1. 2-1 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev This is the prescribed textbook for your course. Available NOW at your campus bookstore!

2. 2-2 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Property law: mortgages, leases and licences Chapter 10

3. 2-3 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Learning objectives At the end of this chapter you should understand: the definition of the term ‘mortgage’ and the distinction between old title mortgages and Torrens system mortgages the remedies available to a mortgagee if a mortgagor defaults the definition of a personal property security the statutory provisions for the registration of security interest in goods the terms ‘pledge’, ‘pawnbroker’, ‘lien’, ‘guarantee’, and ‘indemnity’

4. 2-4 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Learning objectives (cont.) the term ‘bailment’ and its differences from other legal relationships the difference between a gratuitous bailment and a non-gratuitous bailment the duties of bailees and bailors of goods the ways that a bailment may be terminated the liability of common carriers and innkeepers.

5. 2-5 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Introduction People can hold an interest in real property. Often money is lent and real property is used as security for the loan. The resulting contract is called a mortgage. If personal property is used to secure a loan, a bill of sale is prepared. Alternatively, goods may be held by way of security. Bailment is the transfer of goods from one person to another with the intention that the goods will be returned to the owner at a later date.

6. 2-6 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Distinction between real property and personal property Real property Land Items attached to land Leases Personal property Chattels that can be (not real property) possessed (tangible objects) Chattels that cannot be possessed (intangible objects) interest in partnership copyright shares trademarks

7. 2-7 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Distinction between ownership of property and possession of property Ownership –Person has legal rights over the property. Owners are said to have ‘title’ to the property. Possession –Person has physical control over the property.

8. 2-8 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Real property—attachments TestFixtures (part of real property for sale purposes) Fittings Manner of attachmentPermanentCan be easily removed Purpose of attachment (intention) For enjoyment of the item Damage resulting to remove Major damageMinor damage

9. 2-9 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Interests in land Doctrine of tenure –Absolute ownership is not possible as all land is owned by the Crown.

10. 2-10 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Estates in land Freehold Interest in land of uncertain duration –Fee simple –Interest continues, provided owner dies leaving an heir –Life estates –Created for the life of a particular person Leasehold Contract in the form of a lease for a fixed period between two parties:  lessor (landowner)  lessee (tenant). Native title Title enjoyed by descendants of the original inhabitants

11. 2-11 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Freehold estates ReversionRemainder A (Fee simple of land) on B ’ s death B (Life estate of land) on B ’ s death C

12. 2-12 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Leasehold estates ‘Leasehold interest’ in land is created by the formation of a lease. This is a contract between two parties: –lessor (landowner) –lessee (tenant). Lease gives the lessee exclusive possession of real property for a fixed period in exchange for payment (rent). Regarded as an estate in land.

13. 2-13 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Definitions Lease: an interest in land given by a landlord to a tenant, for a fixed period of time, granting exclusive possession, e.g. lease of shop, house. Licence: a contractual right to do something on land that would otherwise be illegal, e.g. –to agist stock upon a neighbour’s land –to regularly set up a market stall on local council land.

14. 2-14 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Comparison of lease and licence

15. 2-15 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Types of lease Fixed-term lease—for a fixed period. Periodic tenancy—continues indefinitely from one period to another (ending by notice given by either party). Length of tenancy corresponds to period of payment, e.g. weekly. Tenancy at will—no fixed duration, with the consent of the landlord, requiring no rent repayments (ending by notice given by either party). Tenancy at sufferance—where the tenant remains in possession of premises after the expiry of the previous tenancy, without consent of the landlord, and does not pay rent.

16. 2-16 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Terms of a lease Agreed upon by the parties to the lease. Terms are described as covenants or conditions. Some leases provide for an assignment of lease. –To assign a lease means to transfer it—to substitute one tenant for another.

17. 2-17 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Covenants of landlord and tenant Covenants by tenant To pay rent To keep and deliver up the premises to the landlord at the end of the term in a good state of repair Permit landlord to enter to inspect Permit landlord to re-enter if fail to pay rent Not to assign or sublet without landlord’s permission Not to conduct illegal activity on premises Covenants by landlord To allow the tenant quiet possession of premises (without interference) Pay rates and taxes, except those that are expressly the duty of the tenant Repair the premises

18. 2-18 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Termination of leases Lease: Expiry of term Notice to quit Forfeiture Surrender Repudiation Breach of an essential term (i.e. condition) of a lease Tenancy: Express agreement By tenant By landlord Surrender

19. 2-19 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Comparison of leases

20. 2-20 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Title to land Old system land: –Title based on the production of all deeds transferring or conveying land from one person to another for the history of the property Torrens system land: –Title based on transactions recorded on one certificate of title creating indefeasibility of title –State government holds all certificates of title.

21. 2-21 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Indefeasibility of title Means that the person who is registered on the title as owner has an indefeasible or unquestionable title to the land. State guarantees the correctness of information contained on the title and provides compensation under an assurance fund.

22. 2-22 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Legal and equitable interests in land Legal interests –Concerned with ownership (and controls associated with ownership) Equitable interests –Concerned with those entitled to the benefits of the land –Relevance: the holder of an equitable interest cannot enforce their claim against an innocent third party purchasing the legal interest in the land.

23. 2-23 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Examples of legal and equitable interests

24. 2-24 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Co-ownership of land Land can be owned by a number of persons jointly. The law refers to this as co-ownership. Co-owners can hold land either as: –joint tenants –tenants in common.

25. 2-25 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Types of co-ownership of land

26. 2-26 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Securities for loans: mortgages A mortgage is a contract in which a borrower (the mortgagor) gives the lender (the mortgagee) his/her real property as security for the repayment of a loan.

27. 2-27 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Mortgages over real property Old systemTorrens system Mortgagor transfers title to mortgagee Mortgagee registers on title (can be more than one) Mortgagor redeems land on payment of all mortgage moneys (equity of redemption)

28. 2-28 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Remedies in the event of default Sue for breach of contract Appoint a receiver Power to foreclose Power of sale

29. 2-29 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Power of foreclosure Mortgagee can take ownership of the property if the mortgagor defaults if the court so orders. Major requirements: –Default of at least 6 months –Failure to achieve mortgagor’s debt at public auction –Shortfall is not recoverable from mortgagor

30. 2-30 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Power of sale The most commonly exercised remedy for sustained default of mortgage repayments. Mortgagee has the right to sell the property to recoup their losses but must achieve the best possible price for the property. Mortgagor has the right to any excess monies generated by the sale.

31. 2-31 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Personal property securities reform Personal property, both tangible and intangible, can be used as security for a loan. The intensely complicated and inconsistent state legislation and systems of registration of personal property for loans limited both individuals and businesses. National reform achieved through referral of state powers—purpose to improve ability of individuals and businesses to employ all their property in raising capital. New national personal property security system commenced operation October 2011.

32. 2-32 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Personal Properties Securities Act 2009 (Cwlth) One federal Act applying across Australia provides rules for the creation, extinguishment and enforcement of security interests. Personal property security defined as ‘an interest in personal property that secures a payment or performance obligation’. Provides for a national electronic Personal Property Securities Register (PPSR) which replaces more than 40 existing registers. PPSR to be available at all times, contain all relevant details for use of all relevant parties.

33. 2-33 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Security interests A pledge is a transfer of possession (not ownership) of a chattel, giving the lender (pledgee) the right to sell the pledged goods if the borrower (pledgor) defaults by the stipulated date, or within a reasonable time (if no date stipulated).

34. 2-34 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Liens A lien gives a creditor a right to possess the debtor’s property until the debt is paid. A particular possessory lien is the right of one person to retain possession of goods of another until the debt associated with those goods is paid. A general possessory lien is the right of one person to retain possession of goods (lawfully obtained) of another until the debt owing is paid. An equitable lien is the right to have the property of another utilised to ensure payment of a debt, without possession of the property. Maritime liens are specifically binding on a ship and its cargo and freight. Statutory liens are created by an Act of Parliament.

35. 2-35 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Guarantees A contract where one party (the guarantor) promises another party (the creditor) to carry out the obligations to another (the debtor), should the debtor default on their obligations.

36. 2-36 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Indemnity A contract where one party (the indemnifier) undertakes to become liable for another against any loss arising out of a transaction with a third party.

37. 2-37 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Bailment Occurs when possession (not ownership) of goods is transferred from one person (bailor) to another (bailee), e.g. pledge.

38. 2-38 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Duties and liabilities of a bailee Duties of bailee –To return the goods to the bailor at the expiry of the bailment –Not to misuse the goods –To retain possession of the goods –To take (reasonable) care of the goods Liability of bailee –Breach of contract –Torts:  Negligence  Conversion  Detinue –Vicarious liability

39. 2-39 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Duties of a bailor Not to interfere with possession of goods that the bailee has, for the duration of the bailment. To ensure quality and fitness of goods for a particular purpose.

40. 2-40 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Special types of bailment— common carrier A carrier whose business is to carry goods for any customer requesting this service: –Airlines –Shipping operators –Railways Liability: –For any loss or damage to goods in its possession.

41. 2-41 Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev Special types of bailment— innkeepers Persons who hold themselves out as providing accommodation for travellers: –Hotel keeper –Motel keeper Liability: –For loss or damage of guests’ property, taken into their possession for safekeeping.