24-1 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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5• Personal Property and Bailments

• Real Property• Landlord and Tenant

• Estates and Trusts• Insurance Law

Property

PART

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Real Property

PA ET RHC 24

Study how a society uses its land, and you can come to pretty reliable conclusions as to what its future will be.

E.F. Schumacher, Small is Beautiful (1973)

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Learning Objectives

• Define real property and describe the scope of related rights and interests

• Distinguish the forms of real property ownership and how transfer occurs

• Explain the process of acquiring real property and relevant deeds

• Discuss government control of real property and constitutional limits

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• The law of real property concerns the ownership, acquisition, and use of land

• Real property includes not only land but also things firmly attached to or embedded in land:– Buildings– Trees, crops, and other vegetation– Water and groundwater– Minerals– Airspace above

Overview

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• A fixture is personal property that has become attached to or connected to real property in such a way that it ceases being personal property and becomes part of the real property

Fixtures

– Fixtures belong to real property owner

– Chevron U.S.A., Inc. v. Sheikhpour: underground fuel storage tanks were fixtures

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• Attachment– If firmly attached to real property so it

cannot be removed without damaging property, the item is likely to be a fixture

• Adaptation– When an item would be of little value except

for use with real property, item likely to be a fixture

• Intent– Judged by what the circumstances indicate

as intended not person’s subjective intent

Factors To Determine Status as Fixture

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• An exception to the usual fixture rules involve trade fixtures, which are personal property attached to leased premises by a tenant for the purpose of carrying on the trade or business– Trade fixtures remain tenant’s

personal property and may be removed at lease end

Trade Fixtures

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• Estate is used to describe a person’s ownership interest in real property– Classified as either freehold or nonfreehold

• Freehold estates are ownership interests of uncertain duration

• Nonfreehold (or leasehold) estates are those held by persons who lease real property

• Co-ownership of real property exists when two or more persons share same ownership interest in property

Estates in Land

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• An easement is the right to make certain use of another person’s property (affirmative easement) or to prevent another from making certain uses of his own property (negative easement)

• Easements may be acquired by grant, reservation, prescription, or implication

Easement

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• A profit is a right to enter another’s land and remove some product or part of land

• A license is a temporary right to enter another’s land for a specific purpose

Profit & License

The tenant who planted the cotton crop has a profit, the combine crew has a license

to pick cotton

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• Real estate owners may create agreements that restrict use of real property called restrictive covenants– Covenants “run with the

land” and bind subsequent owners of the property

– Enforceability of covenants depends on purpose, nature, scope of restrictions

Restrictive Covenants

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• Title to real property may be acquired by purchase, gift, will or inheritance, tax sale, and adverse possession

• Adverse possession occurs when person wrongfully occupies land and acts in open and hostile manner as if he were the owner– True owner must take steps within a statutory

time limit to eject possessor from the land or forever lose the right to eject the possessor

Acquisition of Real Property

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1. Contracting with real estate broker to locate buyer

2. Negotiating and signing a contract of sale3. Arranging for financing of the purchase and

other requirements (e.g., conduct a survey or acquire title insurance)

4. Closing the sale, primarily involving payment of purchase price and transfer of the deed

5. Recording the deed

Steps for Sale & Purchase

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• A quitclaim deed conveys whatever title the grantor has at the time he executes the deed– Contains no warranty of title

• A warranty deed contains covenants of warranty about the title– Two types: general and special

• A deed of bargain and sale (grant deeds) grantor makes no covenants about the title

Types of Deeds

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• In a title opinion, an attorney examines the abstract of title and gives an opinion whether grantor has marketable title– Marketable title: title free from defects or

reasonable doubt about its validity – Abstract of title: history of what public

records show about the passage of title to, and other interests in, a parcel of real property• Not a guarantee of good title

Methods of Assuring Title

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• Under the Torrens system of registration (in a few states), one who owns land in fee simple obtains a certificate of title

• Purchasing a policy of title insurance is the preferred and most common means of protecting title to real property– Title insurance obligates insurer to

reimburse insured for loss if the title proves defective

Methods of Assuring Title

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• Over the last century, an implied warranty of habitability developed that guarantees the house is free of hidden defects rendering it unsafe or unsuitable for human habitation– Similar to implied warranties for sale of

goods

• Seller may be liable for damages if seller breaches the implied warranty– Damages measured by either the cost of

repairs or the loss in value of the house

Residential Property

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• Premises liability refers to negligence cases in which property owners or possessors (such as business operators leasing commercial real estate) are held liable to persons injured while on the property– Negligence: failure to exercise reasonable

care to keep the property reasonably safe– Generally includes duty to take reasonable

security precautions to protect persons lawfully on premises from foreseeable wrongful (including criminal) acts by third parties

Premises Liability

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• Enacted to eliminate long-standing patterns of discrimination against disabled persons in employment, access to public services, and access to business establishments and similar facilities open to the public, ADA’s Title III focuses on places of public accommodation– Requires property owners and possessors to take

reasonable steps to make property accessible to disabled persons

Americans with Disabilities Act

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• Society imposes duties on landowners by nuisance, zoning, & eminent domain laws

• Nuisance refers to the lawsuit that may be filed if a property use unreasonably interferes with another person’s ability to use or enjoy her own property

Land Use Control: Nuisance

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• The Fifth Amendment to the Constitution guarantees that private property shall not be taken for public use without “just compensation”

• This implies the government’s power of eminent domain to effect the taking– The key is “just compensation”

• Eminent domain is controversial, perhaps more so given the Kelo decision

Land Use Control: Eminent Domain

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• Normally, zoning ordinances divide a city or town into various districts and specify or limit the uses to which property in those districts may be put– Single-family or high-density residential

uses, or commercial, light industry, or heavy industry uses

– Restrictions on building height, building footprint, and distance buildings must be from lot lines (setback regulations)

Land Use Control: Zoning

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• A zoning ordinance is prospective, thus the ordinance may require gradual phasing out of nonconforming uses and buildings that do not fit the general zoning plan

• Property owners may seek a variance, allowing a deviation from the zoning law

Land Use Control: Zoning

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• Other takings litigation centers around land use regulations that make the use of property less profitable for development– Landowners challenge application of regulations

• In Nollan v. California Coastal Commission: – Conditioning permit on grant of easement

was unconstitutional taking

Regulatory Takings

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Thought Questions

• Is the old adage, good fences make good neighbors, as true today as yesterday?

• What is your opinion of the Kelo decision?