1. 49 - 1 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Chapter 48 Real Property Business Law Legal, E-Commerce, Ethical, and International Environments

2. 49 - 2 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Real Property Real property is immovable or attached to immovable land or buildings –Land –Buildings –Subsurface Rights –Plant Life and Vegetation –Fixtures

3. 49 - 3 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Land and Buildings Most common form of real property. Landowner usually purchases surface rights. Buildings constructed on land are real property.

4. 49 - 4 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Subsurface Rights These are mineral rights to the earth located beneath surface. Are often sold separately from surface rights.

5. 49 - 5 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Plant Life and Vegetation These are considered real property until they are harvested. Includes both natural and cultivated plants. Sold with land.

6. 49 - 6 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Fixtures Personal property that is so closely associated with real property that it cannot be separated without damaging real property. Becomes part of the realty. Included in sale of building.

7. 49 - 7 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Estates in Land Ownership rights in real property. Bundle of legal rights that the owner has to possess, use, and enjoy the property. The type of estate is determined from the deed, will, lease, or other document that transferred the ownership rights.

8. 49 - 8 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Freehold Estate An estate where the owner has a present possessory interest in the real property. Estates in Fee –Fee simple absolute –Fee simple defeasible Life Estates

9. 49 - 9 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Estates in Fee Fee Simple Absolute Highest form of owner-ship of real property. Ownership: –Is infinite in duration –Has no limitation on inheritability –Does not end upon the occurrence or non-occurrence of an event Fee Simple Defeasible Grants owner all of the incidents of a fee simple absolute except that it may be taken away if a specified condition occurs or does not occur.

10. 49 - 10 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Life Estate Interest in property that lasts for the life of a specified person. Called estate pour autre vie. A life estate terminates upon the death of a named person and reverts back to the grantor.

11. 49 - 11 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Concurrent Ownership When two or more persons own a piece of real property. Also called co-ownership.

12. 49 - 12 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Joint Tenancy Tenancy in Common Tenancy by the Entirety Community Property Condominium Cooperative Forms of Co-ownership

13. 49 - 13 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Joint Tenancy Words must clearly show intent to create. Co-owners have right of survivorship. –Deceased partner’s property automatically passes to surviving partner. –Contrary provisions in will ineffective.

14. 49 - 14 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Tenants in Common Interests of deceased partner passes by will, not by survivorship. May encumber, sell, gift, or devise their interest at any time.

15. 49 - 15 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Tenants by the Entirety Co-ownership form that can only be used by married couples. Created by express wording. Surviving spouse has right of survivorship. Neither spouse may sell, gift, devise, or otherwise transfer property without permission of other spouse.

16. 49 - 16 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Community Property Nine states recognize this form of co-ownership. Applies only to married couples Each spouse owns one-half of assets acquired by income during marriage. Property received by gift or inheritance or held before marriage belong to that partner alone.

17. 49 - 17 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Concurrent Ownership Form of Ownership Right of Survivorship Tenant May Unilaterally Transfer His or Her Interest Joint TenancyYes. Deceased tenant’s interest automatically passes to co- tenants. Yes. Tenant may transfer his or her interest without the consent of co-tenants. Transfer severs joint tenancy. Tenancy in Common No. Deceased tenant’s interest passes to his or her estate. Yes. Tenant may transfer his or her interest without the consent of co-tenants. Transfer does not sever tenancy in common.

18. 49 - 18 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Concurrent Ownership (continued) Form of Ownership Right of Survivorship Tenant May Unilaterally Transfer His or Her Interest Tenancy by the Entirety Yes. Deceased tenant’s interest automatically passes to his or her spouse. No. Neither spouse may transfer his or her interest without the other spouse’s consent. Community Property Yes. When a spouse dies, surviving spouse automatically receives one-half of the community property; other half passes to the heirs of the deceased spouse as directed by will. No. Neither spouse may transfer his or her interest without the other spouse’s consent.

19. 49 - 19 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Condominium Common form of ownership in a multiple-dwelling building. Purchasers of a condominium: –Have title to their individual units. –Own the common areas as a tenant in common with the other condominium owners. Owners may sell or mortgage their units without the permission of the other owners.

20. 49 - 20 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Cooperative Form of co-ownership of a multiple-dwelling building. –A corporation owns the building –The residents own shares in the corporation

21. 49 - 21 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Future Interests The interest that the grantor retains for himself or a third party. Reversion – a right of possession that returns to the grantor after the expiration of a limited or contingent estate. –Implied by law –Do not have to be express Remainder – a right of possession that goes to a third party upon the expiration of a limited or contingent estate.

22. 49 - 22 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Sale of Real Estate The passing of title from a seller to a buyer for a price. Also called a conveyance. Closing – the finalization of a real estate sales transaction that passes title to the property from the seller to the buyer.

23. 49 - 23 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Deeds A writing that describes a person’s ownership interest in a piece of real property. –Warranty Deed –Quitclaim Deed Grantor – the party who transfers an ownership interest in real property. Grantee – the party to whom an interest in real property is transferred.

24. 49 - 24 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Recording Statutes A state statute that requires the mortgage or deed of trust to be recorded in the county recorder’s office of the county in which the real property is located. –Gives constructive notice of interest in property. Quiet title action is brought by a party concerned about ownership rights in a parcel of real property –Can have a court determine the extent of those rights.

25. 49 - 25 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Marketable Title Title that is free from any encumbrances or other defects that are not disclosed but would affect the value of the property. –Attorney’s Opinion –Torrens System –Title Insurance

26. 49 - 26 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Tax Sale A method of transferring property ownership that involves a government lien on property for unpaid property taxes. If the lien remains unpaid after a certain amount of time, a tax sale is held to satisfy the lien. Most states provide for a period of redemption

27. 49 - 27 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Gift, Will, or Inheritance Gift –A transfer of property from one person to another without exchange of money. Will –If a person dies with a will, his or her property is distributed to the beneficiaries as designated in the will. Inheritance –If a person dies without a will, his or her property is distributed to the heirs as stipulated in the state’s intestate statute.

28. 49 - 28 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Adverse Possession Occurs when a person who wrongfully possesses someone else’s real property obtains title to that property if certain statutory requirements are met. –Statutorily prescribed time period –Open, visible, and notorious –Actual and exclusive –Continuous and peaceful –Hostile and adverse Property owned by federal and state governments are not subject to adverse possession.

29. 49 - 29 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Nonpossessory Interests Easements Licenses Profits

30. 49 - 30 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Easement A given or required right to make limited use of someone else’s land without owning or leasing it. –Easement Appurtenant created when the owner of one piece of land is given an easement over an adjacent piece of land. –Easement in Gross authorizes a person who does not own adjacent land the right to use another’s land.

31. 49 - 31 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman License Grants a person the right to enter upon another’s property for a specified and usually short period of time. A license does not transfer any interest in the property. A license is a personal privilege that may be revoked by the licensor at any time.

32. 49 - 32 © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Profit Grants a person the right to remove something from another’s real property. –Gravel, minerals, grain, or timber –Profit Appurtenant – grants the owner of one piece of land the right to go onto another’s adjacent land and remove things from it. –Profit in Gross – authorizes someone who does not own adjacent land the right to go onto another’s property and remove things from it.