1. © 2007 West Legal Studies in Business, A Division of Thomson Learning Chapter 29 Real Property and Landlord-Tenant Law

2. © 2007 West Legal Studies in Business, A Division of Thomson Learning 2 What can a person who holds property in fee simple absolute do with the property? Can a person who holds property as a life estate do the same? What are the requirements for acquiring property by adverse possession? What limitations may be imposed on rights of property owners? What is a leasehold estate? What types of leasehold estates, or tenancies, can be created when real property is leased? What are the respective duties of the landlord and tenant concerning the use and maintenance of leased property? Is the tenant responsible for all damages that he or she causes? Learning Objectives

3. © 2007 West Legal Studies in Business, A Division of Thomson Learning 3 Nature of Real Property Real property is immovable and includes: –Land. –Buildings. –Airspace. –Plant Life and Vegetation. –Subsurface (mineral) rights. –Fixtures .

4. © 2007 West Legal Studies in Business, A Division of Thomson Learning 4 Fixtures A fixture is personal property that becomes permanently affixed to real property. –Intent that it become a fixture is necessary. –Intent is determined by: The fact that the property cannot be removed without causing damage to the realty. The fact that the property is so adapted to the realty that it has become part of the realty.

5. © 2007 West Legal Studies in Business, A Division of Thomson Learning 5 Fixtures CASE 29.1 In re Sand & Sage Farm and Ranch, Inc. (2001). Trade fixtures: installed for commercial purposes by a tenant. They remain the property of the tenant and can be removed when tenant leaves, repairing any damage caused by removal.

6. © 2007 West Legal Studies in Business, A Division of Thomson Learning 6 Ownership Interests in Real Property Ownership interests are classified as either Possessory or Non-Possessory: A Possessory interest such as a fee simple, life or leasehold estate, gives the owner a right to possess the land. A Nonpossessory interest such as an easement, profit or license, does not give the owner a right to possess the land.

7. © 2007 West Legal Studies in Business, A Division of Thomson Learning 7 Ownership in Fee Simple The Fee Simple (sometimes called fee simple absolute) gives the owner the greatest aggregation of rights, powers and privileges possible under American law and can assigned to heirs. –A “conveyance” (transfer of real estate) “from A to B” creates a fee simple. A is the Grantor and B is the Grantee. Fee Simple Defeasible: grants conditional ownership to Grantee as long as he complies with condition. “A to B as long as ….”

8. © 2007 West Legal Studies in Business, A Division of Thomson Learning 8 Life Estates Estate that lasts for the life of some specified individual. “A grants Blackacre to B for B’s life” grants B a life estate in Blackacre. When B dies, Blackacre returns to A or his heirs or assigns, or a third party in the same condition, normal wear and tear excepted. Grantor A retains a “future interest” in the property. During B’s life, she can possess, use, and take the fruits of the estate, but not take from the property itself.

9. © 2007 West Legal Studies in Business, A Division of Thomson Learning 9 An easement is a right of a person to make limited use of another person's real property without taking anything from the property. A profit is the right to go onto land in possession of another and take away some part of the land itself or some product of the land. Property that is benefited by easement/profit carries the the interest with the sale of land. Nonpossessory Interests

10. © 2007 West Legal Studies in Business, A Division of Thomson Learning 10 Nonpossessory Interests Easements or profits can be created by: –Deed (physical delivery is sufficient). –Will (at Grantor’s death). –Contract between Grantor and Grantee. –Implication: circumstances surrounding creation of easement imply its creation. –Necessity. –Prescription: easement by adverse possession.

11. © 2007 West Legal Studies in Business, A Division of Thomson Learning 11 Nonpossessory Interests If the owner of the easement (A) or profit has the right to go onto another’s land (B) that is adjacent to A’s own, it is said to be appurtenant. If A’s property is physically separated from B’s, it is said to be in gross. ABAppurtenant A B In Gross

12. © 2007 West Legal Studies in Business, A Division of Thomson Learning 12 Termination of an Easement or Profit By deed back to owner of the land burdened by it. Owner of easement or profit becomes owner of the land burdened with it. Abandonment by the owner of the right.

13. © 2007 West Legal Studies in Business, A Division of Thomson Learning 13 License Revocable right of a person to come unto another’s land without removing anything from the land. Personal privilege that arises from the consent of the owner of the land that can be revoked.

14. © 2007 West Legal Studies in Business, A Division of Thomson Learning 14 Transfer of Ownership  Ownership in real property can be transferred by: –A written Deed. –A Gift. –A Sale. –An Inheritance. –Adverse Possession. –Eminent Domain.

15. © 2007 West Legal Studies in Business, A Division of Thomson Learning 15 Deeds A Deed is the instrument setting forth the interests in real property being transferred. Necessary components of a Deed: –Names of Grantor and Grantee. –Words evidencing intent to convey. –Legally sufficient description of the land. –Grantor’s signature. –Delivery of the Deed.

16. © 2007 West Legal Studies in Business, A Division of Thomson Learning 16 Types of Deeds Warranty Deed. –Special Warranty Deed. Quitclaim Deed. Grant Deed. Sheriff’s Deed. –Period of redemption.

17. © 2007 West Legal Studies in Business, A Division of Thomson Learning 17 Recording a deed (or any interest in real property) puts the public on notice of the new owner’s interest in the land and prevents the previous owner from fraudulently conveying the same interest to another buyer. Race statute. –Pure notice statute. –Notice-race statute. Recording Statutes

18. © 2007 West Legal Studies in Business, A Division of Thomson Learning 18 Transfer By Inheritance Owner of real property dies, his property is transferred by: –Will (testate). –Without Will (intestate). Title is transferred at the time state law so provides in its testate and intestate laws.

19. © 2007 West Legal Studies in Business, A Division of Thomson Learning 19 Transfer By Adverse Possession One person possesses the property of another for a certain statutory period of time, that person automatically acquires title to the land, just as if there had been a conveyance by deed. Must be: Actual and exclusive. Open, visible and notorious. Continuous and peaceable. Hostile and adverse.

20. © 2007 West Legal Studies in Business, A Division of Thomson Learning 20 Eminent Domain Rights in property are not absolute. They are constrained by federal and state laws, e.g., nuisance, tax and environmental. A “Taking” By Eminent Domain: The 5 th amendment gives the government the right to “take” private land for public use with just compensation. CASE 29.2 Kelo v. City of New London, Connecticut (2005).

21. © 2007 West Legal Studies in Business, A Division of Thomson Learning 21 Leasehold Estates Anyone who rents housing to the public for commercial purposes subjects herself to various state and federal Landlord-Tenant laws. Owner of the property is the LESSOR and Tenant is LESSEE; the contract is called the LEASE. The property interest is called a leasehold estate.

22. © 2007 West Legal Studies in Business, A Division of Thomson Learning 22 Tenancy Interests Tenancy for Years. –Created by an express contract. –Property is leased for a specified period of time. Periodic Tenancy. –Does not specify how long lease lasts. –But rent paid at certain intervals. Tenancy at Will. –For as long as both agree. Tenancy at Sufferance. –Wrongful possession without the right to possess.

23. © 2007 West Legal Studies in Business, A Division of Thomson Learning 23 Lease Agreement can be oral or written (oral may not be enforceable). Lease gives Tenant the temporary right to exclusively possess the property. Sources of Law: –Common Law. –State and Local Statutes, and –The Uniform Residential Landlord and Tenant Act (URLTA) which has been adopted by 1/4 of the states. Landlord-Tenant Relationships

24. © 2007 West Legal Studies in Business, A Division of Thomson Learning 24 Landlord-Tenant Lease Contract Form of the Contract: –Must express intent to establish the lease. –Provide for transfer of possession to the Tenant. –Provide for the Landlord’s “reversionary” interest. –Describe the property. –Indicate length of the term, amount of rent, when and where rent paid. –Illegality.

25. © 2007 West Legal Studies in Business, A Division of Thomson Learning 25 Trend in the law is to curtail, by contract and real estate law, the immense freedom that Landlords had in the past. –Possession. –Using the Premises. –Maintaining the Premises. –Rent. Rights and Duties

26. © 2007 West Legal Studies in Business, A Division of Thomson Learning 26 Rights and Duties Landlord has a duty to deliver actual physical possession under URLTA or legal right to possession (“American” rule). Tenant’s right to exclusive possession is only subject to Landlord’s limited right to come unto the property. Tenant has a “covenant of quiet enjoyment” by which Landlord promises Tenant’s peace and enjoyment of the property.

27. © 2007 West Legal Studies in Business, A Division of Thomson Learning 27 Eviction occurs when Landlord: –Deprives Tenant of possession of the leased property; or –Interferes with this use or enjoyment of the property to the extent that Tenant cannot use or enjoy. Constructive eviction occurs when Landlord: – Breaches lease or covenant or quiet enjoyment; and –Makes it impossible for the Tenant to use and enjoy the property. Rights and Duties

28. © 2007 West Legal Studies in Business, A Division of Thomson Learning 28 Rights and Duties Tenant’s Duty Not To Commit Waste: –Tenant is liable for destruction or abuse of the property. –Tenant not liable for normal wear and tear or depreciation in value over time. Altering the Premises: –Tenant needs Landlord’s consent to make material alterations. –Installation of fixtures become the property of the Landlord. Whether Tenant can remove depends on state law and consent of Landlord.

29. © 2007 West Legal Studies in Business, A Division of Thomson Learning 29 Residential property -- Landlord must furnish premises in habitable condition. Landlord is responsible for maintaining common areas such as stairs, parking lots, elevators and swimming pools. Commercial property -- may still require Tenant to maintain depending on the lease. Rights and Duties

30. © 2007 West Legal Studies in Business, A Division of Thomson Learning 30 Rights and Duties Implied Warranty of Habitability applies to major (substantial) defects if Landlord knew or should have known about & he had a reasonable time to repair. To determine breach, Courts consider: –Whether Tenant caused damage. –How long defect existed and age of building. –Defects impact on Tenant’s safety and health. –Whether defect contravenes relevant statutes.

31. © 2007 West Legal Studies in Business, A Division of Thomson Learning 31 Rent is Tenant’s payment to the Landlord for the Tenant’s occupancy or use of the Landlord’s real property. –Payment based on agreement, custom, state statute, waiver. Security Deposits. –A deposit by Tenant which Landlord may retain for non-payment of rent or damage to premises. –URLTA has specific provisions as to when it may be kept and when it must be returned. Rent

32. © 2007 West Legal Studies in Business, A Division of Thomson Learning 32 If Landlord breaches the warranty of habitability, depending on state law, Tenant may: –Withhold rent -- put in escrow. –Repair and Deduct -- notify, repair, and deduct repair from rent. –Cancel the Lease -- must be constructive eviction or breach of habitability. –Sue for Damages -- difference between what paid for and what received. Tenant’s Remedies

33. © 2007 West Legal Studies in Business, A Division of Thomson Learning 33 Transferring Rights to Leased Property Transferring Landlord's Interest. –Landlord may sell any and all of his rights in the real property. –New owner buys “subject to the lease,” if lease is recorded. Transferring Tenant’s Interest. –Landlord’s consent may or may not be required by statute or the lease itself.

34. © 2007 West Legal Studies in Business, A Division of Thomson Learning 34 Transferring the Tenant’s Interest (cont’d) –Assignments: Tenant transfers his entire interest in the lease to a third person. Original Tenant is not released from liability under the lease. –Subleases: Tenant transfers all or part of his interest in the lease for a shorter period of time than the lease. Original Tenant is not relieved of liability under the lease. Transferring Rights