1. © 2005 West Legal Studies in Business A Division of Thomson Learning  Real property is immovable and includes:  Land.  Buildings.  Airspace.  Plant Life and Vegetation.  Subsurface (mineral) rights.  Fixtures. 1

2. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. ▪ In re Sand & Sage Farm & Ranch, Inc. (2001). 2

3. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 3

4. © 2005 West Legal Studies in Business A Division of Thomson Learning 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. 4

5. © 2005 West Legal Studies in Business A Division of Thomson Learning Financial Advisors, Inc., signs a lease for the first floor of an office building owned by Goodrich Investments, Inc. Unlike a licensee, Financial Advisors  a.has only a temporary right to go upon the property.  b.is entitled to the exclusive use and possession of the property.  c.is not entitled to the exclusive use of the property.  d.must pay for the right to use the property.

6. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:B Lease is a possessory interest.

7. © 2005 West Legal Studies in Business A Division of Thomson Learning Parts of a Deed Parties: “Grantor” and “Grantee” Words of Conveyance: “convey;” “bargain and sell;” give; grant and transfer;” etc. Description of Property: “Blackacre” Habendum: “To have and to hold…” Warranty: General, Special, other? Due Execution: Signed and Acknowledged 7

8. © 2005 West Legal Studies in Business A Division of Thomson Learning  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

9. © 2005 West Legal Studies in Business A Division of Thomson Learning “To A, but only for so long as he runs his liquor store on the land, then to B” “To A and his heirs, the surface only of Blackacre” “To A and his heirs, but there is reserved to Grantor ½ of all oil, gas & other minerals on, in, under and that may be produced from Redacre…” 9

10. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 10

11. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 11

12. © 2005 West Legal Studies in Business A Division of Thomson Learning Beth owns a corporate office park in Ohio. Her ownership rights include the right to sell or give away the property without restriction, as well as the right to commit waste, if she chooses. Beth’s ownership interest is  a.a fee simple absolute.  b.a leasehold estate.  c.a life estate.  d.the power of eminent domain.

13. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:A Fee simple owner can do anything they want to, subject to laws or ordinances affecting all other property owners. These would limit ability to commit waste, for instance, if dilapidated buildings were regulated.

14. © 2005 West Legal Studies in Business A Division of Thomson Learning With respect to Adam’s land, Bob has an easement, Carol has a profit, and Don has a license. A right to possess the land is owned by  a.Adam, Bob, and Carol only.  b.Adam and Don only.  c.Adam only.  d.Bob, Carol, and Don only.

15. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:C What would answer be if Ed had a lease on Adam’s land?

16. © 2005 West Legal Studies in Business A Division of Thomson Learning Regional Construction Company has a right to drive its trucks across Standard Business Corporation’s property, which is adjacent to Regional’s office. This right is  a.a leasehold estate.  b.a license.  c.an easement.  d.a profit.

17. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER: C Roads, pipelines, power lines, utility installations, etc. are normally on easement estates.

18. © 2005 West Legal Studies in Business A Division of Thomson Learning Wood Products Corporation, which owns no land, has a right to cut trees from Natural Resource Company’s land. Wood’s right is  a.a leasehold estate.  b.a license.  c.an easement.  d.a profit.

19. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER: D Profit is a right to enter and take something away from land. What about a hunting arrangement?

20. © 2005 West Legal Studies in Business A Division of Thomson Learning  Ownership in real property can be transferred by:  A written Deed.  A Gift.  A Sale.  An Inheritance.  Adverse Possession.  Eminent Domain. 20

21. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 21

22. © 2005 West Legal Studies in Business A Division of Thomson Learning  Warranty Deed.  Special Warranty Deed.  Quitclaim Deed.  Grant Deed.  Sheriff’s Deed.  Period of redemption. 22

23. © 2005 West Legal Studies in Business A Division of Thomson Learning Investment Properties Corporation conveys an office building to Jay with a deed that makes the greatest number of warranties and provides the most extensive protection against defects of title. This deed is  a.a grant deed.  b.a quitclaim deed.  c.a special warranty deed.  d.a warranty deed.

24. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:D Deed warrants property to grantee as against all claims, whether arising from things that the grantor did or things that others in the chain of title before him did. …and Grantor does hereby bind itself to warrant and forever defend all and singular the Property unto Grantee against every person whomsoever, lawfully claiming or to claim the same or any part thereof.

25. © 2005 West Legal Studies in Business A Division of Thomson Learning  Opal conveys three acres of wetlands to Pristine Places, Inc., with a deed that warrants only that Opal held good title during her ownership of the property. This deed is  a.a grant deed.  b.a quitclaim deed.  c.a special warranty deed.  d.a warranty deed.

26. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:C The special warranty deed adds a qualifier at the end of the warranty clause to limit the grantor’s liability: and Grantor does hereby bind itself to warrant and forever defend all and singular the Property unto Grantee against every person whomsoever, lawfully claiming or to claim the same or any part thereof, by through or under Grantor but not otherwise.

27. © 2005 West Legal Studies in Business A Division of Thomson Learning Manhattan Developers, Inc., pays Northeast Trust Company to release its claim to a strip of waterfront property. Northeast gives Manhattan a deed that conveys only whatever interest Northeast has in the strip. This deed is  a.a grant deed.  b.a quitclaim deed.  c.a special warranty deed.  d.a warranty deed.

28. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:B Actually not a conveyance of property, but a relase of any claim to property. Effect is to give the grantee whatever interest, if any, that the grantee may have.

29. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 29

30. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 30

31. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 31

32. © 2005 West Legal Studies in Business A Division of Thomson Learning True or False: Adverse possession has the same legal result as a tenancy at sufferance.

33. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:F No, it’s much stronger than that! First, what’s a tenant at sufferance? Adverse possession results in what’s called a “limitations” title which can be a fee simple.

34. © 2005 West Legal Studies in Business A Division of Thomson Learning Eminent domain refers to the ultimate right of an owner in fee simple absolute to transfer the property by will to whomever he or she wishes.

35. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:F Eminent domain is the right of the government to take property for public use

36. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 36

37. © 2005 West Legal Studies in Business A Division of Thomson Learning Bay City wants to acquire undeveloped land within the city limits to convert into a public park. Bay City brings a judicial proceeding to obtain title to the land. This is  a.adverse possession.  b.an easement.  c.constructive eviction.  d.the power of eminent domain.

38. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:D Where in the constitution does it say the City can do this?

39. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 39

40. © 2005 West Legal Studies in Business A Division of Thomson Learning True or False: Contract doctrines do not apply to landlord-tenant relationships.

41. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:F Leases are heavily governed by contracts…

42. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 42

43. © 2005 West Legal Studies in Business A Division of Thomson Learning True or False: A periodic tenancy is created by an express contract under which property is leased for a specified period of time.

44. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:F No, what’s described here is a tenancy for years (even if it’s only months). You may think of a periodic tenancy as measured by the rent period, in a sense, since you are entitled to one rent period’s notice to leave.

45. © 2005 West Legal Studies in Business A Division of Thomson Learning True or False: A tenancy for years is created by a lease that does not specify how long it is to last but does specify that rent is to be paid at certain intervals.

46. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:F

47. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 47

48. © 2005 West Legal Studies in Business A Division of Thomson Learning  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.  Illegality. ▪ Osborn v. Kellogg (1996). 48

49. © 2005 West Legal Studies in Business A Division of Thomson Learning Dora leases a house from Evan for a two-year term. To ensure the validity of their lease, it should include  a.a description of the premises.  b.a due date for the payment of the property taxes.  c.a requirement that Dora perform structural repairs to the house.  d.a requirement that Evan carry liability insurance.

50. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:A Read the question – only A is necessary to the validity of the lease; the other things are all very good ideas and examples of the many things that need to be addressed in a lease.

51. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 51

52. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 52

53. © 2005 West Legal Studies in Business A Division of Thomson Learning True or False: Under the covenant of quiet enjoyment, a landlord promises that a tenant will not be disturbed in the use of the premises.

54. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:T How might a landlord breach this covenant?

55. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 55

56. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 56

57. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 57

58. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 58

59. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 59

60. © 2005 West Legal Studies in Business A Division of Thomson Learning True or False: When a landlord sells leased premises to a third party, any existing leases terminate automatically.

61. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:F Leases usually* are encumbrances that remain in place when property is sold. It is said that the property is sold “subject to” the lease. The buyer simply becomes the landlord. *Depends on the contract, however!

62. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 62

63. © 2005 West Legal Studies in Business A Division of Thomson Learning  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. 63

64. © 2005 West Legal Studies in Business A Division of Thomson Learning Allen owns a duplex that he leases to Brad and Cora. Allen may sell  a.the duplex at any time.  b.the duplex, but only after the lease term expires and Brad and Cora have moved out.  c.the duplex, but only with Brad and Cora’s permission.  d.the lease, but not the duplex.

65. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:A He can sell the duplex “subject to” the lease. What rights do Brad and Cora have to dispose of the leasehold interests that they have?

66. © 2005 West Legal Studies in Business A Division of Thomson Learning Bill leases an apartment from Cathy. Two months later, Bill moves out, and arranges with Dian to move in and pay the rent to Cathy for the rest of the term. This is  a.an assignment.  b.an easement.  c.an eviction.  d.a sublease.

67. © 2005 West Legal Studies in Business A Division of Thomson Learning ANSWER:A How is a sublease different than this?