Charles J. Jacobus TEXAS REAL ESTATE LAW 11E

2 Chapter 6 Fixtures and Easements Both involve rights that a third party may have in an owner’s real estate. Fixtures involve the rights that one may have in certain appliances or appurtenances to one’s real estate. Easements involve the rights of a one party to the use of an access across another individual’s real estate.

3 Fixtures The exact meaning of the term “fixture,” as used in every case, is difficult to define. Case law defines a fixture as an article or personalty that has been attached to the real estate so that it becomes real estate. Statutorily, it has been determined that goods are “fixtures” when they become so related to particular real estate that an interest in them arises.

4 Realty to Personalty — Personalty to Realty Realty = Real Estate Also called real property Conveyed by a deed Controlled by real estate law Personalty = Personal Property Also called chattel Conveyed by a bill of sale Controlled by UCC Whether an item is real estate or personal property depends on: Nature of the article Instrument used in conveyance Who is making the claim? Are there liens or other security instruments?

5 Determination of a Fixture Three criteria are consistently applied: Annexation - the manner in which the article is attached to the real estate. Adaptation - the character of the article and its adaptation to the property. Intention - what did the parties intend when they signed the contract? Preference is given to the question of intention! It is not a question of law but a question of fact. Often created by the conduct of the parties. The intent should be clearly expressed in the earnest money contract.

6 TREC One to Four Family Residential Contract (Resale)

7 Other Determinations Does the seller still have a claim (i.e., seller financing)? Are there mechanics or materialmen involved? Is there a mortgage lender(s)? Can the item be removed without material injury? Are there other security interests involved?

8 Security Interests When chattel is purchased on credit, the seller of that item may protect his interest by recording a UCC lien or “chattel mortgage” lien. The lender would prepare a promissory note, a security agreement, and two financing statements commonly called UCC-1 forms. The seller would record his interest: (1) in the real property records in the county clerk’s office in the county of the purchaser’s residence, and (2) in the office of the Secretary of State. When a UCC lien has been properly recorded, it is considered to be “perfected,” and the public is legally on notice of that vendor’s interest. Any subsequent purchaser is to search the records for such liens.

9 When the collateral will be affixed to real estate, there are additional provisions for filing the UCC liens. This type of lien is termed a fixture filing. A perfected security interest in fixtures has a priority over the conflicting interest of an encumbrance or owner of the real estate where the security interest is: 1. A purchase money interest. 2. The fixture filing is perfected before the interest of the owner. 3. The fixture is readily removable factory or office machines. 4. The lien is prior in time to any other conflicting security interest. Once perfected, a chattel mortgage is released by use of a UCC-3 form. Security Interests

10 Trade Fixtures Articles annexed to the realty by the tenant for his business for trade. The parties’ rights are usually set out in a lease between the parties. The general rule is that trade fixtures are removable at the end of the lease, provided they can be removed without material injury. Unless otherwise specified in the contract, the fixtures must be removed within a reasonable time after the termination of the tenant’s occupancy. “Reasonable time” is a question of fact for the jury to decide. If tenant fails to remove the trade fixtures within a reasonable time they will become the property of the landlord.

11 Manufactured Housing There has been a rapid growth in Texas in HUD manufactured housing (previously known as mobile homes). The cost is approximately half that of a regularly constructed home. A “HUD-Code manufactured home” is a structure: (1) constructed on or after June 15, 1976; (2) transported in one or more sections, which, in the traveling mode, is 8 body feet or more in width or 40 body feet or more in length or, when erected on site, it is 320 or more square feet, and (3) is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities (plumbing, HVAC, electrical).

12 This is not the same as industrialized housing. Industrialized housing is constructed in one or more modules built at a location other than the permanent residential site and transported to the permanent residential site and are erected on a permanent foundation. It does not include any residential structure that is in excess of 3 stories or 49 feet in height. Apparently, if the home can be moved in a single unit, it will be a HUD manufactured home, but if it were built by components it would be industrialized housing. In transacting the sale of any of the foregoing units they are obviously sales of personal property and certificates of title are issued as personal property. Manufactured Housing

13 Real Property Issues Property Code says a manufactured home is personal property if placed: 1. On a lot that is not titled in the name of the consumer. 2. In a manufactured home rental community. Texas Manufactured Housing Standards Act has established standards. Texas established a supervisory state agency for manufactured housing. This has enabled a tremendous amount of affordable housing to be developed in Texas with controls on quality. This may be the fastest growing area of new homeownership in the state. Are these fixtures? Good question. Probably not.

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15 Easements The right of one person to use the land of another for a special purpose. Also known as “incorporeal hereditaments”. Easement carries the right to reasonable use with as little burden to the owner of that real estate as possible. Easement right carries with it only a right to use, not ownership.

16 Appurtenant vs In Gross An easement appurtenant is created for the benefit of another tract of land. There must be two different owners involved. The parcel the easement crosses is called the servient estate. The parcel that uses the easement is called the dominant estate. Runs with the land. An easement in gross benefits only the individual owner for his particular use. Holder often has no right to sell, assign, or devise it. Normally terminates with the dissolution of the entity that has the right. Often a right-of-way or a utility easement. Generally in writing and agreed to by all parties or acquired by eminent domain proceedings.

17 Appurtenant vs In Gross

18 Creation One of eight ways, four of which are in writing and four of which are oral. Four that are required to be in writing include easements by: (1) express grant; (2) express reservation; (3) reference to a plat; and (4) statute. Four are created by conduct of the parties and include easements by: (1) implication; (2) prescription; (3) estoppel; and (4) necessity.

19 Easement by Express Grant Must be: in writing, properly subscribed by the party to be charged, state the intent to grant the easement, have an adequate legal description, acknowledged (if it is to be recorded), and properly delivered. The simplest and most direct method of creating an easement.

20 Easement by Express Reservation Created by express reservation in a deed. Usually appurtenant and necessary for the property being conveyed or for the real estate contiguous thereto. Owner A may sell his property owner B but will reserve an easement for access to the remainder of his property. Usually not an exception to title, but rather a property right reserved in the deed.

21 Easement by Reference to a Plat An easement can be created by reference to an existing subdivision plat. It is quite common for subdivision developers. Developers may create easements for water mains, gas distribution lines, road rights-of-way, and other types of easements.

22 Easement by Reference to a Statute Texas created an easement under the Texas Open Beaches Act. Created a public “right of use” over the beaches from the mean low tide to the line of vegetation bordering on the Gulf of Mexico. If there is no marked vegetation line, the easement may vary but cannot extend farther than 200 feet from the seaward line of mean low tide. Prohibits homeowners from rebuilding when the line is forced inland. It has also been held that the public’s right arises from “custom” because of the public’s right to use these beaches over hundreds of years.

23 Texas Supreme Court noted that Galveston’s west beach had been privately owned since the Republic of Texas. The Court went on, then, to describe two beaches that exist: 1) the wet beach which is under tidally influenced water; and 2) the dry beach between mean high tide and the vegetation line. The state of Texas owns the wet beach area, and the private landowner owns the dry beach area. The owner can lose his right to occupy the dry beach area if the land is slowly and imperceptibly eroded away. If the land is torn away because of a hurricane, flood, or other act of nature, the owner is allowed to reclaim. Texas Open Beaches Act

24 Texas Department of Transportation Texas Open Beaches Act

25 Entry to Galveston Bay at Port Bolivar

26 Terminus of the Waterway in Brownsville

27 TREC has a promulgated form!

28 (a) Any county attorney, district attorney, or criminal district attorney, or the attorney general at the request of the commissioner, shall file in a district court of Travis County, or in the county in which the property is located, a suit to obtain either a temporary or permanent court order or injunction, either prohibitory or mandatory, to remove or prevent any improvement, maintenance, obstruction, barrier, or other encroachment on a public beach. Open Beaches Act, Chapter 61, Natural Resources Code

29 Ownership moves with the vegetation line! Beach Vegetation Line Gulf of Mexico

30 Easement by Implication Imposed by a court to provide access to a landlocked parcel. Certain criteria must be met to justify the court’s intervention: 1. The prior use of the easement must be apparent and obvious. 2. The prior use must also have been reasonably continuous. 3. The use of that easement must be reasonably necessary. 4. There must have originally been a unity of ownership. Two owners have an oral agreement where one has granted the easement to another’s landlocked parcel that was originally owned by the grantor. When the oral agreement is breached, the aggrieved party sues.

31 Easement by Prescription Has been obtained by a claimant against the wishes of the landowner. Think of it as obtaining an easement by adverse possession. Generally imposed by a court, as in an easement by implication. The requirements for an easement by prescription are as follows: 1. Use must be adverse, open, notorious, and hostile. 2. Use must be exclusive to the claimant and not to the public. 3. Use must be uninterrupted & continuous for at least 10 years.

32 Easement by Estoppel A party, by oral agreement, has granted an easement which the other party has relied on and has expended money that would be lost if the easement is revoked. The only requirements for creating an easement by estoppel are that: 1. The representation must have been communicated to the promisee. 2. The representation must have been believed by that promisee. 3. There must have been a reliance to the detriment of the promisee. It is imposed by equity because of the bad faith of promisor and then attempting to take it back after the promisee has relied on his promise.

33 Easement by Necessity There has often been confusion between easements by implication and easements by necessity. In order for an easement by necessity to exist, it must be shown that: 1. There was a unity of ownership with the dominant and servient estates. 2. The roadway is a necessity, not a mere convenience. 3. The necessity existed at the time of the severance of the two estates. No one can have an easement by necessity over the land of a stranger. There must be some conduct between the dominant and servient estates. Being landlocked, by itself, does not create the necessity. Must be a “strict” necessity, providing the only access. No requirement that the easement be apparent or continuously used. A temporary right that ceases when the necessity terminates.

34 Termination The methods of terminating an easement are: release, merger, failure of purpose, and abandonment.

35 Release An easement can be released by express agreement of the parties. The same care in drawing the instrument for creating the easement should also be taken in the termination of that easement. There may be rights created that could be overlooked when the release is drawn, and such oversight may inadvertently create a cloud on the title.

36 Merger When the owner of the dominant estate purchases the servient estate or vice versa and therefore owns fee simple title to the entire property and no longer has any use for the easement.

37 Failure of Purpose If an easement is created for a particular purpose, it is within this purpose that guidelines are established for reasonable use. When the purpose for an easement fails, so does the easement. An illustration of this would be a right of way that was created to cross property solely for train traffic when the trains are permanently re-routed.

38 Abandonment Abandonment is difficult to prove and not an easy method of termination. There must be proof of an intent of the party using the easement to abandon that easement. This must be proved by the person attempting to terminate the easement. Must be established by clear and satisfactory evidence. Mere nonuse, by itself, does not constitute abandonment.

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40 Questions for Discussion 1. What is a fixture and what are the three tests of a fixture? 2. What is a trade fixture? 3. Define an easement and explain the difference between an easement appurtenant and an easement in gross. 4. Explain the difference between the dominant and servient parcels in an easement appurtenant. 5. How may easements be created and terminated?