Principles of California Real Estate PDF (2021)

Principles of California Real Estate Kathryn J. Haupt David L. Rockwell Copyright© 2021 By Rockwell Publishing Company 13218 N.E. 20th Bellevue, WA 98005...

Principles of California Real Estate Kathryn J. Haupt David L. Rockwell Copyright© 2021 By Rockwell Publishing Company 13218 N.E. 20th Bellevue, WA 98005 +1-(425)-747-7272 / +1-(800)-221-9347 Nineteenth edition ALL RIGHTS RESERVED No part of this book may be reproduced in any form or by any means without permission in writing from the publisher.  ISBN: 978-1-950728-00-8 PRINTED IN THE UNITED STATES OF AMERICA Chapter 1: The Nature of Real Property What Is Real Property? Appurtenances Attachments Land Description Chapter 2: Estates in Land and Methods of Holding Title Estates in Land Methods of Holding Title Chapter 3: Transfer of Real Property Title and Alienation Voluntary Alienation Involuntary Alienation Recording Title Insurance Chapter 4: Encumbrances Encumbrances Financial Encumbrances (Liens) Nonfinancial Encumbrances Chapter 5: Public Restrictions on Land Land Use Controls Eminent Domain Taxation of Real Property Chapter 6: Contract Law Legal Classifications of Contracts Elements of a Valid Contract Legal Status of Contracts Discharging a Contract Breach of Contract Chapter 7: Types of Real Estate Contracts Listing Agreements Buyer Representation Agreements Purchase Agreements Land Contracts Option Agreements Leases Chapter 8: Real Estate Agency Law Introduction to Agency Creating an Agency Relationship Legal Effects of Agency Duties in an Agency Relationship Terminating an Agency Relationship Real Estate Agency Relationships Agency Disclosure Requirements Broker/Salesperson Relationship Chapter 9: Principles of Real Estate Financing Economics of Real Estate Finance Real Estate Finance Markets Real Estate Finance Documents Types of Mortgage Loans Land Contracts Chapter 10: Applying for a Residential Loan Choosing a Lender Loan Application Process Basic Loan Features Residential Financing Programs Predatory Lending Mortgage Fraud Chapter 11: Real Estate Appraisal Introduction to Appraisal  Value Appraisal Process Gathering Data Methods of Appraisal Reconciliation and Final Estimate of Value Chapter 12: Closing Real Estate Transactions Escrow Closing Costs and Settlement Statements Income Tax Aspects of Closing Real Estate Settlement Procedures Act Chapter 13: Income Taxation and Real Estate Basic Taxation Concepts Nonrecognition Transactions Exclusion of Gain from the Deductions Available to Property Owners California Income Tax Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Federal Antidiscrimination Legislation California Antidiscrimination Legislation Discriminatory Restrictive Covenants Other Marketing Regulations Chapter 15: Real Estate Construction, Ownership, and Investment Construction To Rent or to Buy? Factors to Consider When Choosing a Home Investing in Real Estate Chapter 16: California Real Estate License Law Administration of the Real Estate Law Real Estate Licenses  Disciplinary Action Trust Funds Documentation Requirements Advertising Regulations Chapter 17: Real Estate Math Solving Math Problems Area Problems Volume Problems Percentage Problems Tax Assessment Problems Seller’s Net Problems Proration Problems Glossary  I. What is Real Property? II. Appurtenances A. Air rights B. Water rights C. Solid mineral rights D. Oil and gas rights E. Other appurtenant rights III. Attachments A. Natural attachments B. Man-made attachments (fixtures) C. Distinguishing fixtures from personal property 1. Written agreement 2. Method of attachment 3. Adaptation to the property 4. Intention of the annexor 5. Relationship of the parties D. Mobile homes IV. Land Description A. Metes and bounds B. Government survey C. Recorded map D. Other methods of land description Real estate agents are concerned not just with the sale of land and houses, but with the sale of real property generally. Real property includes the land and improvements, and it also encompasses the rights that go along with ownership of land. The first part of this chapter explains those rights, which are known as appurtenances. It also explains natural attachments and fixtures, which are sold as part of the land, and the distinction between fixtures and personal property (which ordinarily is not transferred with the land). The second part of this chapter explains methods of legal description —the different ways in which a parcel of land may be identified in legal documents to prevent confusion about its boundaries or ownership. What Is Real Property? There are two types of property: real property (realty) and personal property (personalty). Real property can be defined as land, anything affixed or attached to the land, and anything incidental or appurtenant to the land. Sometimes it is described as “that which is immovable.” Personal property, by contrast, is usually movable. A car, a sofa, and a hat are simple examples of personal property. Anything that is not real property is personal property. The distinction between real and personal property is very important in real estate transactions. When a piece of land (a parcel) is sold, anything that is considered part of the real property is transferred to the buyers along with the land, unless otherwise agreed. But if an item is personal property, the sellers can take it with them when they move away, unless otherwise agreed. Of course, the principal component of real property is land. But this means more than just the surface of the earth. Real property also includes the subsurface: everything beneath the surface of the parcel down to the center of the earth. It also includes the airspace: the space above the surface of the parcel. A parcel of real property can be imagined as an inverted pyramid, with its tip at the center of the globe and its base above the earth’s surface. The landowner owns not only the earth’s surface within the boundaries of the parcel, but also everything under and over the surface. In addition to the land itself, any improvements to the land are part of the landowner’s real property. Improvements are things that have been added to, built on, or done to the land to improve or develop it. A house, a driveway, and landscaping are all examples of improvements. The rights, privileges, and interests associated with land ownership are also considered part of the real property. Think of real property as the land and improvements plus a “bundle of rights.” The owner’s bundle of rights includes the right to possess, use, enjoy, encumber, will, sell, or do nothing at all with the land. Of course, these rights aren’t absolute; they’re subject to government regulation (see Chapter 5). Appurtenances In addition to the basic bundle of ownership rights, a landowner has appurtenant rights. An appurtenance is a right or interest that goes along with or pertains to a piece of land. A landowner’s property may include any or all of these appurtenances: air rights, water rights, solid mineral rights, oil and gas rights, and support rights. Appurtenances are ordinarily transferred along with the land, but the landowner can sell certain appurtenant rights separately from the land. For example, the owner may keep the land but sell his mineral rights to a mining company. Air Rights  Air rights give a landowner the right to use the airspace above her land. In theory, a landowner’s air rights extend to the upper limits of the sky. In practice, however, this is no longer true. Congress gave the federal government complete control over the nation’s airspace. Landowners still have the exclusive right to use the lower reaches of airspace over their property, but may do nothing that would interfere with normal air traffic. On the other hand, sometimes air traffic interferes with a landowner’s right to the normal use of his land. If aircraft overflights cause substantial harm to a landowner, he may sue the government for some form of reimbursement. The classic example is an airport built right next to a chicken farm. The noise and vibrations from overflights are so severe that the chickens no longer lay eggs. If the land can’t be used for any other reasonable purpose, the value of the land is significantly diminished. The landowner may be able to force the government to condemn the property and compensate him for its fair market value. (This is called an inverse condemnation lawsuit; see Chapter 3.) Water Rights The right to use water can be—but isn’t necessarily—an appurtenant right, tied to land ownership. Because water is vital for agriculture, industry, and day-to-day living, water rights are an important issue in many places, including California. Water is found both on the surface of the earth and beneath the surface. (The natural level at which water can be located in a particular piece of land is called the water table.) Surface water may be confined to a channel or basin, or it may be unconfined water, such as runoff or flood water. The water beneath the surface may also be “confined” in the sense that it runs in recognizable underground streams, or it may collect in porous ground layers called aquifers. In regard to confined surface waters, two systems govern water rights: 1. the riparian rights system, and 2. the appropriative rights system. Riparian Rights System. Riparian rights are the water rights of a landowner with respect to water that is adjacent to or flows through her property. For example, someone who owns land beside a stream has the right to make reasonable use of the water for domestic purposes, such as drinking, bathing, and watering a personal-use produce garden. However, upstream riparian owners aren’t allowed to use the water in ways that could deprive downstream owners of its use; they must not substantially diminish the stream’s flow in quantity, quality, or velocity. Although “riparian rights” is the general term for this type of water rights, strictly speaking the word riparian refers to flowing water, such as the water in a river, stream, creek, or other watercourse. In contrast, littoral water is standing water—a pond, a lake, or even an ocean. Under the riparian rights system, someone who owns littoral land (lakefront property, for example) has essentially the same water rights as someone who owns land beside a river or stream. There’s an important restriction on riparian (or littoral) rights. The landowner is not permitted to take water from the stream or lake for use on property that does not adjoin that stream or lake. Example: Brown is a riparian landowner. She owns Parcel A, property that borders on the Swiftwater River. She also owns Parcel B, property that is about 300 feet inland. She cannot divert water from the Swiftwater River to water a vegetable garden on her non-riparian property. In addition to the right to take water for domestic use, riparian and littoral landowners have the right to use the body of water for activities such as boating, swimming, and fishing. However, if the body of water is navigable, the public is also generally entitled to use it for commercial or recreational purposes. A body of water is ordinarily considered navigable if it is large enough for use by commercial or pleasure craft. In some cases a riparian or littoral owner’s property includes some of the land that’s underwater—the adjacent stream bed or lake bed. In other cases the owner’s property ends at a certain point on the shore, and the beach and submerged land beyond that point are held in trust for the public by the state government. That’s generally true for properties located on navigable waters or tidal shorelines in California. Appropriative Rights System. Riparian and littoral rights are tied to ownership of land beside a body of water. The second major type of water rights, appropriative rights, do not depend on land ownership. Instead, appropriative rights are based on priority of use (first in time, first in right). The appropriative rights system is also called the prior appropriation system. To establish an appropriative right, someone who wants to use water from a particular lake or stream applies to the state government for a permit. It isn’t necessary for the applicant to own land beside the body of water, and water taken by a permit holder doesn’t have to be used on property adjacent to the water source. If someone with an appropriative right fails to use the water for a certain period of time, she is likely to lose the appropriative right. Another person can then apply for a permit to use the water. Water Rights in California. The appropriative rights system is primarily used in the western United States, where water resources are scarce and therefore carefully controlled. This is certainly true in California. As a result of years of legislation and litigation, California has an extremely complex body of law that regulates the use of water in the state. The basis of this body of law is the appropriative rights system, the most common method of obtaining water rights in California. California also recognizes a limited form of riparian rights. Riparian owners in California do not have the right to limitless water, but are entitled to a reasonable amount of water for beneficial uses, leaving the surplus for nonriparian appropriative users. Stock in a mutual water company is considered appurtenant to real property. A mutual water company is a corporation that is created to secure adequate water supplies at reasonable rates for water users in a particular area. The stock in the company is issued to the water users. Ground Water. Ground water is subsurface water that may collect in aquifers. Landowners have overlying rights in regard to the ground water in aquifers beneath their properties. Overlying rights are similar to riparian rights; the landowner may make reasonable use of the ground water, but isn’t allowed to transport it for use on land outside the ground water basin from which it was removed. The appropriative rights system may also be applied to ground water, but the appropriator’s rights are always subordinate to those with overlying rights. Solid Mineral Rights Land may contain a wide range of solid minerals, such as coal, copper, gemstones, or gold. A landowner owns all of the solid minerals within the “inverted pyramid” under the surface of his property. These minerals are considered to be real property until they are extracted from the earth, at which point they become personal property. As we mentioned earlier, a landowner can sell his mineral rights separately from the rest of the property. When rights to a particular mineral are sold, the purchaser automatically acquires an implied easement—the right to enter the land in order to extract the minerals from it. Oil and Gas Rights Ownership of oil and gas is not as straightforward as ownership of solid minerals. In their natural state, oil and gas lie trapped beneath the surface in porous layers of earth. However, once an oil or gas reservoir has been tapped, the oil and gas begin to flow toward the point where the reservoir has been pierced by the well. A well on one parcel of land can attract all of the oil and gas from the surrounding properties. Ownership of oil and gas is governed by the “rule of capture.” Under this rule, a landowner owns all of the oil and gas produced from wells on her property. The oil and gas become the personal property of the landowner once they are brought to the surface. The rule of capture has the effect of stimulating oil and gas production, since the only way for a landowner to protect her interest in the underlying gas and oil is to drill her own well to keep the oil and gas from migrating to her neighbor’s well. Fugitive Substances. Because they are not stationary in their natural state, oil, gas, and water are sometimes referred to as “fugitive substances.” As we’ve discussed, appurtenant rights to extract oil and gas and to use water are classified as real property; and the substances themselves become personal property once they have been captured or contained. Until that point, however, oil, gas, and water are not considered property at all under California law. Other Appurtenant Rights In addition to rights concerning air, water, minerals, and oil and gas, there are some other important appurtenant rights. A piece of land is supported by the other land that surrounds it. A landowner has support rights—the right to the natural support provided by the land beside and beneath his property. Lateral support is support from adjacent land; it may be disturbed by construction or excavations on the adjacent property. Subjacent support is support from the underlying earth. Subjacent support may become an issue when a landowner sells his mineral rights. Easements and restrictive covenants also create appurtenant rights. These are discussed in detail in Chapter 4. Attachments We’ve said that the land and the appurtenances are part of the real property. The third and final element of real property is attachments. There are two main categories of attachments: 1. natural, and 2. man-made. Natural Attachments Natural attachments are things attached to the earth by roots, such as trees, shrubs, and crops. This includes plants that grow spontaneously, without the help of humans, and plants cultivated by people. Natural attachments are classified as part of the real property they’re growing on. This means that if the property is sold, the natural attachments are transferred along with the land, unless otherwise agreed. In accordance with that rule, when farmland is sold, unharvested crops are ordinarily treated as part of the real property and included in the sale of the land. However, if crops are sold separately from the land, they’re treated as personal property as soon as they’re subject to a contract of sale, even before they’ve been harvested. Example: The owner of an apple orchard enters into a contract to sell her current crop of apples to a juice company. This crop of apples (but only this crop) is now the personal property of the juice company, even while the apples are still on the trees. If the orchard owner sells the land to a third party before this crop is harvested, the sale will include the apple trees but not the unharvested apples. The buyer of the land will own the future crops of apples that the trees produce, but the current crop belongs to the juice company and is not included in the sale of the land.  A special rule called the doctrine of emblements applies to crops planted by a tenant farmer. If the tenancy is terminated through no fault of the tenant before the crops are ready for harvest, she has the right to re-enter the land and harvest the first crop that matures after the tenancy is terminated. Man-made Attachments: Fixtures Things that have been attached to the land by people are called fixtures. Houses, fences, and cement patios are all examples of fixtures. Like natural attachments, fixtures are considered part of the real property. Fixtures always start out as personal property. For example, lumber is personal property, but it becomes a fixture when it’s used to build a fence. It is sometimes difficult to determine whether a particular item has become a fixture or is still personal property. If the item is personal property, the owner can take it away when the land is sold. But if the item is a fixture, it’s transferred to the buyer along with the land unless otherwise agreed. Adding an item of personal property to real property so that it becomes a fixture is called annexation. Removing a fixture from real property so that it becomes personal property again is called severance. (These terms may be used for natural attachments as well as fixtures.) Distinguishing Fixtures from Personal Property Buyers and sellers often disagree as to exactly what has been purchased and sold in their transaction. For instance, is the heirloom chandelier installed by the seller real property that’s transferred to the buyer, or can the seller remove it when he moves out? Written Agreement. The easiest way to avoid such a controversy is to put the intentions of the parties in writing. If there is a written agreement between a buyer and a seller (or a landlord and a tenant, or a lender and a borrower) stipulating how a particular item is going to be treated—as part of the real estate or as personal property—then the court will respect and enforce that agreement. The stipulation between a buyer and a seller would ordinarily be found in their purchase agreement. For example, if a seller plans to take certain shrubs from the property before the transaction closes, a statement to that effect ought to be included in the purchase agreement, since shrubbery is usually considered part of the real property. Similarly, if the seller intends to transfer personal property, such as a couch, to the buyer, that should also be stated in the purchase agreement. In addition to the deed conveying title to the real property, a separate document called a bill of sale should be used. A bill of sale conveys title to personal property. In the absence of a written agreement, courts apply a series of tests to classify the item in dispute. These tests include: the method of attachment, adaptation of the item to the real property, the intention of the annexor, and the relationship of the parties. Method of Attachment. Generally, any item permanently attached to the land becomes a part of the real estate. A permanent attachment occurs when the item is: annexed to the land by roots, like trees or rose bushes; embedded in the earth, like sewer lines or septic tanks; permanently resting on the land, like a storage shed; or attached by any other enduring method, such as cement, plaster, nails, bolts, or screws. Note that it isn’t necessary for an item to be literally attached to the real property in order to be considered a fixture. There may be physical annexation even without actual attachment. The force of gravity alone may be sufficient, as in the case of a building with no foundation. Also, an article enclosed within a building may be considered annexed to the real property if it cannot be removed without dismantling it, or without tearing down part of the building. In addition, even easily movable articles may be considered constructively annexed (legally attached) to the real property if they are essential parts of other fixtures. For example, the key to the front door of a house is a fixture. Also, fixtures that have been temporarily removed for servicing or repair remain constructively annexed to the real property. For example, a built-in dishwasher that’s been sent to the repair shop is still considered to be a part of the house in which it is ordinarily installed. Adaptation to the Property. If an unattached article was designed or specially adapted for use on a particular property, then it’s probably a fixture. Examples include the pews in a church, and storm windows specifically made for a particular building. Intention of the Annexor. The method of attachment was once regarded as the most important test in determining whether an item was a fixture, but over time courts decided that test was too rigid. It didn’t allow for special situations where something permanently affixed would be more justly classified as personal property. Now the intention of the annexor is considered a more important test. Courts try to determine what the person who annexed the item to the property intended. Did she intend the item to become part of the realty or remain personal property? Each of the other tests is viewed as objective evidence of this intention. For instance, permanently embedding a birdbath in concrete indicates an intention to make the item a permanent fixture, while just setting a birdbath out in the yard does not. Relationship of the Parties. Intent is also indicated by the relationship between the parties: landlord/tenant, buyer/seller, borrower/lender. Under this test a tenant who installs an item, such as new lighting, is doing so with the intention of removing it at the expiration of the lease (absent a lease provision to the contrary). On the other hand, it’s assumed that an owner making the same alteration is trying to improve the property and does not intend to remove the item. So an item that would be considered personal property if installed by a tenant might be considered a fixture if installed by an owner. Items installed by a tenant so she can carry on a trade or business are called trade fixtures. Trade fixtures generally remain personal property and may be removed by the tenant (again, unless there is a contrary provision in the lease), or unless the fixtures have become an integral part of the land or improvements. In the latter case, if the tenant wants to remove the fixtures, it is her responsibility to either restore the property to its original condition after removing them, or else compensate the landlord for any physical damage resulting from the removal. Trade fixtures that are not removed by the tenant become the property of the landlord. Mobile Homes The distinction between personal property and real property has special significance in relation to mobile homes, also called manufactured homes. A mobile home is mostly or entirely assembled in a factory, then transported to the property it will occupy. (This is in contrast to traditional houses that are built on the property they occupy, sometimes called site-built or stick-built homes.) Mobile homes leave the factory as personal property but may become real property later on. As long as a mobile home is classified as personal property, a real estate broker may list and sell it only if it has been registered with the Department of Housing and Community Development. (Unregistered mobile homes are considered “new” and cannot be listed or sold by a real estate licensee who doesn’t also have a mobile home dealer’s license.) When a registered mobile home is sold, the real estate broker should make sure that the title and registration are delivered to the buyer, and that the Department of Housing and Community Development is notified of the transfer in writing within 10 calendar days. To become real property, a mobile home must be permanently affixed to land. It must be installed on a foundation, the installation must be inspected and approved, a certificate of occupancy must be issued, and the registration must be canceled. The final step in the process is recording a document that identifies the property and the property owner and states that the mobile home has been affixed to the real property on a foundation system. (Recording is explained in Chapter 3.) A mobile home can be installed on a foundation without becoming real property. It becomes real property only if all of the steps listed above are taken. Once a mobile home has become real property, it’s treated just like a site- built home. So an agent who lists or sells a mobile home and the land it’s attached to must have a real estate license. When a house attached to real property is purchased separately from the land so that it can be moved to another site, it’s severed from the real property and becomes personal property. This is true whether it was originally a mobile home or site-built. Since the house is personal property, the sale is subject to sales tax. The house will become real property again when installed on its new site. Land Description When ownership of real property is transferred from one person to another, the legal documents used in the transaction must specify what piece of land is being conveyed. The section of a document that identifies the land is called the property description or the legal description. It’s essential for the description of the property to be clear and accurate. An ambiguous or erroneous description could make a contract or a deed invalid, and confusion over exactly what land was transferred could cause problems not only for the parties involved in the current transaction, but also for the parties in future transactions. A legal description describes a piece of real property with sufficient accuracy that a surveyor could locate the property’s boundaries. The main methods of legal description are: metes and bounds, government survey, and recorded map. Metes and Bounds The metes and bounds method describes a parcel by specifying the location of its boundaries. The boundaries are described by reference to three things: monuments, which may be natural objects such as rivers or trees, or man-made objects such as roads or survey markers; courses (directions), in the form of compass readings; and distances, measured in any convenient units of length. Reading a Metes and Bounds Description. A metes and bounds description first specifies a point of beginning, which is a convenient and well-defined point on one of the parcel’s boundaries. A monument may be used as the point of beginning (“Beginning at the old oak tree,” for example), or the point of beginning may be described by reference to a monument (“Beginning at a point 200 feet east of the northwest corner of the Sutters’ barn,” for example).  After establishing the point of beginning, the description then specifies a series of courses and distances. For example, “south 30 degrees east, 263.5 feet” is a course and distance. By starting at the point of beginning and following the courses and distances given, a surveyor could walk along the parcel’s boundary lines, all the way around and back to the point of beginning. A metes and bounds description must end up back at the point of beginning; otherwise, it wouldn’t describe a completely enclosed tract of land. Compass Bearings. The directions (courses) in metes and bounds descriptions are given in a peculiar fashion. A direction is described by reference to its deviation from either north or south, whichever is closer. Thus, northwest is written as north 45° west, since it’s a deviation of 45° to the west of north. Similarly, south-southeast is written south 22½° east, since it’s a deviation of 22½° to the east of south. Due east and due west are both written relative to north: north 90° east and north 90° west, respectively. (There are 360 degrees in a circle.) Resolving Discrepancies. To specify the direction or length of a boundary, monuments are sometimes used in conjunction with courses and distances, as in “northerly along the eastern edge of Front Street 100 feet” or “north, 100 feet more or less, to the centerline of Smith Creek.” If there’s a discrepancy between a monument and a course or distance, the monument takes precedence. In the examples just given, the first boundary would be along the edge of Front Street, even if that edge does not run due north, and the second boundary would extend to the center of Smith Creek, even if the actual distance to that point is not 100 feet.  Discrepancies may also occur between other elements of a metes and bounds description. To resolve them, the following order of priority is used: 1. natural monuments, 2. man-made monuments, 3. courses, 4. distances, 5. names (e.g., “Smith Farm”), 6. areas (e.g., “40 acres”). In the case of a conflict between any two of these elements in a description, the one with higher priority prevails. Metes and bounds descriptions tend to be lengthy, and they are often confusing. Furthermore, monuments don’t always maintain their exact locations over the years. An actual survey of the property is usually necessary when dealing with a metes and bounds description. Government Survey In the government survey system, also called the rectangular survey system, land is described by reference to a grid of lines established by survey. (These are imaginary lines, like the lines of latitude and longitude on a globe.) This system of land description was established by the federal government after many eastern states had already been settled and described using the metes and bounds method. As a result, government survey descriptions are mainly used west of the Mississippi River. The terminology used in the government survey system may seem confusing at first, and we recommend that you study the accompanying diagrams closely. The system is made up of a series of large grids covering much of the United States. Each of these grids is composed of two sets of lines, one set running north/south, the other east/west. Each grid is identified by a principal meridian, which is the original north/south line established in that grid, and by a base line, which is the original east/west line. In California, there are three principal meridians: Humboldt, Mt. Diablo, and San Bernardino. Each has its own base line. (See Figure 1.6.)  Grid lines run parallel to the principal meridian and the base line at intervals of six miles. The east/west lines are called township lines, and they divide the land into rows or tiers called township tiers. The north/south lines, called range lines, divide the land into columns called ranges. Every fourth range line is a guide meridian. (See Figure 1.7.)  The area of land that is located at the intersection of a range and a township tier is called a township, and it is identified by its position relative to the principal meridian and base line. For example, the township that is located in the fourth tier north of the base line and the third range east of the principal meridian is called “Township 4 North Range 3 East.” (See Figure 1.7.) This is often abbreviated “T4N, R3E.” Grid systems are identical across the country, so a government survey description must include the name of the principal meridian that’s being used as a reference. (Since each principal meridian has its own base line, it isn’t necessary to specify the base line.) It’s also a good practice to mention the county and state where the land is situated, to avoid any possible confusion. Thus, for example, a complete description of a township might be T4N, R3E of the Mt. Diablo Meridian, Sacramento County, State of California. Each township measures 36 square miles and contains 36 sections. Each section is one square mile, or 640 acres. The sections are numbered in a special way, starting with the northeast corner and moving west, then down a row and eastward, snaking back and forth and ending with the southeast corner. (See Figure 1.8.) Smaller parcels of land can be identified by reference to sections and partial sections, as illustrated in Figure 1.9. For example, the description for a five-acre parcel might be “the east half of the NW quarter of the NE quarter of the SW quarter of Section 12, Township 4 North, Range 3 East of the Mt. Diablo Meridian, Sacramento County, State of California.” To locate a parcel of property on a government survey map, first find the section in question, then start at the end of the description and work backwards through the partial sections to the beginning. In other words, find Section 12, then the southwest quarter of Section 12, then the northeast quarter of that southwest quarter, then the northwest quarter of that northeast quarter, and finally the east half of that northwest quarter. Even in an area where land is described using the government survey method, it may be necessary to use the metes and bounds method in conjunction with it. This is true, for example, when the parcel to be described is small or non-rectangular. The government survey method is used to identify the general location of the parcel, but then the metes and bounds method is used to more precisely specify the parcel’s location and boundaries. Government Lots. A government lot is a section of land of irregular shape or size that is referred to by a lot number. Because of the curvature of the earth, range lines converge, so it’s impossible to keep all sections exactly one mile square. As a result, the sections along the north and west boundaries of each township are irregular in size. The quarter sections along the north and west boundaries of these sections are used to take up the excess or shortage. The quarter-quarter sections, then, along the north and west boundaries of a township are given government lot numbers. Another situation in which government lots occur is when a body of water or some other obstacle makes it impossible to survey a square-mile section. The irregularly shaped sections are assigned government lot numbers. Recorded Map The recorded map method of land description is sometimes referred to as the lot and block method, or the maps and plats system. It was developed to make legal descriptions of subdivided land more convenient, and it is now the method of description used for most property in urban and suburban areas. When land is subdivided, a surveyor uses the metes and bounds method or the government survey method (or both) to map out lots and blocks (groups of lots surrounded by streets) on a subdivision map called a plat or plat map. The plat is then recorded in the county where the land is located. (See Chapter 3 for a discussion of the recording system.) Once a plat has been recorded, a reference to one of the lot numbers on the specified plat is a sufficient legal description of the lot. Since a precise description of the lot’s location and boundaries is already on file in the county recorder’s office, that description may be incorporated into any legal document simply by stating the lot number, the block number (if any), and the name of the subdivision. Example: The recorded map description for a particular single-family property is Lot 2, Block 4 of Tract 455, in the City of Fresno, County of Fresno, State of California, as per map recorded in Book 25, page 92, of maps, in the office of the recorder of said county. By looking up the plat for this subdivision in the county records, you could find the precise location and dimensions of this parcel. Plat maps frequently contain a considerable amount of useful information beyond a detailed description of lot boundaries. For example, they may include area measurements, the location and dimensions of any easements, the location of survey markers, and a list of use restrictions that apply to the land. (Note, however, that studying a plat map is not a substitute for a title search. See Chapter 3.) Other Methods of Land Description There are other ways of describing land besides the three major methods of description we’ve discussed. When an adequate description of property is already a matter of public record—contained in a recorded document—then a simple reference to that earlier document serves as an adequate property description in a new document. (For example, “All that land described in the grant deed recorded under recording number 92122401503 in Orange County, California.”) References to records of survey or tax assessor’s maps may be used, as long as those records or maps have been recorded in the county where the property is located. Also, generalized descriptions such as “all my lands” or “Smith Farm” can be adequate, as long as they make it possible to determine exactly what property is being described. But it’s always best to use the least ambiguous description possible, to prevent future problems. This is especially true if the property owner has several properties in one area. It should be noted that a property’s street address is usually not an adequate legal description. It’s also not a good idea to use the property description shown on a property tax bill. Air Lots. Not every parcel of real property can be described simply in terms of its position on the face of the earth. Descriptions of some forms of real property must also indicate their elevation above the ground. Elevations are mainly needed for units above the ground floor of a condominium building; each of those units occupies a parcel of airspace called an air lot. The underlying legal description of the air lot includes its elevation. A position above the ground is described by reference to an established plane of elevation, called a datum. Most large cities have their own official datum (in Los Angeles, for example, it’s called the National Geodetic Vertical Datum of 1929), and frequently subsidiary reference points, called bench marks, are also established. A bench mark is a point whose position relative to a datum has been accurately measured. A surveyor can use the bench mark as a reference when that’s more convenient than using the datum. 1. There are two types of property: real property and personal property. Real property is the land, anything affixed to the land, and anything appurtenant to the land. Movable items, such as furniture, are usually personal property. 2. Appurtenances to land include air rights, water rights, mineral rights, oil and gas rights, and support rights. 3. Attachments may be natural (growing plants) or man-made (fixtures). Personal property may be converted into real property through annexation, and an attachment may be converted back into personal property through severance. 4. In the absence of a written agreement, the tests used to distinguish fixtures from personal property include the method of attachment, the adaptation of the item to the real property, the intention of the annexor, and the relationship of the parties. 5. When real property is transferred from one owner to another, the legal documents must include an adequate description of the property. There are three major methods of legal description: metes and bounds, government survey, and recorded map. Real property—Land, attachments, and appurtenances. Personal property—Anything that is not real property. Its main characteristic is movability. Appurtenance—A right incidental to the land that is transferred with it. Riparian rights—The water rights of a landowner whose land borders on a stream or other flowing water. Riparian rights allow only reasonable use of the water. Littoral property—Land bordered by a stationary body of water, such as a lake or a pond. Appropriative rights—Water rights established by obtaining a government permit, and not based on ownership of land beside a body of water. Lateral support—The support that a piece of land receives from the surrounding land. Subjacent support—The support that a piece of land receives from the underlying earth. Emblements—Crops, such as wheat, produced annually through the labor of the cultivator. Trade fixtures—Personal property attached to real property by a tenant for use in his trade or business. Trade fixtures are removable by the tenant. Metes and bounds—A system of land description in which the boundaries of a parcel of land are described by reference to monuments, courses, and distances. Monument—A visible marker (natural or artificial) used in a survey or a metes and bounds description to establish the boundaries of a piece of property. Point of beginning—The starting point in a metes and bounds description; a monument or a point described by reference to a monument. Course—In a metes and bounds description, a direction, stated in terms of a compass bearing. Distance—In a metes and bounds description, the length of a boundary, measured in any convenient unit of length. Government survey—A system of land description in which the land is divided into squares called townships, and each township is, in turn, divided into 36 sections, each one square mile or 640 acres. Principal meridian—In the government survey system, the main north- south line in a particular grid, used as the starting point in numbering the ranges and township tiers. California’s principal meridians are the Humboldt, Mt. Diablo, and San Bernardino meridians. Range—In the government survey system, a strip of land six miles wide, running north and south. Township—The intersection of a range and a township tier in the government survey system. It is a parcel of land that is six miles square and contains 36 sections. Section—One square mile of land, containing 640 acres. There are 36 sections in a township. Government lot—In the government survey system, a parcel of land that is not a regular section. Recorded map—The system of description used for subdivided land. The properties within a subdivision are assigned lot numbers on a plat map, which is then recorded. The location and dimensions of a particular lot can be determined by consulting the recorded plat. Air lot—A parcel of property above the surface of the earth, not containing any land. For example, a condominium unit on the third floor of the building occupies an air lot. 1. Real property is equivalent to: a. land b. personal property c. land, attachments, and appurtenances d. land and water 2. The most important consideration in determining whether an article is a fixture is:  a. physical attachment b. the annexor’s intention c. adaptation of the article to the realty d. the intended use of the article 3. Articles installed in or on realty by tenants for use in a business are called: a. personalty b. trade fixtures c. emblements d. easements 4. A right that goes with or pertains to real property is called: a. an attachment b. an appurtenance c. personal property d. a fixture 5. A landowner’s rights regarding water in a stream flowing through her land are called: a. riparian rights b. littoral rights c. appropriative rights d. easement rights 6. Minerals become personal property when they are: a. surveyed b. extracted from the land c. taken to a refinery d. claimed 7. Rights to oil and gas are determined by: a. the rule of capture b. offset wells c. the Bureau of Land Management d. the Department of the Interior 8. Whether land borders on a lake or stream is irrelevant under the system of:  a. riparian rights b. capture rights c. littoral rights d. appropriative rights 9. Ted’s property is damaged by sinkholes caused by old coal mining tunnels beneath his land. The rights implicated in this situation are: a. riparian rights b. subjacent support rights c. proximate support rights d. lateral support rights 10. Which of the following is most likely to be considered part of the real property? a. Piano b. Dining room table c. Area rug d. Kitchen sink 11. Which of the following benefits tenant farmers? a. Doctrine of emblements b. Rule of capture c. Overlying rights d. Method of attachment test 12. A section of a township contains the following number of acres: a. 360 b. 580 c. 640 d. 560 13. A parcel that measures 1/4 of a mile by 1/4 of a mile is: a. 1/4 of a section b. 1/8 of a section c. 1/16 of a section d. 1/36 of a section  14. The distance between the east and west boundary lines of a township is: a. one mile b. two miles c. six miles d. ten miles 15. A township contains 36 sections that are numbered consecutively 1 through 36. The last section in the township is located in the: a. southeast corner b. southwest corner c. northeast corner d. northwest corner 1. c) Real property is made up of land, everything that is attached to the land (for example, fixtures), and everything that is appurtenant to the land (for example, water rights). 2. b) The intention of the party who attached the item is the primary consideration in determining whether it is a fixture. The other tests provide evidence of the party’s intention. 3. b) An article installed by a tenant for use in a business is called a trade fixture, and the tenant can remove it at the end of the tenancy. 4. b) An appurtenance is a right or interest that goes with the property. Riparian rights are an example. 5. a) Riparian rights include the right to reasonable use of the water that flows through a property owner’s land. 6. b) When minerals are extracted from the land, they become personal property. 7. a) The rule of capture determines ownership of oil and gas. This rule provides that the landowner owns all the oil and gas removed from a well on his property, even if the oil or gas was originally beneath someone else’s property. 8. d) To obtain a water appropriation permit, it is not necessary to own riparian or littoral land. 9. b) Subjacent support rights involve support from the underlying earth. 10. d) Unlike the other items listed, the kitchen sink is a fixture, and therefore part of the real property. 11. a) The doctrine of emblements allows a tenant farmer to return and harvest crops after the lease expires. 12. c) In the government survey system of land description, one section contains 640 acres. 13. c) A section is one mile on each side, a quarter section is ½ mile on each side, and a quarter of a quarter section is ¼ mile on each side. 14. c) A township measures six miles by six miles. 15. a) Section 36 is always in the southeast corner of a township.