Real Estate Principles

Ninth Edition

Real Estate:
An Introduction to the Profession
Ninth Edition

By: Atty. Dennis O. Go, EnP, MBA, REA, REB, CMC

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 Chapter 3
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Rights and Interests in Land

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 Exclusive Right to Use of Land
(past)
• land ownership went to the head of the state,
usually a king.
• The king, in turn, gave the right (called a feud)
to use large tracts of land to select individuals,
called lords.

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 Feudal System
• The lords did not receive ownership. They were
tenants of the king, and were required to serve and
pay duties to the king and to help fight the king’s
wars.
• It was customary for the lords to remain tenants for
life, subject, of course, to the defeat of their king by
another king. This system, wherein all land
ownership rested in the name of the king, became
known as the feudal system.

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 Philippines Land Ownership
(origin)
• about 300 years under Spanish colony (1565-
1898);
• about 40 years under United States rule (1898-
1941);
• four years of Japanese occupation (1941-
1945); and
• Independence since 1946

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 Philippines Land Ownership
(origin)
• The datus (chiefs) comprised the nobility who
reigned over a barangays .
• The serfs served a master or lord, who may
have been a datu, and tilled his land. Both
master and serf equally divided the produce of
the land.
• The serfs corresponded to the aparceros
(tenants) of the late 19th century Spanish era.

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 Real Estate as a
Bundle of Property Rights
• Property rights are what gives value to the real estate.
• Private property rights are subject to limitations
imposed by government. Thus, this can limit
the value of the investment.

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 The Fee Simple Bundle of Rights

Real estate ownership is, in actuality, the ownership of rights to land.

The largest bundle available for private ownership is called “fee simple”.

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 Ownership Limitations

• Private ownership
– Government Rights in Land
• Property taxes
• Eminent domain
• Police power
• Escheat

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 Government Limitations

Police Power
• The right of government to regulate private property
for the protection of the general public’s health,
morals, and welfare
• Further discussion in Chapter 25

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 Government Limitations

Eminent Domain
The right of government to take private property
for public use upon payment of just compensation

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 Eminent Domain
• The legal proceeding involved in eminent
domain is condemnation, and the property
owner must be paid the fair market value of
the property taken from him.

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 Eminent Domain
• When only a portion of a parcel of land is
being taken, severance damages maybe
awarded in addition to payment for land
actually being taken.
•For example, if a new highway requires a 40-H strip of land
through the middle of a 160-H farm, the farm owner will not only
be paid for the 40 H, but will also receive severance damages to
compensate for the fact that the farm will be more difficult to
work because it is no longer in one piece.

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 Eminent Domain
• An inverse condemnation is a proceeding brought about
by a property owner demanding that his land be purchased
from him.

•Damage awards may also be made when land itself is not

taken but its usefulness is reduced because of a nearby
condemnation. These are consequential damages and
might be awarded, for instance, when land is taken for a
sewage treatment plant and privately owned land
downwind from the plant suffers a loss in value owing to
foul odors.

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 Government Limitations

Taxation
• The right of government to tax private property
• Further discussion in chapter 15

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 Government Limitations

Escheat
• Ownership of property passes to the government
if there is no will or no heirs.

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 Removing Sticks from the Fee
Simple Bundle

Impediments/
encumbrances

Note that the fee simple bundle

shrinks as an owner voluntarily
removes rights from it.

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Real Estate as a Bundle of
Property Rights
Right or Benefit Stick in Bundle
Control Mortgage
Lease
Impose covenants or conditions
Grant easement
Grant license
Build or remove structures
Use & Enjoy Occupy as residence
Use as place of business
Farm
Mine/drill for oil, etc.
Place of recreation
Exclusion Maintain privacy
Non-trespass
Disposition Sell or refuse to sell
Give
Will
Abandon

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 Easement

• The right or privilege one party has to use land

belonging to another for a special purpose not
inconsistent with the owner’s use of the land.

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Commonly Found Easements

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 Encroachments

• The right or privilege one party has to use land

belonging to another for a special purpose not
inconsistent with the owner’s use of the land.

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Commonly Found Encroachments

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 Other Estates

• Qualified Fee Estates

• Life Estates
• Statutory Estates
• Freehold Estates
• Leasehold Estates

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Rights and Interests in Land

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Cross Section of Estates
and Rights in Land

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 Cross Section of Estates
and Rights in Land (continued)

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 Checkpoint
In the absence of any other factors, which bundle of rights has
a higher value?

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 Key Terms
• Chattel • Encumbrance
• Easement • Estate
• Eminent Domain • Fee simple
• Encroachment • Lien
• Title

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