2. P A R T P A R T Property Personal Property and Bailments Real Property Landlord and Tenant Estates and Trusts Insurance Law 5 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. Real Property PA E TR HC 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)

4. Learning Objectives  Scope of real property  Rights and interests in real property  Acquisition of real property and transfer by sale  Obligations related to property condition  Land use 24 - 4

5.  Real property land and things attached to or embedded in land: b uildings, trees, crops, surface and ground water, minerals, airspace above the land Overview 24 - 5

6.  A fixture is an item of personal property that has become so attached to real property that it becomes part of real property  Real property owner now owns fixtures  Relevant factors to determine transformation: attachment, adaptation, intent  An exception is trade fixtures  Remain tenant’s personal property Fixtures 24 - 6

7.  Estate refers to a person’s ownership interest in real property, 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 the same ownership interest in property Estates in Land & Co-Ownership 24 - 7

8.  An easement is a right to make use of another person’s property (affirmative) or prevent another from using property (negative)  Restrictive covenants also restrict use of real property  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 Easement, Profit, & License 24 - 8

9.  Title to real property may be acquired by purchase, gift, will or inheritance, tax sale, and adverse possession  A valid conveyance of real property occurs through execution and delivery of a deed  Quitclaim, warranty, grant deeds  Adverse possession occurs when person wrongfully occupies land and acts in open and hostile manner as if he were the owner Acquiring Real Property 24 - 9

10.  In a title opinion, an attorney examines the abstract of title and gives an opinion about whether the grantor has marketable title  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 Assuring Title 24 - 10

11.  Implied warranty of habitability guarantees a residence is free of hidden defects making it unsafe or unsuited to human habitation  Similar to implied warranties for sale of goods  Premises liability refers to negligence cases in which property owners or possessors (e.g., businesses leasing commercial real estate) are held liable to persons injured while on the property Defective & Dangerous Premises 24 - 11

12.  Nuisance occurs when one owner’s use of property unreasonably interferes with another person’s property use  Zoning ordinances organize a municipality into districts according to the allowed uses for property in those districts Land Use Control 24 - 12

13.  The Fifth Amendment guarantees that private property shall not be “taken for public use” without “just compensation”  Implies government’s power of eminent domain to effect the taking  Key is “just compensation”  Eminent domain is controversial, perhaps more so given the Kelo decision Land Use Control 24 - 13

14. Test Your Knowledge  True=A, False = B  For his two dogs, Brett built a dog kennel and run of wood posts and wire fencing behind his house. When Brett sells his house, the kennel is a fixture that has become real property.  Carol opened a restaurant in an empty leased space in the food court of Shopping Center. Carol equipped the space with ovens, shelving, and refrigerators. When Carol’s lease is over, Carol must leave the ovens and refrigerators. 24 - 14

15. Test Your Knowledge  True=A, False = B  Sheila has a drainage ditch behind her house that is described in the written deed. Sheila is not permitted to alter the ditch in any way. The drainage ditch is an easement.  An implied warranty of habitability promises that a house has no hidden defects rendering it unsafe or unsuitable for human habitation  A warranty deed contains promises about the quality of the house construction 24 - 15

16. Test Your Knowledge  Multiple Choice  Chris slipped on a tomato that had fallen on the grocery store’s produce section. If Chris sues the store, what type of law will apply?  (a) Tort law  (b) Premises liability law  (c) Breach of contract  (d) Both A and B  (e) All of the above 24 - 16

17. Test Your Knowledge  Multiple Choice  Newton owned 500 acres and leased 300 to Kevin for farming beans. When Kevin is working the 300 acres he leased, he is:  (a) an invitee with the right to take the bean crop as a license  (b) a lessor with the right to work the bean crop for the benefit of Newton  (c) a licensee with the right to take the bean crop as a profit  (e) none of the above 24 - 17

18. Thought Questions  Is the cliché, “good fences make good neighbors,” a true statement?  What is your opinion of the Kelo decision? 24 - 18