How does deeded real estate expire?

[Bjaiken77]

I’m hoping for someone smarter than me to answer this question. The Palmetto group ownership trust got me thinking about this issue.

We all know DVC contracts have an expiration date. But how does that happen to a deeded real estate transaction? In other words, if I own a light switch in a room, how do I forfeit that after 50 years? That doesn’t seem like a real estate transaction - that seems like a long term rental agreement.

Putting points in a trust and assigning user percentages makes more sense in terms of a start and end date. You can say the trust dissolves in 50 years. But, again, how do I “own” real estate at Grand Floridian and the lose it after a fixed period of time? I never thought about it until now.

 

[CarolMN]

You don't own real estate. (That's a popular misconception). You own a deeded interest in a RIGHT-TO-USE lease. The lease expires.

 

[Rex1993]

I don't believe DVC is right to use. I believe the expiration coincides with the expiration of the underlying ground lease. When a ground lease expires, the deeded, leashold improvements revert to the landowner.

 

[Bjaiken77]

You don't own real estate. (That's a popular misconception). You own a deeded interest in a RIGHT-TO-USE lease. The lease expires.

That makes more sense. But isn’t it on file with Orange County as a deed? What’s the point of assigning a light switch? Why don’t you just say it’s a right-to-use club? Aren’t there other factors where it is treated like a real estate transaction? I don’t understand the point in doing that if it’s just a usage agreement.

 

[Bjaiken77]

I don't believe DVC is right to use. I believe the expiration coincides with the expiration of the underlying ground lease. When a ground lease expires, the deeded, leashold improvements revert to the landowner.

Can I ask for my light switch at that point in time? I’m taking it with me…haha. I’ll probably be in the ground when my ground lease expires.

 

[Rex1993]

Light switches are technically part of the real property so they revert.

 

[CarolMN]

I don't believe DVC is right to use. I believe the expiration coincides with the expiration of the underlying ground lease. When a ground lease expires, the deeded, leashold improvements revert to the landowner.

Could be. All I'm really sure about is that we own a deeded interest in a lease that ends on a certain date, whatever type the lease may be. After that, we own nothing.

 

[Sandisw]

The way I see it is we own the interest in the building which is s leasehold condominium.

But it is on a ground lease that then expires and we agree to give it back to Disney when the ground lease expires.

So, while I see us as having ownership in the property, we basically give it back for free when it’s done.

 

[supersnoop]

This is a common concept in Hawaii. You own the building, but Disney owns the land. At the end of the ground lease, they take ownership of everything on their property.

 

[wench]

Can I ask for my light switch at that point in time? I’m taking it with me…haha. I’ll probably be in the ground when my ground lease expires.

If the light switch is yours, you should charge every other owner a fee every time they flip your switch. It could be very lucrative.

Whoever owns the bed would make serious bank.

 

[Bjaiken77]

This is a common concept in Hawaii. You own the building, but Disney owns the land. At the end of the ground lease, they take ownership of everything on their property.

Hmmm…I’ve never heard of this. This is fascinating. Thanks for the example.

 

[mkatsy]

Hmmm…I’ve never heard of this. This is fascinating. Thanks for the example.

Many big box stores are like this. Starbucks are usually ground leases. It allows Starbucks to build on a parcel that they would not have been able to afford to buy, and it allows the property owner to retain ownership of the land and receive an income stream from the lease. At the end of the ground lease Starbucks walks away and the owner deals with the outdated decrepit building on his land.

 

[Lorana]

You don't own real estate. (That's a popular misconception). You own a deeded interest in a RIGHT-TO-USE lease. The lease expires.

That makes more sense. But isn’t it on file with Orange County as a deed? What’s the point of assigning a light switch? Why don’t you just say it’s a right-to-use club? Aren’t there other factors where it is treated like a real estate transaction? I don’t understand the point in doing that if it’s just a usage agreement.

It is in fact a real estate ownership. You purchase a deeded percentage ownership interest. For example: If you take out a loan, it is considered a mortgage and you can claim the mortgage interest deduction on your taxes. You can also claim the portion of dues paid on real estate taxes on your taxes, too.

 

[NVDISFamily]

I’m not sure if this is 100% linked but it’s been part of GAAP (generally accepted accounting principles) and other standards that long term leases are defined as capital leases and carried as an asset for accounting purposes (with liabilities netting out).

 

[CarolMN]

It is in fact a real estate ownership. You purchase a deeded percentage ownership interest. For example: If you take out a loan, it is considered a mortgage and you can claim the mortgage interest deduction on your taxes. You can also claim the portion of dues paid on real estate taxes on your taxes, too.

We will have to disagree. It is not real estate. We purchased a deeded interest in a lease.

Real Estate is generally defined as land, including the resources in and on it, and the buildings and permanent fixtures attached to it. We do not own a percentage of the land, and when the lease expires, the buildings on it revert to Disney.

 

[mkatsy]

We will have to disagree. It is not real estate. We purchased a deeded interest in a lease.

Real Estate is generally defined as land, including the resources in and on it, and the buildings and permanent fixtures attached to it. We do not own a percentage of the land, and when the lease expires, the buildings on it revert to Disney.

the ownership interest is determined by the language of the deed. It's a deeded ownership interest in a leasehold.
https://www.southfloridalawpllc.com...omenon-in-most-states-more-common-in-florida/

 

[mkatsy]

.

 

[Rex1993]

the ownership interest is determined by the language of the deed. It's a deeded ownership interest in a leasehold.

Almost. As it states, it is a deeded, undivided ownership interest in a leasehold condominium. See relevant FL statute below:

718.101 Short title.—This chapter shall be known and may be cited as the “Condominium Act.”

718.102 Purposes.—The purpose of this chapter is:
(1) To give statutory recognition to the condominium form of ownership of real property. [emphasis added]
/
/
/
(11) “Condominium” means that form of ownership of real property created pursuant to this chapter, which is comprised entirely of units that may be owned by one or more persons, and in which there is, appurtenant to each unit, an undivided share in common elements.
(12) “Condominium parcel” means a unit, together with the undivided share in the common elements appurtenant to the unit.
(13) “Condominium property” means the lands, leaseholds, and personal property that are subjected to condominium ownership, whether or not contiguous, and all improvements thereon and all easements and rights appurtenant thereto intended for use in connection with the condominium

 

[mkatsy]

Almost. As it states, it is a deeded, undivided ownership interest in a leasehold condominium. See relevant FL statute below:

718.101 Short title.—This chapter shall be known and may be cited as the “Condominium Act.”

718.102 Purposes.—The purpose of this chapter is:
(1) To give statutory recognition to the condominium form of ownership of real property. [emphasis added]
/
/
/
(11) “Condominium” means that form of ownership of real property created pursuant to this chapter, which is comprised entirely of units that may be owned by one or more persons, and in which there is, appurtenant to each unit, an undivided share in common elements.
(12) “Condominium parcel” means a unit, together with the undivided share in the common elements appurtenant to the unit.
(13) “Condominium property” means the lands, leaseholds, and personal property that are subjected to condominium ownership, whether or not contiguous, and all improvements thereon and all easements and rights appurtenant thereto intended for use in connection with the condominium

you don't have it in perpetuity. If it were a deeded week in a traditional timeshare model yes, then I agree with you. DVC is an easement.

 

[AnnaKristoff2013]

I’m hoping for someone smarter than me to answer this question. The Palmetto group ownership trust got me thinking about this issue.

We all know DVC contracts have an expiration date. But how does that happen to a deeded real estate transaction? In other words, if I own a light switch in a room, how do I forfeit that after 50 years? That doesn’t seem like a real estate transaction - that seems like a long term rental agreement.

Putting points in a trust and assigning user percentages makes more sense in terms of a start and end date. You can say the trust dissolves in 50 years. But, again, how do I “own” real estate at Grand Floridian and the lose it after a fixed period of time? I never thought about it until now.

There are all kinds of real estate interests (having nothing to do with timeshares) that expire or revert. Life Estates are a common one that revert back to some other owner after the death of a person living at the time the estate is conveyed. They are usually “deeded.”