CHAPTER 16 Real Property

Introduction In tort and product liability cases, defendant’s insurance coverage is often an important factor in how litigation proceeds Property owners also depend on insurance to protect themselves from liability Mortgage companies and banks that make loans to finance property purchases require that insurance be carried

Real Property The Law Has Divided Property into Two Classifications Land and all things attached to the land Real estate Personal Property All other property Tangible Intangible Learning Objective: The difference between real property and personal property.

Real Property Ownership Rights in Property Often viewed as a “bundle of rights” Fee simple absolute Ownership rights to the greatest degree Upon the owner’s death, interests in property descend to owner’s heirs Learning Objective: How one acquires, holds, and transfers ownership rights in property and what procedures are involved in the sale of real estate.

Real Property Ownership Rights in Property Government restrictions on property May be subject to restrictions Zoning laws Eminent domain Easements Right of another to use the owner’s land Limited purpose

Real Property Ownership Rights in Property Concurrent ownership Owners who share the bundle of ownership rights Tenancy in common If tenant in common dies, tenant’s ownership rights pass to heirs Joint tenancy If joint tenant dies, tenant’s interest passes to surviving joint tenant Other tenancies Tenancy by the entirety Community property

Real Property Ownership Rights in Property Life estates An interest in real property Transferred to another for life of that individual Future interests Fee simple owner conveys property to another conditionally or for a limited time Original owner still retains interest

Real Property The Transfer and Sale of Real Property Ownership can be transferred in numerous ways Gift Inheritance Lease Sale Sale of tangible personal property Covered by common law of contracts

Real Property The Transfer and Sale of Real Property Contract formation—offer and acceptance Earnest money Responding to an offer The role of the escrow agent Financing Mortgage Inspection of the premises

Real Property The Transfer and Sale of Real Property Title examination and insurance Checking records carefully to be certain the seller is actually the owner of the property The closing Deeds Closing costs

Real Property

Real Property Leases Contractual agreement under which owner (lessor) agrees to rent property to another (lessee) Specific period of time Leases of real estate governed by Common law of contracts State statutory law

Real Property Leases Paralegals frequently draft or review lease agreements Should be familiar with typical terms of a lease

Real Property Commercial Leases Usually more detailed than residential leases Special expertise is needed Terminology follows industry practices Building Owners and Managers Association International Gross leasable Net leasable square footage Specific discussion of common areas and responsibilities, inspection rights, etc.

Real Property Property Law and the Paralegal Work requires understanding of law governing real property Handling real estate transactions Contact with buyers, sellers, and real estate agents Work with title companies and banking institutions

Real Property Protecting the Real Estate Purchaser: The Legal Due-Diligence Team The legal due-diligence team Title due diligence Survey due diligence Government regulation due diligence Lease review The legal due-diligence team provides value

Summary An insurable interest exists whenever an individual or entity benefits from the preservation of the property to be insured or the continued health or life of the person to be insured The general principles of contract law are applied to the insurance contract The insurance industry is also regulated by the states

Summary Defenses against payment to an insured include fraud, lack of an insurable interest, and improper actions on the part of the insured Some parties prefer to self-insure against risk of loss by setting aside funds for such possibilities Captive insurance is sometimes employed by large companies that form their own insurance company to handle insurance needs