CHAPTER 41 REAL PROPERTY AND JOINT OWNERSHIP DAVIDSON, KNOWLES & FORSYTHE Business Law: Cases and Principles in the Legal Environment (8 th Ed.)

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 2 PROPERTY RIGHTS Two distinctly different meanings for property: Two distinctly different meanings for property: – An object subject to ownership, a valuable asset. – A group of rights and interests protected by law.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 3 PROPERTY RIGHTS Rights associated with owning property: Rights associated with owning property: – To use property personally. – Give someone else the use of it. – Rent it to someone else. – Use property to secure loan.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 4 PROPERTY RIGHTS Rights associated with owning property: Rights associated with owning property: – Right of support from adjoining lands. – Right to use adjacent body of water. – Limited rights to airspace. – Right to grow things. – Right to things attached to the land.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 5 REAL PROPERTY DEFINED Definition of Real Property: Definition of Real Property: – Land and things permanently attached to land, like buildings and roadways. Definition of a Fixture: Definition of a Fixture: – Property at one time was movable and independent of real estate but became attached to it. – Examples are: water heaters, built-in ovens, installed dishwashers.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 6 REAL PROPERTY DEFINED The Nature of Plants: The Nature of Plants: – Generally considered as real property. – UCC classifies plants based on who will remove them: Seller removes plants: personal property. Seller removes plants: personal property. Buyer removes plants: real property. Buyer removes plants: real property. State Governance. State Governance. – Property laws vary from state to state. – Laws of the state where property located govern land.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 7 REAL PROPERTY DEFINED Federal Regulation: Federal Regulation: – Title III of the Americans with Disabilities Act, regulates property open to the public to accommodate those with a disability. – Violators subject to damages and civil penalties.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 8 ACQUISITION OF REAL PROPERTY Original Occupancy: Original Occupancy: – Private ownership of land previously owned by the government. – May be accomplished by outright grants or homestead entry laws. Voluntary Transfer by the Owner: Voluntary Transfer by the Owner: – Transfer accomplished by written deed. – Deed is evidence used for real estate and indicates who owns the land. – Written document required by Statutes of Fraud.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 9 Voluntary Transfer by the Owner. Voluntary Transfer by the Owner. – Warranty deed: contains implied covenants to effect that a good and marketable title is being conveyed. – Grant deed: includes covenant that grantor has not conveyed property interest to anyone else and all the encumbrances are listed on the deed. – Quitclaim deed: grantor makes no promises about property interest. ACQUISITION OF REAL PROPERTY

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 10 Delivery of the Deed: Grantor delivers deed to grantee to complete transfer or uses a third person to deliver. Delivery of the Deed: Grantor delivers deed to grantee to complete transfer or uses a third person to deliver. Recording of the Deed: Accomplished by filing the deed with the proper authority. Recording of the Deed: Accomplished by filing the deed with the proper authority. – Not a legal prerequisite to transfer, but establishes grantee’s interest in the property. ACQUISITION OF REAL PROPERTY

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 11 Transfer by Will or Intestate Succession. Transfer by Will or Intestate Succession. – Person arranges to transfer real property by provisions in a valid will. – If person doesn’t have valid will pass by intestate succession statute of state where property is located. – Intestate statute determines who inherits property if valid will does not exist. ACQUISITION OF REAL PROPERTY

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 12 PROTECTION OF REAL PROPERTY Real property subject to loss: Real property subject to loss: – By operation of law. – Due to actions of government. – Due to actions of another person. – Or by act of nature. Such losses are generally involuntary on part of the owner. Such losses are generally involuntary on part of the owner.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 13 PROTECTION OF REAL PROPERTY Involuntary Transfers by Operation of Law. Involuntary Transfers by Operation of Law. – Lender may foreclose if a person is in default on a mortgage. – Property may be attached to satisfy a legal judgment. – Failure to pay for labor or materials will create a mechanic’s liens.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 14 PROTECTION OF REAL PROPERTY Involuntary Transfers by Government Action. Involuntary Transfers by Government Action. – Government has right to take private land for public use. – This right is called eminent domain. – Government must have legitimate use and must pay owner a reasonable amount of money. – Government may enact zoning and planning laws that restrict how the property may be used.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 15 PROTECTION OF REAL PROPERTY Private Restrictions on Land Use: Private Restrictions on Land Use: – Restrictive covenants may limit how land can be used. – These are private agreements between landowners on the use of the property.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 16 PROTECTION OF REAL PROPERTY Adverse Possession: Adverse Possession: – Occurs when someone tries to take title and possession of real estate from the owner. – If possession is of an adverse nature and continues for sufficient length of time, adverse possessor may take ownership from true owner.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 17 PROTECTION OF REAL PROPERTY Adverse Possession. Adverse Possession. – For possession to be adverse, it must be actual, open, and notorious. Actual: adverse possessor is actually on land and is using real estate in a reasonable manner. Actual: adverse possessor is actually on land and is using real estate in a reasonable manner. Open: must be obvious that adverse possessor is on the property. Open: must be obvious that adverse possessor is on the property. Notorious: must be adverse or hostile to the true owner. Notorious: must be adverse or hostile to the true owner. – Required holding period varies from state to state and is specified by state statute.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 18 PROTECTION OF REAL PROPERTY Easements: Person entitled to use the land of another in a particular manner. Easements: Person entitled to use the land of another in a particular manner. – Not a right to own, but the right to use property in a particular manner. Easements created by: Easements created by: – Express. – Prescription. – Contract. – Necessity. – Implication.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 19 RENTAL OF REAL PROPERTY Types of Tenancies: Types of Tenancies: – Owner of real property may allow others to use their property. – Exchanging temporary possession of property for money or other consideration is a rental agreement. – Tenancies are governed by the rules of both contract law and real estate law.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 20 RENTAL OF REAL PROPERTY Types of Tenancies: Types of Tenancies: – Tenancy for a fixed term: automatically expires after a set period of time. – Periodic tenancy: starts at specific time and continues for successive periods until expired. – Tenancy at will: terminated by landlord or tenant at will. – Tenancy at sufferance: tenant entered into possession properly and with landlord’s permission but wrongfully remains on the property.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 21 RENTAL OF REAL PROPERTY Rights and Duties of Tenants: Rights and Duties of Tenants: – Tenants rents the right to exclusive possession and control of premises. – Landlord not entitled to enter the premises. – Tenant is allowed to remove trade fixtures, but if removal causes damages, tenant must repair. – Tenants do not have an obligation to make major improvements.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 22 RENTAL OF REAL PROPERTY Rights and Duties of Tenants: Rights and Duties of Tenants: – Warranty of Habitability: landlord impliedly promises that premises will be fit for living. – Constructive Eviction: owner does not protect interest of tenant and allows material interference with tenant’s enjoyment of premises. – Assignments and Subleases: allowed unless prohibited by lease. Transfer of the tenant’s entire interest in the lease (assignment); tenant transfers only part of interest and retains the balance (sublease).

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 23 RENTAL OF REAL PROPERTY Rights and Duties of Landlords: Rights and Duties of Landlords: – Have right to retake possession of property at the end of the lease. – Rent: compensation landlord receives in exchange for granting tenant the right to use the property. – Damages by the Tenant: landlord has right to reimbursement from tenant for any damages caused by the tenant.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 24 RENTAL OF REAL PROPERTY Rights and Duties of Landlords: Rights and Duties of Landlords: – Security Deposits: money to be used after tenant has vacated the premises to repair any damage negligently/intentionally caused by tenant. – Duty to Protect a Tenant and His or Her Guests: landlord does not warrant premises are safe but does have duty to warn tenant of latent defects. – Rights After Abandonment by a Tenant: tenant wrongfully abandons premises during the term of the lease, landlord has several options.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 25 LEGISLATIVE TRENDS Discrimination in housing prohibited by federal statutes. Discrimination in housing prohibited by federal statutes. Amendment increased the amount of protection by providing methods for enforcement: Amendment increased the amount of protection by providing methods for enforcement: – HUD can initiate lawsuit in federal court or before administrative law judge, if all parties agree. – Person subjected to discrimination can file suit in state or federal court. – U.S. attorney general can file suit if pattern or practice of discrimination exist.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 26 LEGISLATIVE TRENDS To recover retaliatory eviction tenant must prove: To recover retaliatory eviction tenant must prove: – Complaint was bona fide, reasonable, and serious. – Did not create the problem. – Complaint was filed before the landlord began eviction proceedings. – Primary reason landlord began eviction proceedings was to retaliate against the tenant for filing complaint.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 27 JOINT OWNERSHIP OF PROPERTY Exist when two or more people have concurrent title to property. Exist when two or more people have concurrent title to property. Five forms of joint ownership recognized in property law. Five forms of joint ownership recognized in property law. Each of co-owners have undivided right to use the whole property. Each of co-owners have undivided right to use the whole property. Most forms of co-ownership created voluntarily or by someone else. Most forms of co-ownership created voluntarily or by someone else.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 28 JOINT OWNERSHIP OF PROPERTY Primary remedies to resolve a dispute are: Primary remedies to resolve a dispute are: – To sell property and divide the proceeds. – To divide the property equitably and give each tenant a separate parcel. Tenancy in Common: Tenancy in Common: – Exists when two or more people have an undivided right to use the whole property. – Tenant may sell, assign, give, and in a valid will, pass his/her interest. – No valid will, then interest passes to heirs.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 29 JOINT OWNERSHIP OF PROPERTY Joint Tenancy with Rights of Survivorship: Joint Tenancy with Rights of Survivorship: – Each tenant has an equal interest in the property. – Interest passes to other tenants upon death of a tenant. – Will has no effect on this type of tenancy.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 30 JOINT OWNERSHIP OF PROPERTY Tenancy by the Entireties: Tenancy by the Entireties: – Tenants must be husband and wife, who share the property. – Each tenant is a joint owner in the whole property. – One spouse dies, the survivor receives the property.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 31 JOINT OWNERSHIP OF PROPERTY Community Property: Community Property: – Each spouse owns one-half of property accumulated during marriage. – Separate property includes: Property acquired before marriage Property acquired before marriage Inherited, received by gift, or by intestate succession Inherited, received by gift, or by intestate succession Purchased with separate funds Purchased with separate funds

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 32 JOINT OWNERSHIP OF PROPERTY Distinguishing Among the Forms of Joint Ownership: Distinguishing Among the Forms of Joint Ownership: – If tenants are married, most states presume community property or entireties property. – If state recognized neither form, it will presume a joint tenancy with the right of survivorship. – If tenants are not married, most states presume a tenancy in common.

© 2004 West Legal Studies in Business A Division of Thomson Learning BUSINESS LAW: Cases & Principles Davidson Knowles Forsythe 8 th Ed. 33 JOINT OWNERSHIP OF PROPERTY Transfer on Death Ownership: Transfer on Death Ownership: – Transfer on death or pay on death ownership should be distinguished from forms of joint ownership. – Recipient does not have an interest in the asset during the owner’s life. – Recipient entitled to the assets at the owner’s death.