rescind the transaction against any assignee of the obligation.

• ✓Written acknowledgement of receipt is conclusive proof of delivery for good-faith assignees
• ✓Exception applies under 15 USC 1635(c)
• ✓A borrower with a right of rescission may rescind against any assignee of the obligation

Standard 1 covers development: define the problem, determine scope of work, perform data collection/analysis (market and highest-and-best-use), apply the three approaches, and reconcile to a final opinion. Standard 2 covers reporting/communication of the value opinion.

• ✓Standard 1 covers development; Standard 2 covers reporting
• ✓Defining the problem includes identifying client, intended use, value type, and effective date
• ✓Reconciliation of value indications yields the final opinion of value
• ✓Report = any communication (written or oral) of an appraisal transmitted to the client

The first step in any appraisal is a clear understanding of the purpose and value sought. Each approach is used independently, then conclusions are reconciled into one value opinion. Reconciliation is a judgment process, not an average.

• ✓First step is understanding the purpose and value to be sought
• ✓Adequacy and reliability of data determine which approaches are used
• ✓Reconciliation is the final step; it is NOT an average of the approaches

The federal gift tax applies to completed voluntary transfers of property for less than adequate consideration. There is an annual exclusion for present-interest gifts, and certain indirect payments are not treated as gifts.

• ✓Annual exclusion of $13,000 for present-interest gifts; return due if gift exceeds $13,000
• ✓Future-interest gifts: no exclusion applies and return is due
• ✓Tuition paid directly to an educational organization is not a gift
• ✓Medical care payments made to a provider are not a gift
• ✓Transfers between spouses are not taxable gifts
• ✓Federal Gift Tax Return due April 15 of year following the gift

Any unpaid Internal Revenue Code tax becomes a lien on all property and rights to property of the taxpayer, including after-acquired property. To be valid against certain parties, a notice of lien must be filed with the county recorder for real property.

• ✓Federal tax lien attaches to all property including after-acquired property
• ✓Not valid against purchasers, security interest holders, or judgment lien creditors until notice filed
• ✓For real property, notice must be filed with the county recorder
• ✓'Super Priority' creditors (Section 6323(b)) prevail even after notice is filed

The Internal Revenue Code provides special unrecorded liens for estate and gift taxes attaching automatically upon death or gift and continuing for ten years.

• ✓Estate tax lien attaches at death to gross estate, continues 10 years, valid against most purchasers
• ✓Gift tax lien attaches to gifts made during the year, extends 10 years
• ✓If gift tax unpaid by donor, the donee becomes personally liable

The Unified Credit is a dollar-for-dollar offset against gift and estate tax. Using it for gift tax reduces the amount available for estate tax.

• ✓Unified Credit is a dollar-for-dollar offset against the tax
• ✓Using the credit for gift tax makes it unavailable for estate tax
• ✓Applicable exclusion amounts increased over time (e.g., estate: $2,000,000 in 2006-2008, $3,500,000 in 2009)

The federal government collects Social Security/Medicare (FICA) and unemployment taxes from employers. FICA has specific rates and wage bases.

• ✓FICA employee tax rate is 7.65% (Social Security + Medicare)
• ✓Social Security portion applies to wages up to a cap (e.g., $106,800 for 2010); Medicare applies to all wages
• ✓Unemployment tax applies to non-farm employers paying $1,500+ in a quarter or employing someone 20+ weeks

CC&Rs are a Declaration used to assure that a subdivision's nature remains unchanged, controlling land use and prescribing the nature of common interest subdivisions.

• ✓Conveyances are made subject to CC&Rs
• ✓CC&Rs control land use, prescribe the nature of common interest subdivisions, provide for maintenance, and raise money for repair/replacement
• ✓Complex CC&Rs are best set out in a separate document; simple ones may be in the deed
• ✓Common interest subdivisions almost invariably have a homeowners' association to carry out CC&Rs

Title reports may disclose old recorded restrictions that cannot be eliminated, so an attorney should examine them for provisions that hinder development.

• ✓Restrictions recorded years before may still bind the land
• ✓Set-back provisions and density limits frequently cannot be eliminated
• ✓An attorney should examine restrictions to discover whether they hinder intended development

Regardless of association or status, licensees must keep current with changing real estate laws, technology, and trends. The Uniform Electronic Transaction Act (UETA) and the Electronic Signatures in Global and National Commerce Act (E-sign) impact brokerage, making the Internet and e-mail common means for conducting transactions. The DRE web site and CAR web site are sources of current information.

• ✓UETA and E-sign enable electronic signatures and electronic transactions in real estate
• ✓Licensees must stay current with changing laws, technology, and trends

A disclosure law applies to residential transactions of not more than four units where the seller extends credit (carry-back) with a finance charge or more than four payments of principal and interest. The disclosures are the responsibility of the arranger of credit — a person not a party who negotiates credit terms and is compensated. A real estate broker may be an arranger, as may a licensee/attorney principal.

• ✓Applies to residential dwellings of not more than four units with seller carry-back financing
• ✓Triggered by a finance charge or more than four payments of principal and interest (excluding down payment)
• ✓The arranger of credit is responsible for the disclosures
• ✓Not required if the buyer/seller receives a disclosure under Truth-in-Lending, RESPA, mortgage loan disclosure statements, or specified securities law

The disclosure must be delivered as soon as possible before executing any note or security document and be signed by the arranger, buyer, and seller. It includes identification of the note/property, encumbrance terms, balloon payment warnings, negative amortization effects, AITD provisions, buyer creditworthiness information, foreclosure recovery limits, and recording/title insurance status.

• ✓Must be delivered as soon as possible before executing any note or security document
• ✓Must be signed by the arranger of credit, the buyer, and the seller
• ✓Must warn of balloon payments (amount and due date) and difficulty refinancing
• ✓Must explain negative amortization for variable/adjustable-rate financing
• ✓Applies also to real property sales contracts (Civil Code 2985) and lease-options intending to transfer equitable title

Under Business and Professions Code Section 10177.6, when an agent arranges financing in connection with a sale/lease/exchange, or a financing arranger undertakes to act as an agent, they must within 24 hours make a written disclosure of those roles to all parties to the sale/lease/exchange and any related loan transaction.

• ✓Written disclosure of dual roles must be made within 24 hours
• ✓Applies under Business and Professions Code Section 10177.6
• ✓'Agent' has the meaning in Civil Code Section 2079.13(a)
• ✓Disclosure goes to all parties to the sale/lease/exchange and related loan transaction

An arranger of credit must inform the seller that a buyer intending to occupy the property may have a right to homeownership counseling upon default. The collector of payments (seller or loan servicing agent) must inform a defaulting homeowner of the availability of counseling, regardless of the credit transaction type or presence of an arranger.

• ✓Arranger must inform the seller of the buyer's possible right to homeownership counseling upon default
• ✓The payment collector must inform a defaulting homeowner of counseling availability
• ✓This duty is operative regardless of the credit transaction type or presence of an arranger

The government survey specifies location using prime meridians, base lines, standard parallels, guide meridians, townships and sections. Base and meridian are imaginary lines: base line runs east-west, meridians run north-south. Correction lines compensate for the earth's curvature; every fourth township line (24-mile intervals) is a correction line where range line intervals are corrected to a full 6 miles.

• ✓Base lines run east-west; meridians run north-south
• ✓Correction lines occur every fourth township line at 24-mile intervals to correct for earth curvature
• ✓Government survey uses meridians, base lines, townships and sections

An acre = 160 square rods = 4,840 square yards = 43,560 square feet, about 208.71 feet square. A chain = 100 links = 66 feet. A commercial acre is the remainder after deducting streets, sidewalks, and curbs. Legal description locates property by reference to government surveys or recorded maps.

• ✓An acre = 43,560 square feet = 4,840 square yards = 160 square rods
• ✓A chain equals 66 feet (100 links)
• ✓Legal description references government surveys or recorded maps

The Realtist Preamble recognizes land as the fixed, controlled element of nature and views the Realtist as one through whom transfers of ownership are made with competence and integrity, protecting the client's best interests. The Realtist has a moral obligation to deal fairly and honestly with all parties. NAREB's mission is to enhance the economic improvement of its members and the minority community it serves.

• ✓The Realtist has a moral obligation to deal fairly and honestly with all parties
• ✓NAREB's mission is economic improvement of members and the minority community served
• ✓The Realtist pledges to observe the Code of Ethics in all business transactions

Agency and fiduciary duty are complex and difficult to apply, particularly for real estate and mortgage brokers acting as special agents. Brokers and their salespersons and broker associates may act as principals only, as principals and special agents, or as special agents of the principals in real property transactions (buying, selling, leasing, exchanging, or property managing) and in real property secured transactions (making and arranging loans).

• ✓Real estate brokers typically act as special agents of their principals
• ✓Brokers may act as principals only, as principals and special agents, or as special agents in property and loan transactions

All renewal applicants must prove compliance with CE requirements. Salespersons renewing an original license for the first time (with applications filed before 10/1/2007) must complete five three-hour courses in Ethics, Agency, Trust Fund Handling, Fair Housing, and Risk Management. All other renewals require 45 clock-hours within the four-year period preceding renewal.

• ✓First-time salesperson renewals must complete five 3-hour courses: Ethics, Agency, Trust Fund Handling, Fair Housing, Risk Management
• ✓Other renewals require 45 clock-hours of approved CE within the preceding four years
• ✓DRE does not accept a renewal application earlier than 90 days before expiration

An individual who has been a licensee in good standing for 30 continuous years in California and is 70 years of age or older is exempt from the continuing education requirement. Good standing means no disciplinary actions and no expiration beyond the two-year late renewal grace period.

• ✓CE exemption requires 30 continuous years of good standing AND being 70 years or older
• ✓Good standing means no disciplinary action and no lapse beyond the two-year late renewal grace period