113. Ownership

All right, in this lecture we are going to cover the topic of ownership. And the under the list of objectives or the items that we're going to cover in relation to ownership, we're going to look at sole proprietorship, we're going to look at sole ownership in sole proprietorship, co-ownership, estates in trust, condominiums, cooperatives, and in time shares. So under sole ownership, this is called a tendency in severality, a tendency in severality. So if a single party, so a single individual owns a fear life estate, the ownership is called a tendency in severality. Other terms that mean the same thing are sole ownership, ownership in severality, and estate in severality. So those all mean the same thing. So tendency in severality, sole ownership, ownership in severality, or estate in severality. A husband and wife can be a sole owner, and this is where the homestead, dour, courtesy, or elective share rights come into play. And then also since Texas is a community property state, the community property laws will apply. So we'll talk about that in a minute. The estate of a tenant in severality passes to the heirs of that tenant. If we look at a sole proprietorship, this is still sole ownership of property by one individual. But in this case, what we're looking at is ownership in relation to a going enterprise, in relation to a business. And one thing to note, getting a little bit into the weeds on this is that, and comparing the sole proprietorship to another form of business entity, like a corporation or a LLC or limited partnership, is that with that ownership, the individual has unlimited liability. So should something occur in relation to the use of operation of that property where another individual or properties damaged, then that sole proprietor has unlimited liability. And then we also get into some other issues in terms of the, just like with the, the tendency in severality is that the ownership interest in that sole proprietorship passes to the heirs, if, when the sole proprietors deceased, so there's no continuity of the business. It's a common form of ownership that exists, but there are some limitations with it. And the main thing is going to be the unlimited liability, the lack of continuity or the lack of perpetuity upon the death of the sole proprietor. And so those are those are two things to look at. We're not going to get into that into the into the weeds on sole proprietorships come as a business entity right now, but just understanding that it is another form of ownership. We have co ownership. If two or more individuals have an ownership interest, then there is some form of a co ownership. And so the types of co ownership that we're going to cover are the tendency in common, the joint tendency, tendency by the entirety, community property, and tendency in partnership. So tendency in common, joint tendency, tendency by the entirety, community property, and the tendency in partnership and co owners are referred to as co tenants. So if we start off with the tendency in common, this is the most form, the most common form of co ownership between two or more individuals who are not married. So make sure you understand that distinction. So the most common form of ownership between two or more individuals who are not married, a tendency in common is also referred to as an estate in common, but generally you'll hear you'll hear refer to as a tendency in common. And a tendency in common can be created by purchase, gift, device, descent, or a court order. And the distinction there is if you have two or more individuals that end up buying a track of land, and there's no distinction in that deed in terms of what the what the type of interest is between those owners, then the court order. And then the court is going to assume that it is a tendency in common. The if the property is gifted to two more individuals, then and again without a designation in terms of how that interest is to be own, then it is a tendency in common. And then by divisor descent is devise is inheritance through a will and descent is inheritance through state law. And so if two or more individuals received title to property through either divisor descent, so either under the administration of a will or by Texas law, then that would be a tendency in common. And I had I had one situation one instance or one one matter one time where the will had specifically said the property was to be transferred to four individuals as tenants in common. And then by court order so if a court orders the property to be transferred from one or more parties to two or more parties, then those parties would own that property as tenants in common. So the characteristics of a tendency in common to a more owners who are not married. The individuals have identical rights. The interests are individually owned. There are electable ownership shares. There's no survivorship and there's no unity of time. So two or more owners, identical rights, interests are individually owned, electable ownership shares, no survivorship and no unity of time. We're going to talk about what those mean here. So two more owners so a tendency in common can include any number of individuals from at least to to infinity. So you have to have at least two, but you could have 10, 20, 100, etc. Identical rights. So co tenant share an indivisible interest in the estate. So all tenants are all co tenants have equal rights to use the property. No tenant can claim a certain portion of the property. So one tenant can't say I own the northern half and you own the southern half. And then co tenant share an undivided possession or unity of possession in the property. So they have an undivided interest. So if you have two owners, each owner has an undivided one half interest in that property. Interest individually owned. So tenants in common have a distinct and separable ownership of their respective interests, which means they can sell, income or transfer their interests without the consent from the other co tenants. Okay, so if you have two individual's by piece property so they each have a one half undivided ownership interest in that property. And then one of them decides they want to sell their property to a third party, then they have the right to do that. Then that third party would come in as a one half undivided ownership interest owner in that property. Electable ownership shares. So tenants in common determine what ownership interest each has. So if we, you know, if we have two owners and there's no reference in the. And the conveyance as to what ownership interest the individuals have, then it's presumed that each has a one half undivided ownership interest in that property. However, each can determine what ownership interest each has. So if we assume, so again, we assume each has an equal share in the situation with two owners. But let's say we have a situation we have a ownership of property by three individuals. And so two could have a 40% undivided ownership interest in that property each would get us, which would get us to 80% interest in the property. And the third, a co tenant has a 20% undivided ownership interest in that property, which would then get us to 100%. We'll look at that distinction with the joint tenancy. So keep these elements in mind when we're talking about the joint tenancy. And then no survivorship. So it deceased co tenants interest passes to his or her heirs, not to the remaining co tenants. Okay, so with no survivorship, a deceased co tenants interest passes to his or her heirs, not to the remaining co tenants. And then no unity of time. So co tenants do not have to acquire their interests at the same time. And if we look at joint tenancy, here we have ownership by two or more individuals. So very similar to the tenancy in common. But there are some characteristics that separates. a joint tenancy from a tenancy in common. Those four are the unity of ownership, equal ownership, transfer of ownership, and survivorship. So if we look at each of those under unity of ownership, joint tenants hold separate title to their individual interests. And the joint tenants acquire that interest in title at the same time. So if you have three joint tenants, they all acquire their interest in that property at the same time in order for joint tenancy to be affected. Equal ownership, so joint tenets own equal shares in the property. So if there are four owners in a joint tenancy, then each owns a 25% interest in that property, whereas with the tenancy in common under the elective shares, that can vary. So under equal ownership, the joint tenets own equal shares in the property. Under transfer of ownership, so a joint tenant may transfer his or her ownership interest to a third party. But then that third party comes into ownership of that property as a tenant in common with the other joint tenets. So let's say you have four tenets or four joint tenets. So each has a 25% ownership interest in the property. And one of those tenets sells his or her interest in that property to another party. Then that other party comes into ownership of that property as a tenant in common with the other three joint tenets. So those other three joint tenets remain joint tenets in terms of their ownership interest in that property. But the fourth, the new fourth owner is a tenant in common with the joint tenets. Then under survivorship, the joint tenets have a right to survivorship. So where the interest of a deceased tenant under a tenancy in common passes to his or her heirs, with the joint tenancy, one of the things that separates it or sits at a part is that there is a right to survivorship. And so the interest of a deceased joint tenant passes to the other remaining joint tenets in that ownership structure. If we look at creating a joint tenancy, so that this is on the front end creating the joint tenancy, we have four unities that must be met. We've got unity of time, unity of title, unity of interest, and unity of possession. So under unity of time, all parties must acquire the joint tenet interest at the same time. So if that was, if they were all deeded the property, then that happens all at the same time. You can't, like we brought in that fourth person in terms of ownership, the new fourth person, and that creates a tenancy in common. Under unity of title, all parties must acquire the property in or under the same conveyance. So that could be under the same deed. So if the parties were requiring the title to the joint tenancy, by deed, then they would all need to be named in that same deed. The conveyance, and then the conveyance instrument must have a reference to the joint tenancy being created. So if there's no reference, then it's presumed to be a tenancy in common. So you'd have to go to that state law where that property is located to determine what the requirements are for creating a joint tenancy. Because if the joint tenancy fails, then it ends up being a tenancy in common. Under the unity of interest, all parties must receive equal undivided interests in the property. And under unity of possession, all parties must receive the same rights of possession. So unity of time, title, interest, and possession. And then the termination of a tenancy in common or joint tenancy. One means of termination is through a partition suit. And this is where one or more of the owners files a lawsuit to terminate the joint tenancy or tenancy in common and ask the court to divide the property into individual partition, divide, or partition the property physically. So where each individual would have a distinct ownership portion of the track of land or the property itself. And that can become very difficult based on the topography of the land and how it's laid out. And then also foreclosure or bankruptcy can also terminate either of these estates, the tenancy in common or the joint tenancy. Tenancy by the entire is another form of co-ownership. And this is where you have ownership by a husband and wife. So each spouse has equal undivided interests in the property. The husband and wife are treated as one owner of the property. And then the tenancy by the entire can be terminated by divorce, death, mutual agreement, and judgment for joint debts. So those are the ways the tenancy by the entire is can be terminated. Now in Texas we have community property. And then we'll talk about community property and separate property. And so community property is a form of ownership, co-ownership, and the state of Texas between a husband and wife. And so one of the distinctions with the tenancy in common, the joint tenancy is that you had co-ownership that was not between a husband and wife. So where we get into tenancy by the entire or community property, depending upon the state where that property is located, where the parties are located. So in Texas the Texas Constitution provides the basis for community property and separate property in Texas. So the Texas Constitution says all property, both real and personal, of a spouse owned or claimed before marriage. And that is after that is acquired afterward by gift divisor to sent, shall be the separate property of that spouse. And law shall be passed more clearly to finding the rights of the spouses in relation to separate and community property. So this provides the basis in the Texas Constitution for community property and separate property in Texas. So then we get into community property. And community property is defined in the Texas family code as follows. So community property consists of the property other than separate property acquired by either spouse during marriage. And this is found in chapter three of the Texas family code. Section 3.02 states that real or personal property acquired on the date of and subsequent to the date of marriage by either spouse is part of the community estate. So it belongs to that community estate. The property in the community estate is primarily an issue in three circumstances. Just in right division in a divorce disposition at death or sale of the community property during the marriage. The Texas family code provides a presumption of community property relating to any property acquired during the marriage. So any property acquired during the marriage is presumed to be community property. And then the party claiming otherwise must provide a rebuttable presumption to that presumption. So property in the Texas family code property possessed by either spouse during or on dissolution of marriage is presumed to be community property. The degree of proof necessary to establish that property is separate property is clear in convincing evidence. So we have different standards and you may have heard the ponderance of the evidence which is where something is more likely than not. You know 50% plus one. So clear and convincing is higher than that standard. And then like in criminal matters we have beyond a reasonable doubt which is a very high standard. And so just this is not exact but just to give people an idea of where this falls. Let's put this at about 75%. So that's not that's not an exact number requirement. I'm just trying to give you a visual in terms of what clear and convincing evidence means. So the property possessed by either spouse during the marriage is presumed to be a community property and part of the community property estate. So to overcome this presumption the party claiming property acquired during the marriage is not community property and thus a separate property must provide evidence to rebut the presumption and show that the property is separate property. Spouses can agree that all or part of their community property becomes the property of the surviving spouse on the date of the spouse on the death of the spouse which effectively creates a survivorship agreement as to the community property between the spouses. So the text constitution states spouses may agree in writing that all or part of their community property becomes the property of the surviving spouse on the death of the spouse. And spouses may agree in writing that all or part of the separate property owned by either or both of them shall be the spouse's community property. And so this is found in the text as a states code section 112.051. It states at any time spouses may agree between themselves that all are part of their community property, then existing or to be acquired becomes the property of the surviving spouse on the death of the spouse. So we've got, and then we've got, if we have two individuals that buy any property, a car, a house, during marriage, then that is presumed to be, or during the marriage, that's presumed to be community property. Section 112.052 of the Texas States Code then outlines the requirements going back to the survivorship agreement, outlines the requirements for an agreement under Section 112.051. And that section says a written agreement signed by both spouses is sufficient to create a right to survivorship in the community property, describing the agreement if the agreement includes any of the following phrases. With right to survivorship will become the property of the survivor will vest in and belong to the surviving spouse or shall pass to the surviving spouse. So now we've got some specific language by the, by the Texas legislature in the Texas States Code for the written requirement for that community property survivorship agreement. One scenario I often see in relation to community property is the situation where you've got two individuals that get engaged, let's say a boy and girl, they get engaged and, you know, the, the, and I've seen this a number of times. The boy is still, or he's finished with school, he has a job, he's earning income and the, the girl is still in school and not yet finished with, with school and so they get engaged and they're going to get married, you know, within the next six to 12 months. But then he purchases a house in his name and then she may or may not move in. But at that point in time, then that property is his separate property. It is not owned by her. So the Texas family code defines separate property as follows. So the property owned or claimed by the spouse before marriage, the property, property acquired by the spouse during marriage by gift divisor to sent. And then also the recovery for personal injury sustained by the spouse during marriage, except for any recovery for loss of earning capacity during the marriage. So that would be part of the community property estate. And so you got a situation where one person buys the house, they get married, then that other now the wife in this scenario does not have any ownership rights in that, in that property directly. Any ownership rights in that property because it is the husband's separate property and that follows under the Texas Constitution and the Texas family code. Next form of ownership is tendency and partnership. So this is a form of ownership held by business partners and then the partnership tendency gives equal rights to all partners in that business. And then we've seen this form of ownership codified in the uniform partnership act. All right, next we're going to look at a states in trust. So a grant or a trust or will transfer legal title to fiduciary. Who's the trustee? So the trustee is fiduciary and so one who has a fiduciary duty. And then the trustee holds and manages the the estate for the benefit of the beneficiary of the trust. So with a trust, you'll have the trust or you'll have the trustee. And then you'll have a beneficiary. So the trust or trustee and beneficiary. So the trust or is the one transferring legal title into the trust. And then you have trustee who is a fiduciary who will then hold and manage that estate for the benefit of a beneficiary of the trust. So three parties to a trust, trust or fiduciary, the trustee who is the fiduciary and then the beneficiary of the trust. So trust may be created by deed, by will or by trust agreement. And then there's two types of trust that we're going to look at. We have a living trust. These are the these are the big big picture headings, the living trust and the land trust. So the living trust and then the land trust. So with the living trust, this allows the trust or so the one transferring title to the property during his or her lifetime to convey title to a trustee for the benefit of a third party, which is the beneficiary. So the trustee manages the property. The trustee has a fiduciary duty. So when we get into fiduciary duty, you have care, obligation, loyalty, accountability, disclosure and confidentiality. So the trustee has a fiduciary duty and must protect the value of the corpus of the trust. And the corpus is the property of the trust. So if it's personal for real property. So the fiduciary of the trustee must protect the value of the corpus of the trust and then must secure any income that it may produce. Okay, so that's part of the fiduciary duty also of the trustee under that duty of care. A testamentary trust. We're still talking about trust now. Under the living trust, a testamentary trust is a trust that only takes effect when the trust or dies. And then the provisions of the will will establish the trust. So instead of, you know, it may not be necessary to create a trust right now at this point in time. And so it's part of the estate planning process. Individual will include the testamentary trust provisions in the will so that if and when or when that individual passes away, then the provisions of that trust are then created. And then so it takes effect when the trust or dies. So we call that a testamentary trust. So the provisions in the will will establish the trust. A land trust is a trust where the trust or conveys the fee estate to the trustee and then names himself or herself as the beneficiary. So the land trust, the trust or conveys the fee estate to the trustee and names himself or herself as the beneficiary. And then the land trust only applies to real property does not apply to personal property. And then an agreement grants the beneficiary the right to possess and then use that property. Okay, so it could be somebody for state planning purposes transfers their real estate into a trust. So they're the trust or. And then they are also, you know, can be beneficiary the trust so they continue to live in that house and maintain it. With the conventional trust structure, the trustee holds title and has fiduciary duties. The trustee may be an individual or an entity so the trustee could be an individual. It could be a corporation. It could be a bank. The beneficiary controls the property. The trustee can sell or encumber the property, but generally only with the trust or approval. And then the public records will not reflect who the beneficiary is. So usually what you'll see is a member random of the trust is filed with the county records and the county clerk in the county where the property is located. And all that memorandum outlines is that a trust does exist. And so therefore the trust agreement is not filed. And so the terms of that trust agreement, the beneficiary or beneficiaries of that trust agreement are not disclosed. And so therefore they remain private. So that's one way an individual can protect his or her privacy. And then the term of the land trust is limited. It must be renewed or the trustee must sell the property and distribute the proceeds. We've got three other forms of ownership to cover. We have condominiums, we have cooperatives, and we have time shares. So getting into condominiums, this is a hybrid form of ownership of multifamily multi residential or commercial properties. So it could be for residential condo can be for residential use or commercial use. So we may see this with on the commercial side, we may see this with retail or office properties generally. And not always, but oftentimes you see it in the service sector. The condominium is a combination of a fee simple interest in the airspace within a unit. And then an undivided share in the as a tenant in common in the common areas or the common elements of that condominium development. So there's that's what's a high is a hybrid form of ownership of a fee simple interest in the airspace of a unit, but then also as a tenant in common in with an undivided share in the common elements. So if we look at some of the common elements, we have land such as the driveway. parking lots, sidewalks. This is under common elements. We have structural components of the building, such as exterior windows, the roof, the foundation. We have the physical operating systems, so plumbing, electrical communications, air conditioning. We have recreational facilities, such as a park or green space or swimming pool. And then building in ground areas, such as hallways, landscaping, laundry rooms, elevators, and stairways. So with the condominium, ownership in the condominium includes possession, use, and exclusion of that unit. So effectively, what the owner of a condo owns is the inside four walls of that unit. So unit owners own their condo space, but then they share the common area or the common elements with other unit owners. So unit owners as a group may exclude unit owners or non-owners from using certain facilities, such as under the rules and regulations of the condo association, if a condo owner does not pay their assessments, then they may be excluded from using the pool, for example, or access to the clubhouse, maybe by reservation only. So it's not an absolute that everybody gets automatic, the automatic right to use the common areas, but as to their unit itself, they have the right to possess, use, and exclude others from their unit. In relation to a transfer or an incumbrance on the condo unit, so condo units can be sold individually, can be sold, they can be mortgaged, or they can be encumbered as long as there's no interference from other owners, and as long as that incumbrance does not affect the common areas as well. And so the resell of a unit generally has, it's usually restricted by right to first refusal by the condo association, which means that when an owner of a condo unit gets ready to sell that unit, the condo association having a right to first refusal determines whether or not they want to buy that unit as opposed to that unit being sold to a third party. And then condo units themselves, the inside four walls, are individually taxed, and then the common areas with both the real and personal property is tax separately. The condo regime is created by executing and recording the condominium declaration, and then a master deed by the developer. And in that condominium declaration, it's going to outline the legal description of the property, the name of the property. It's going to include a survey, which includes the common areas, and then all of the units. A plat map where the property has been replatted, which outlines the land and the buildings, easements for the common areas, such as the driveways, and parking lots and sidewalks and things like that, easements for utilities to the units. Identification of each unit, owner's share of interest in the common areas. So that's going to be determined by that unit, generally by that unit owner's square footage in their unit divided by the unit square footage total of all units. And that's going to give a per rat a share of that interest in the common areas. And then that will also generally include the number of parking spaces as well if any. So based on that undivided or based on that share in the common areas, that percentage may allow that unit owner one or two or three or more parking spaces, preserved parking spaces. The condo declaration will also outline the creation of the condo owners association or the COA, which is similar to an HOA or homeowners association, or we use the generic term property owners association, a POA. And then which also will be governed by bylaws. The entity itself will be governed by bylaws. So usually that's going to be a nonprofit corporation. And as a result, that nonprofit corporation will have bylaws. But then there will the entity, the nonprofit entity, the COA will then pass rules and regulations. So the declaration may include voting rights, membership status, and liabilities of expenses for each owner. So we'll talk about the C. We'll talk about that in a minute. I've got that in another in my notes just down the way. So we'll get back to liabilities of expenses. But then that can also be outlined in the in the rules and regulations adopted by the board of directors of the condo owners association. And then that declaration will also include covenants and restrictions. And more particularly in regarding the use and transfer of the units. So in relation to the organization, the declaration provides for where it will provide for the creation of the COA. Then that COA will in turn enforce the bylaws, manage the property and adopt rules and regulations. And then administer those rules and regulations. The condo owners association as a nonprofit corporation will have a board of directors. And then they will have agents who are appointed to manage that property. So sometimes the COA or the property is self-managed. And that's you see that the HOA as well, which means the owners of the or the the board of directors internally manages all the day-to-day responsibilities for that COA or the COA can in turn hire a property manager to oversee the management of that that property. Usually the bylaws will will provide for the creation of a committee, the option to create one or more committees. And then the board of directors you know as one of their primary responsibilities is to establish the budget each year. And then they oversee the properties finance and then policy administration that goes into the rules and regulations. So it's adopting the budget and then administering that budget. From a management standpoint if we look at the management of a condo owners association and then the property as a whole, you've got maintenance day-to-day maintenance so that can include you know upkeep on the grounds. So the COA could have one or more individuals who are on staff that take care of the day-to-day operations of the COA of the condo property, the common elements, the common areas, the common elements. Or they could outsource that to third-party vendors such as the landscaping company. You've got upkeep of the pool, you've got the landscaping, maybe a sprinkler system. There's you know upkeep of the maintenance of the common areas such as doors and windows and locks and you know rest room facilities you know faucets and sinks and things like that. You've got sales and leasing that could take place in that within that as part of that management. You've got accounting you know so you've got not only ministering the budget but then also receiving the monthly assessments and then paying the bills. Owner services if any. So if there's any on-site services then managing those on-site services that could be a rec facility. It could be programming, it could be any number of things. You've got sanitation so you generally will have one water meter not always but generally you'll have one water meter to the property and then one tie in to the sewer and then also with electric coming into the property and so managing those aspects with sanitation and utilities and if there's any specialized maintenance personnel so if you have to get outsourced this ties into contractors and vendors as well but that could be hiring somebody to maintain the pool. That could be you know hiring electricians or plumbers to take care of those utilities within the common elements. So there's a it's a think of it's like managing a little city almost like managing similar to managing a multifamily project depending upon the size of the the property. Now from an owner's perspective you know from the owner's responsibility perspective the owner's responsible for maintaining the you know the inside of those four walls and maintaining the property condition ensuring the contents within that unit and so that's not just the personal property but that's also the what what insurance is needed if there was damage to that unit. So generally you're looking at the sheet rock you're looking at appliances, the flooring and then you get into the the fact that you've got water lines and electrical lines that are inside the walls and then you generally have an AC unit and heater that is in the seal part of the units in the ceiling and then you've got parts of the unit. of the unit outside. And so even though those units are outside or outside those four walls, then that owner is still responsible for the maintenance and repairs and functioning of that unit. And then also of the electrical employment. So what you really would have to do is go look in the in the condo declaration to determine where the owner's liability is in relation to that unit. So it can extend outside of those four walls. And then also paying common area assessments. So this was what I was mentioning earlier when we talked about the liabilities of expenses for each owner. And so based on that budget that's set by the COA, you've got a couple of operating expenses to come into place. You've got taxes, insurance, often water, you know, one water bill. You could have the property management and then a laundry list of other operating expenses, you know, maintenance and repairs and so forth. And so based on that budget, the owner of that unit will pay their share of operating expenses based on their pro-router share of ownership. Okay. And so usually, so the you've got taxes and insurance and let's say water are the big ones included in that in that assessment. But then we say, well, wait a minute, the units already paying taxes and should have insurance on the inside four walls. And that's true. The unit owner will need the unit owner will be taxed on that unit. And then we'll also need to make sure that the real estate inside those four walls and then also the personal property is covered by insurance. But then the COA is responsible for the outside of those four walls plus, you know, all the common elements. And so the COA will have insurance that covers outside of that unit. So for example, if there was damage to the exterior of the building, the facade of the building, then the COA will be responsible for that. And then their insurance may or may not pay out on a claim. And the same thing with the roof is the roof is damaged. That's the COA's responsibility, not the individual owner. And so the COA will pay taxes on the common elements, which includes the personal and real property. And if there's one water meter coming into the unit, then that water bill will be estimated based on a historical usage in the budget and then included in the COA dues. And then you generally, the each unit has its own sub meter for electrical. So each owner will end up paying their per-rata share based on their percentage of ownership for the unit. Now cooperative is a little different. Cooperative is a nonprofit corporation. Or association, so either one that purchases an apartment building. And then an owner ends up buying a share in that nonprofit corporation. So let's say and then the owner then acquires a proprietary lease based on that ownership. So proprietary lease in one of the units inside that building. So let's say hypothetically, we'll keep this simple. There are 10 units in a building. And this COA purchases this building. Okay, so now this nonprofit corporation owns this 10 unit, both a family building. And so now an owner wanting to live in that building will buy one share. And so let's say that that property cost a million dollars. This is just hypothetical, but that property cost a million dollars. So then each unit would pay or each share would be worth a hundred thousand dollars. So then an individual wanting to live in that co-op would then pay a hundred thousand dollars for that share, that one share. And then they would end up getting a lease to one unit to occupy one unit within that building. And then the shareholder, which is the owner of that share in that nonprofit corporation, would then pay his or her per-rata share of operating expenses for the co-op based on their their percentage of ownership. So in this case, again, the co-op would have a budget for that year based on the taxes. And now there are no units that are individually owned. So the co-op owns all the individual or all the units collectively. So any operating expenses, let's say that the budget, and this is again just hypothetical, but let's say the budget for that co-op, for that real estate building owned by the co-op, is a hundred thousand a year. I keep in this very simple. And so you know, that includes taxes, insurance, maintenance, repairs, any other expenses that would come into play in that budget. Then that owner would be responsible for a per-rata share of those expenses. So in this case, that owner has a one-tenth ownership interest in that corporation or a 10% ownership interest. So then they would pay 10% of the operating expenses for that nonprofit co-op. So the co-operative's association's interest is the real property. There is no ownership by anybody of the individual units in that co-op. And then the shareholder's interest is the shareholder own stock in the nonprofit corporation. And that owning that share of stock is a real property interest. So that individual actually that has the proprietary lease in that co-op building actually does not have an ownership interest in real estate. What they have is an ownership interest, or they have a personal property interest in a share of stock in that nonprofit corporation that just happens to own an apartment building. And then the proprietary lease, the shareholder or tenant does not own the building but has a lease to a unit. And then does not pay any rent because they've already bought that share of stock in the co-op. And so what they do is then they pay their share of operating expenses based on their per-rata share in the co-op. And then a transfer. And then if there was any issues, let's say there's a loan, there's debt on that co-op that was used to buy the apartment building, whereas with the condo, that owner, that one unit owner does not pay their mortgage, then only that unit gets foreclosed on. But with a co-op, since that nonprofit co-op owns the entire building, and let's say that that co-op then took out a loan to purchase that property, then if that co-op failed to pay the debt as required, then that whole entire property could be foreclosed on, not just an individual unit. So in an example, if one unit owner did not pay their share of operating expenses, and that impacted the ability for the co-op to pay its debt, then it wouldn't just be that one property or that one that individual, that one shareholder, it wouldn't be foreclosing on that one shareholder's interest in that property, it would be foreclosing on the entire property. And then the co-op interest is not sold like a traditional real estate transaction or property in a real, traditional real estate transaction, that interest is sold by signing the stock and the lease to another party. So it'd be like selling a share of stock from one party to another. And then finally, we have the time share. And the time share can be one of three things. It can be a free hold estate, which is like a fee-simple absolute ownership, or there could be a lease hold interest in a property or it can be a right to use situation. And so any one of those three may be applicable with the time share. Now traditionally what we've seen historically, traditionally, is the fee estate, the fee-simple absolute where an individual and owner buys into a time share. And so they actually receive a deed to a specific time block within the year. And so those years are generally, they generally been broken down based on red, white, and blue weeks. With the red weeks being the best, the blue being not the best, but also not the worst. And then the, I mean, the white being the middle ground, so to speak, not the best, but not the worst. And then the blue weeks being the worst. So for example, if you were to buy a time share out at Canyon Lake, and you wanted a red week, well that's on the lake. So we're looking at what's the best time to go to the lake. So we're generally looking at the summertime. And then the best one would probably around the 4th of July holiday. So that would be like the best red week of the year. And then if we're looking at a white week, that could be, you know, May, June, August, September, October. And if we're looking at a blue week, January, February, March, August, August, August, August, August, August, August, because in Texas, out at the lake, it's cold. And then who's going to the lake in January, February, and March? Now people do, I'm not saying that people don't, but is that when you wanna go spend your quote unquote vacation at the time share and probably not? And so that would be your home base, your home property. If you bought into that time share at the lake, let's, I'm using Canyon Lake as a hypothetical. And so then what you could do is not use that time, not use that week, bank up that time and roll it over to the next year. And so now you've got double, effectively, it works out the points, but double the points that you couldn't end up using somewhere else at a different location at a different time. And so it may be that you end up using that time to go to Lake Tahoe for spring break. Now more likely than not with the blue week at Canyon Lake, you're not gonna have enough, even waiting two years, you're not gonna have enough to probably cover a full trip to use another time share with under that same company at Lake Tahoe, 'cause that's, you know, going to Lake Tahoe in that spring break is prime time. So you may have to end up coughing up some extra money. So you under the fee hold type of time share, you get a fee simple absolute ownership interest. And then it's gonna be an undivided interest in that property, but you're gonna be assigned a specific time. And so you have a home resort, you can bank those fees, and then you'll also pay maintenance fees. So there will be operating expenses for that time share. And then you will, you will just like assessments with condominant association or cooperative, you're going to have monthly maintenance fees for that property. And so that will be in addition to any cost. If you buy the time share outright, that's one thing. If you finance the time share, then you'll have the principal interest, and then you'll have your maintenance fees on top of that. The lease hold time share is a little bit different. So this is where a tenant agrees to rent the property on a schedule basis or under a prearranged system of reservation, so it may not be, you may not have a specific day and time, but you have the ability to get into the reservation system and then select the time that you would like to use the time share. And then with the lease hold, instead of it being a fee estate, where there's effectively all the unities of interest only with the time share all you're getting is the block of time. But then there's also the common elements that come into play. So with regard to that block of time, you have the bundle of rights. So you can assign that ownership, you can sell it, you've got the right to exclude others during your use of that week that you're assigned. But with the lease hold, you have the right of possession, but you don't have the under and then the right of use, but you don't have the other bundle of rights. And so this is gonna be more of a short term opportunities that may be for, let's say, three years, as opposed to a time share in perpetuity like a deed of interest under the free hold or the fee simple absolute estate. And then there's another one called the right to use. And this is where you get points instead of an interest. So when you buy in, you don't actually have a deeded interest, but you have points. And then you can, the benefit of this, you can use those points, not just at one location. So if you buy into the time share at Canyon Lake, that's your home base. And that's where, you know, if you're assigned the week of April 1st, then that's your week. That's what you're assigned. That's what you bought. But with the points, you have a bank of points and then you can use those points at different times and at different locations, different resorts under that ownership umbrella. So there are some benefits to having the point system. And then generally you're gonna have maintenance fees as well. You're gonna have maintenance fees with all three of these. And then another one that's similar to the right to use or could be in conjunction with the right to use is more of a license. And then with that license, that's what I'm starting to see more of now where it's the license is not a deeded interest. If you think, let me put it in this context. So a license is the right to use the property of another for limited and specific use. And that's the same definition as an easement. And the difference between those two is that an easement is non-revocable, which means it's in perpetuity, it runs with the land. So if you have an easement, you give an easement to the utility company to bring utilities to your property. So you have electricity, then that easement stays with that property. When you sell that property, that easement stays there. And it doesn't go away. And even if they stopped using it, that easement is still an effect. Now, there's a whole other lecture that comes into play with easements. And so we're just talking generally now. So that easement is non-revocable. Whereas with a license, a license is revocable. And if we look at a license, think of a license like a movie ticket or ticket to a sports event, you, that ticket says, you have a right to enter that property on a specific day at a specific time. And that when that movie's over, when that sporting event is over, that you're going to vacate the property. So you can't buy one movie ticket and then stay there all day. You've bought that movie ticket for that specific time slot. And then with the license, the license is revocable, which means that if you ever look on the back of your movie ticket or the back of your sporting goods ticket, and then now we really don't have tickets like we used to. Now we have everything's digital. But look on there and it'll say that the venue has the right to terminate your license. That's a revocable, that's an interest that is revocable. And so, same thing in terms of these resort or vacation properties, as we're starting to see a license and that license has a limited use and it's not a perpetuity either. I've seen one in particular that goes for 40 years. So you pay either buy in and then you've got your monthly maintenance fees and that's good for 40 years. And at the end of 40 years, then that's the end of that license. Time shares are regulated. And generally heavily regulated by state law. In Texas, we have the Texas Times Share Act that's located in the Texas Property Code. And so, time share developers or developments must register with the Texas Roll State Commission and the Texas Roll State Commission overseas or provides the regulatory oversight for time shares in Texas. And then the Roll State Commission can create rules associated with time shares such as simple forms and other matters. And then another example in Texas, we have a cooling off period for the purchase of a time share which means that a buyer of a time share could terminate that agreement before the six days of. So those are some examples of regulations in Texas of time shares. So what we've covered is the sole ownership of property, sole proprietorship, co-ownership, the states and trust, condominiums, cooperatives, and then time shares.