1. August 9, 2002BUSINESS LAW (Ms. Hawkins)1 CHAPTER 17: REAL PROPERTY Chapter 17 presents information on real property, including the nature and transfer of ownership and others rights in your land: Physical and legal elements of real property The processes for transferring ownership of land Licenses, easements, restrictive covenants, and zoning

2. August 9, 2002BUSINESS LAW (Ms. Hawkins)2 CHAPTER 17: REAL PROPERTY Hot Debate (Page 312): The Bryants owned a condominium and were required to pay property tax on both the real and personal property. The tax rate on the real property was 1 percent of its value. The rate for personal property was 4 percent. The Bryants owned a digital TV system with surround sound which was wired into each room, with speakers concealed in the walls. The receiver, tuner, and amplifier were permanently built into a closet which had been remodeled to accommodate the equipment.

3. August 9, 2002BUSINESS LAW (Ms. Hawkins)3 CHAPTER 17: REAL PROPERTY Hot Debate (Page 312): Why should the stereo be taxed at 1 percent as real property? Why should the stereo be treated as personal property and taxed at 4 percent? The stereo should be taxed as real property because it is attached to the condominium. The condo has even been remodeled to accommodate the stereo. The stereo should be treated a s personal property because the Bryants probably have every intention of taking the stereo equipment with them if they sell the condo.

4. August 9, 2002BUSINESS LAW (Ms. Hawkins)4 CHAPTER 17: REAL PROPERTY What is Real Property? certain rights Real property includes land, things permanently attached to land, and certain rights to use the land of others: Surface Rights: Surface Rights: the right to occupy the surface of a piece of land. Right to Air Space: Right to Air Space: the right to air space above the surface, except the right to exclude aircraft from flying over (e.g., tree branches) Mineral Rights: Mineral Rights: the right to dig or mine the earth beneath the surface. Water Rights: Water Rights: the right to water on the surface or under the ground.

5. August 9, 2002BUSINESS LAW (Ms. Hawkins)5 CHAPTER 17: REAL PROPERTY Real Property Rights? Water Rights Water RightsStates use two systems for regulating the use of water: Riparian Rights System: Riparian Rights System: allows those who own land abutting a body of water to make use of it. Prior Appropriation System Prior Appropriation System: grants the first party to use the water priority in subsequent years over other potential users.

6. August 9, 2002BUSINESS LAW (Ms. Hawkins)6 CHAPTER 17: REAL PROPERTY Real Property Rights? Whats Your Verdict (Page 313) The limb of an apple tree growing on Gilberts land extended over the boundary onto Osters lot. One day Gilbert discovered that Oster had cut the limb off at the point where it crossed the boundary.

7. August 9, 2002BUSINESS LAW (Ms. Hawkins)7 CHAPTER 17: REAL PROPERTY Real Property Rights? Whats Your Verdict (Page 313) Did Oster act legally? Yes. Oster did act legally. While surface rights and the right to air space are usually owned by the same party, occasionally one party owns the surface rights and another owns the right to the air space. Although Gilbert had the surface rights to the tree branch, the branch was invading Osters air space. Oster had the right to force its removal.

8. August 9, 2002BUSINESS LAW (Ms. Hawkins)8 CHAPTER 17: REAL PROPERTY Real Property Rights? Fluids FluidsOwnership of fluids such as oil (a liquid) and natural gas (a vapor) also usually extends downward from a surface area. However, the doctrine of capture grants ownership of these fluid minerals to the party who extracts (or captures) them. If oil originates on your property but flow beneath the surface to the neighbors property and they begin pumping from the pool of oil that extended to their property, they have a right to remove the oil.

9. August 9, 2002BUSINESS LAW (Ms. Hawkins)9 CHAPTER 17: REAL PROPERTY Real vs. Personal Property Rights? UCC The UCC generally governs the sale of personal property; personal property is a movable thing. common law of contracts The sale of realty is governed by the common law of contracts; real property is land and also immovable things attached to the land.

10. August 9, 2002BUSINESS LAW (Ms. Hawkins)10 CHAPTER 17: REAL PROPERTY Real vs. Personal Property Rights? What are the tests of mobility?there are 3 tests…Attachment Structures Structures or buildings are part of the real property if they are permanently attached to the land. Fixtures Fixtures are personal property that is permanently attached to realty. Crops Crops that are harvested annually (e.g., corn) are treated as personal property even while in the ground; it is not permanently attached to the land.

11. August 9, 2002BUSINESS LAW (Ms. Hawkins)11 CHAPTER 17: REAL PROPERTY Real vs. Personal Property Rights? What are the tests of mobility?Adaptation Certain items are considered realty because they are truly essential to the functioning of realty (e.g., a toilet) The key to the front door is treated as real property in some states under the doctrine of adaptation.

12. August 9, 2002BUSINESS LAW (Ms. Hawkins)12 CHAPTER 17: REAL PROPERTY Real vs. Personal Property Rights? What are the tests of mobility?Intention Parties sometimes reach agreement about how property is to be classified. A landlord and a tenant might agree that a dishwasher installed by a tenant could be removed at the end of the lease period, thus making it property. Absent the agreement, the dishwasher is realty and belongs to the landlord.

13. August 9, 2002BUSINESS LAW (Ms. Hawkins)13 CHAPTER 17: REAL PROPERTY Real vs. Personal Property Rights? Whats Your Verdict? (Page 314) Vada owns a mobile home. She claims that she can change the home into real property by removing its tires, placing it on a concrete foundation, and connecting it to the city water and sewer system.

14. August 9, 2002BUSINESS LAW (Ms. Hawkins)14 CHAPTER 17: REAL PROPERTY Real vs. Personal Property Rights? Whats Your Verdict? (Page 314) Is Vada correct? Yes. Vadas mobile home will be legally classified as real property after she removes the tires, places it on a concrete foundation, and installs permanent plumbing.

15. August 9, 2002BUSINESS LAW (Ms. Hawkins)15 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Ownership of realty is usually acquired by purchase, gift, of inheritance. However, there are different powers of ownership. The powers of ownership are defined by the estate (stake) in the land: Fee Simple Absolute Conditional Estates Life Estates Nonfreehold Estates

16. August 9, 2002BUSINESS LAW (Ms. Hawkins)16 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Fee Simple Absolute This is the estate with all the ownership rights.

17. August 9, 2002BUSINESS LAW (Ms. Hawkins)17 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Conditional Estates Here the ownership is conditional on some act or event.

18. August 9, 2002BUSINESS LAW (Ms. Hawkins)18 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Life Estates Here the ownership is only for the length of a life.

19. August 9, 2002BUSINESS LAW (Ms. Hawkins)19 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Nonfreehold Estates Here the ownership is only for a limited period of time (tenancies).

20. August 9, 2002BUSINESS LAW (Ms. Hawkins)20 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Whats Your Verdict? (Page 316) Susan gave her daughter Emily a deed to a five-acre lot next to her home with the hope that Emily would live there. In the deed, Susan wrote that the property was being deeded on the condition that Emily not keep any livestock on the property. Emily did build a home on the property, but she also built a stable and kept horses there.

21. August 9, 2002BUSINESS LAW (Ms. Hawkins)21 CHAPTER 17: REAL PROPERTY Nature and Transfer of OwnershipMajor Estates in Land Whats Your Verdict? (Page 316) Will Emily lose ownership of the realty because of the horses? Yes. Her ownership was conditional on not keeping any livestock.

22. August 9, 2002BUSINESS LAW (Ms. Hawkins)22 CHAPTER 17: REAL PROPERTY Transfer of Ownership There are 3 principal ways of transferring ownership of real property: Sale by Deed (quit claim deed, warranty deed) Gift Inheritance Adverse Possession (when a person publicly occupies anothers land for 5-21 years) Dedication (giving real property to the government) Eminent Domain (the govt takes private property for public use in exchange for a fair market price.)

23. August 9, 2002BUSINESS LAW (Ms. Hawkins)23 CHAPTER 17: REAL PROPERTY Licenses and Easements Two important rights that others have in your land are licenses and easements. Licenses A license is a temporary revocable right to some limited use of anothers land.

24. August 9, 2002BUSINESS LAW (Ms. Hawkins)24 CHAPTER 17: REAL PROPERTY Licenses and Easements Two important rights that others have in your land are licenses and easements. Easements Irrevocable rights to some limited use of anothers land are called easements. Typical easements include: A utility company needs to bury a sewer pipe or hang power lines; access roads; water ditches

25. August 9, 2002BUSINESS LAW (Ms. Hawkins)25 CHAPTER 17: REAL PROPERTY Restrictive Covenants and Zoning Ordinances Many times when you buy property, there are restrictions on how you can use the property. Restrictive Covenants This is a promise, usually made in writing by the buyer to the seller; furthermore, it limits the use of the land in some way. Subsequent buyers of the land may be bound by the restrictive covenant if 4 tests are met.

26. August 9, 2002BUSINESS LAW (Ms. Hawkins)26 CHAPTER 17: REAL PROPERTY Restrictive Covenants and Zoning Ordinances Many times when you buy property, there are restrictions on how you can use the property. Restrictive Covenants…(the tests) 1. The original parties intended the covenant to run with the land. 2. The covenant must affect the use of the property and or affect the title to the property. 3. The buyer must have had notice of the covenant at the time of purchase 4. There must be a chain of ownership connections between the original promisee and the current owner (privity of estate).

27. August 9, 2002BUSINESS LAW (Ms. Hawkins)27 CHAPTER 17: REAL PROPERTY Restrictive Covenants and Zoning Ordinances Many times when you buy property, there are restrictions on how you can use the property. Zoning Ordinances Zoning ordinances are adopted by cities or counties to regulate the location of residential, business, and industrial districts. If the zoning reduces the value of the owners land, the owner cannot recover from the local govt. for financial injury.

28. August 9, 2002BUSINESS LAW (Ms. Hawkins)28 CHAPTER 17: REAL PROPERTY Restrictive Covenants and Zoning Ordinances Many times when you buy property, there are restrictions on how you can use the property. Invalid Zoning Zoning is not enforceable if it exceeds the constitutional powers of the state. In general, zoning cannot be used to eliminate an existing use. Some courts have begun to allow this.

29. August 9, 2002BUSINESS LAW (Ms. Hawkins)29 CHAPTER 17: REAL PROPERTY Restrictive Covenants and Zoning Ordinances Many times when you buy property, there are restrictions on how you can use the property. Spot Zoning Spot zoning is the treatment of a single property in a manner inconsistent with the treatment of similar properties in the areathis is usually prohibited. However, a variance may be granted by a city or county to allow a landowner to stray from the zoning ordinance.

30. August 9, 2002BUSINESS LAW (Ms. Hawkins)30 CHAPTER 17: REAL PROPERTY Liens Filed Against Real Property A lien is a legal right in anothers property given as security for the performance of a financial obligation. Voluntary liens (mortgage) Involuntary liens (tax lien, mechanics lienproviders of labor or material)

31. August 9, 2002BUSINESS LAW (Ms. Hawkins)31 CHAPTER 17: REAL PROPERTY Liens Filed Against Real Property Whats Your Verdict? (Page 322) Jerry, a high school student, installed a lawn sprinkler system for the Wyatts while he was on summer break. Although the system worked well, the Wyatts failed to pay Jerry for his work or the system itself.

32. August 9, 2002BUSINESS LAW (Ms. Hawkins)32 CHAPTER 17: REAL PROPERTY Liens Filed Against Real Property Whats Your Verdict? (Page 322) What can jerry do to get he money the Wyatts owe him? Jerry can record a mechanics lien against the Wyatts property. Then he can file suit, prove the claim, and foreclose on the property in order to get the money for the system and his work.

33. August 9, 2002BUSINESS LAW (Ms. Hawkins)33 CHAPTER 17: REAL PROPERTY Duties Owed to Those Entering Your Land A possessor may owe certain tort duties to others who come on the land: Trespassers (the possessor cannot intentionally cause harm to the trespasser; duties may be imposed on the possessor w.r.t. the condition of the land if aware of habitual trespassing) Licensee (has permission to be on the land, such as a guest; must be advised of known nonobvious dangers) Invitee (either a public invitee or a business visitor premises must be kept reasonably safe)

34. August 9, 2002BUSINESS LAW (Ms. Hawkins)34 CHAPTER 17: REAL PROPERTY Duties Owed to Those Entering Your Land Whats Your Verdict? (Page 322) Luke has guests at his house for a swimming party. He knows the sliding glass door leading to the pool cannot be seen when the patio lights are on and the house lights are off.

35. August 9, 2002BUSINESS LAW (Ms. Hawkins)35 CHAPTER 17: REAL PROPERTY Duties Owed to Those Entering Your Land Whats Your Verdict? (Page 322) Does Luke have a duty to warn his guests of the glass door? Yes. Luke has a duty to warn his guests of the glass door. If he fails to warn them, and someone is injured by shattering the glass, Luke would be liable for their injuries.

36. August 9, 2002BUSINESS LAW (Ms. Hawkins)36 CHAPTER 17: REAL PROPERTY