Arizona Real Estate: Ownership & Encumbrances

Instructor: Kyle Aken

Kyle is a journalist and marketer that has taught writing to a number of different children and adults after graduating from college with a degree in Journalism. He has a passion for not just the written word, but for finding the universal truths of the world.

When it comes to purchasing real estate in Arizona, there are many important things to consider from the different types of ownership to encumbrances or liens to the common property law which can impact how marital income and property are treated.

Reeled into Real Estate

There is a lot more to buying a home than just finding the home of your dreams and securing financing. In fact, the type of mortgage instrument you decide to use is just as important as how or when you buy. As a home or real property typically costs a lot of money, many different types of real estate ownership have been developed to afford the buyer certain protections.

Common Types of Real Estate Ownership in Arizona

In most cases, homeowners purchase their home with an estate, usually a fee simple estate. The fee simple estate is the most complete form of ownership and gives the homeowner the right to free disposal of any or all parts of the ownership. When a buyer uses a fee simple estate, without any alternations, the home, the ground it sits on, and the air above it are included. This gives homeowners the option to rent space above the property or to let a company mine for gold in the backyard. However, don't forget about the lien the bank holds on the property, as it can hinder what activities that are permitted and which are not.

Other common forms of ownership in Arizona, include:

  • Life estate - allows the owner to process and use the property during their lifetime. However, after the homeowner dies the real estate goes to the beneficiary named in the legal instrument like a trust, will, or deed.
  • Estate of inheritance - just another type of fee simple.
  • Estates for years - an interest in land that can be transferred.
  • Estates by sufferance - when one remains in possession of a property even after the termination of their interest.
  • Estates at will - similar to tenancies, even though they have no beginning or ending date.

In Arizona, there is another way to take ownership of a home using the Adverse Possession Laws. This legal doctrine allows trespassers who openly inhabit a real property and make improvements to gain the title if certain conditions are met. The trespassers must pay property taxes and act like they have the right to possess the land for two years before they can legally take ownership of the property.

Important Things to Consider in Arizona

Depending on your marital status, most people use a fee simple estate as either a sole owner or tenants, especially when purchasing a home for the very first time. It is important to double check all loan documents to ensure that this is the right type of ownership for your needs. This is especially important in 'Common Property States,' like Arizona. Community property states treat both property and marital income differently than other states.

Community property is simply a form of ownership between spouses where any assets or property that were acquired during the marriage, besides inheritance or gifts, are owned by both spouses equally. However, any property that each spouse brought into the relationship before the marriage is still considered separate property, unless they agree to transform it into community property. There are many different types of property that are considered community property, including:

  • Earnings
  • Damages that are awarded in an industrial accident
  • Damages recovered from a personal injury lawsuit
  • Any profit or rent from separate property
  • Property purchased with money that a spouse earns during the marriage

When a spouse passes away, according to the community property law the other half of the assets and real property go to the surviving spouse. Furthermore, in Arizona, you can add the right of survivorship to the community property, which is done to avoid probate. However, if there is a prenuptial, premarital or post-nuptial agreement that states that no community property is allowed, then this automatically overrides the state-mandated status of community property laws.

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