Chapter 37 Real Property

1. Chapter 37Real Property

2. Learning Objectives • What rights does fee simple absolute ownership give to the owner? • What are the requirements for acquiring property by adverse possession? • What limitations may be placed on rights of property owners? • What is a leasehold estate and how is it created? • What are the respective duties of the landlord and tenant?

3. Nature of Real Property • Real property is immovable and includes: • Land. • Buildings. • Plant Life and Vegetation. • Airspace. • Subsurface (mineral) rights. • Fixtures .

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. Fixtures • 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. Ownership of 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. 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. 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. Reversionary Interest Life Estate Grantor Grantee Future Interests • Reversionary Interest: Grantor retains ownership interest in land. Land reverts back to Grantor if condition fails or when life tenant dies.

10. Life Estate Grantor Grantee Remainder 3P Future Interest Remainder Interest: Grantor assigns/transfers/sells her future interest to a 3P who now has a remainder. When Grantee dies, interest passes to 3rd Party.

11. Leasehold Estates • A real property owner or lessor agrees to convey the right to possess and use the property to a lessee for a certain period of time. • Tenancy for Years: • Periodic Tenancy. • Tenancy at Will. • Tenancy at Sufferance.

12. Non-Possessory Interests • An easementis a right of a person to make limited use of another person's real property without taking anything from the property. • A profitis 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.

13. Non-Possessory 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.

14. In Gross Appurtenant A B A B Non-Possessory 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.

15. 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.

16. Licenses • 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.

17. Transfer of Ownership • Ownership in real property can be transferred by: • A written Deed. • A Gift. • A Sale. • An Inheritance. • Adverse Possession. • Eminent Domain.

18. 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.

19. Types of Deeds • Warranty Deed. • Special Warranty Deed. • Quitclaim Deed. • Grant Deed. • Sheriff’s Deed. • Period of redemption.

20. Recording Statutes • 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.

21. 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.

22. 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.

23. 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 5th amendment gives the government the right to “take” private land for public use with just compensation.

24. 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.

25. 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

26. Landlord-Tenant Relationships • 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.

27. Lease Agreement • Form of the Lease: • 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.

28. Rights and Duties • 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.

29. 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.

30. Rights and Duties • 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.

31. 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.

32. Rights and Duties • 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.

33. 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.

34. Rent • 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.

35. Tenant’s Remedies • 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.

36. Landlord’s Remedies • Landlord’s Lien on all Tenant’s personal property. • Lawsuit to Recover Possession -- ejectment or unlawful detainer. • Landlord’s Duty to Mitigate Damages. • Must make reasonable efforts to re-rent the premises.

37. Rights and Duties: Liability • Landlord is liable to Tenants and Licensees (Tenant’s guests) based on who has the right to controls the area where the injury occurred. • Landlord is liable for injuries caused by defects in common areas. “Attractive nuisance” doctrine for children and an unfenced swimming pool.

38. Rights and Duties: Liability • If Landlord makes any repairs, they must be done with reasonable care. • LL may be liable for injuries caused by crimes or third persons when reasonably foreseeable. • Exculpatory clauses may be unenforceable if injury results from violation of statutory duty.

39. Rights and Duties: Liability • Tenant’s Liability? • Tenant has a duty to maintain safe conditions in those areas under her control. • In commercial leases, both Landlord and Tenant may be responsible and liable for same area.

40. 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.

41. Transferring Rights • 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.