1. © Cavico & Mujtaba, 2008 Business Law for the Entrepreneur and Manager Frank Cavico and Bahaudin G. Mujtaba Chapter 12 – Real Property Law

2. © Cavico & Mujtaba, 2008 Business Law for the Entrepreneur and Manager (Frank Cavico & Bahaudin g. Mujtaba, 2008; ILEAD Academy, LLC) Table of Contents – Chapter Titles Chapter 1 – Introduction to Law and the Legal System Chapter 2 – Torts and Business Chapter 3 – Products Liability Chapter 4 – Contract Law Chapter 5 – Sales Law and the Uniform Commercial Code Chapter 6 – Agency and Employment Law Chapter 7 – Business Organizations Chapter 8 – Commercial Paper and Banking Transactions Chapter 9 – Creditors and debtors – Rights and Responsibilities Chapter 10 – Internet Law Chapter 11 – Intellectual Property Law Chapter 12 – Real Property Law Chapter 13 – International Business Law Chapter 14 – Liability of Accountants and Other Professionals Chapter 15 – Wills and Trusts Chapter 16 – Personal Property, Gifts, and Bailment Chapter 17 – Conclusion and Case Problems

3. © Cavico & Mujtaba, 2008 Chapter Topics The Source of Real Estate Law Acquiring Real Estate Ownership of Real Estate Non-Possessory Interest in Real Estate Regulations of Real Estate Real Property Law In The United States –Introduction, Definition, and Nature of Property –Real v. Personal Property –Transfer of Real Property –Real Estate Mortgages –Government Regulation of Real Property and Eminent Domai –Summary

4. © Cavico & Mujtaba, 2008

7. Real Property Law in the United States Introduction, Definition, and Nature of Property Property can be defined generally as anything that can be owned, possessed, used, or disposed of The two basic types of property are real property, which is not moveable, and personal property, which is moveable the concept of a “fixture,” which is a piece of personal property that has become so firmly attached to real property that it is considered part of the real property

8. © Cavico & Mujtaba, 2008 Real v. Personal Property Real property consists of land, that is, the actual soil, attachments to land, such as fences, trees, crops, minerals, and waters If the personal property is so securely attached that it cannot be removed without damaging the real property to which it is attached, then it likely will be regarded as a fixture Personal property is any property or property right that cannot be classified as real property. There are two types of personal property: 1) tangible, and 2) intangible Real property is divided into two major classifications: 1) the fee simple, and 2) the life estate

9. © Cavico & Mujtaba, 2008 “Accession” is a means of acquiring property by an addition or increase in property already owned “Accretion” occurs when the boundary to property is a river, stream, lake, or ocean, and the land is increased by the shifting flow of the water or the depositing of silt or sand on the bank “Confusion” is the mixing of goods by different owners so that the parts belonging to each owner cannot be identified and separated “Adverse possession” is a method of acquiring title to real property by occupying for a period of time fixed by statute, usually 21 years If property is abandoned, the person who discovers and takes possession of it acquires title thereto Real property also can be owned concurrently; that is, two or more people can own the property at the same time as co-owners

10. © Cavico & Mujtaba, 2008 Transfer of Real Property The usual method of transferring title to real estate is by means of a sale, in which there are two key components: 1) the contract of sale, and 2) the delivery of the deed A deed is a written legal instrument signed by the seller of property conveying title to the buyer of the real property There are two main types of deeds: 1) quitclaim deeds, and 2) warranty deeds A deed possesses certain fundamental characteristics. The parties to the deed are the grantor and the grantee; and they both must be named in the deed. If the grantor is married, the grantor’s name and his or her spouse should be named in the deed The rule of law in the U.S. is that a deed is not effective until delivered Title to the property is complete and vested in the grantee upon delivery

11. © Cavico & Mujtaba, 2008 Real Estate Mortgages A mortgage is a lien given on real property to secure a debt. The mortgage is not the debt itself, but only the security for the debt The mortgagor is the person who gives the mortgage as security for the loan of money. The mortgagee is the person or business that holds the mortgage as security for the debt If the debt is defaulted, the mortgagee takes possession of the property or sells the property at foreclosure sale The mortgagor’s first duty is to make all payments of interest and principal when due A second fundamental obligation of the mortgagor is to pay all taxes, assessments, and insurance premiums on the property There is an important distinction between “assuming a mortgage” and buying property “subject to a mortgage.” In the former case, the buyer becomes primarily liable for the payment; but if a buyer takes property “subject to a mortgage,” the buyer is not personally liable for the mortgage debt

12. © Cavico & Mujtaba, 2008 Government Regulation of Real Property and Eminent Domain Zoning laws are the main type of land use regulation in the United States the major purpose of zoning law is to designate certain types of permissible uses for property within a county or municipality or zoning district. The usual “uses” are for residential, commercial, light industrial, heavy industrial, or mixed use Government at all levels – federal, state, and local – in the U.S. possesses the power to seize and to take private property for “public” use or purpose; but the Constitution also requires that government pay the owner of the property “just” compensation for the property

13. © Cavico & Mujtaba, 2008 Land Use Permitting and Entitlements The following are the common definitions for the terms “permitting” and “entitlements”: 1) Permitting – official government sanction to perform a regulated activity; 2) Entitlements - a right to benefits specified by law, or as some developers view them, limitations on the use of the land or its improvement. Multi-jurisdictional Levels. Permits and entitlements typically must be obtained at a number of different levels of government. Each level can prevent a project from going forward Local Government Process. These are intended to be primary, long- range, growth management tools to plan for future development in an orderly fashion and respond to anticipated changing conditions, and usually include both map and text State Environmental Resource Permit Process. Moving up a notch from the local governmental level, the property owner encounters the land use regulations promulgated by the state

14. © Cavico & Mujtaba, 2008 State Development of Regional Impact Process. States that have been experiencing rapid growth that previously outstripped the government’s ability to control impacts of development on the lands within its jurisdiction have developed special bodies of regulations to deal with large-scale developments Community Development Districts. These are the creations of state statute and may not exist in every state. Their purpose is to enable the creation of a special governmental geographic district to finance infrastructure and similar improvements Federal Permitting. The third major level of land use permitting involves the federal government. These regulations apply uniformly in every state Post Permit Compliance. The owner’s or developer’s efforts are completed with the issuance of the requisite permits. Steps must be taken to ensure permit conditions are continuing to be met

15. © Cavico & Mujtaba, 2008 Construction, Mitigation, and Monitoring. The permitting process typically consists of additional steps beyond the planning and preconstruction stages Tactical and Strategic Entitlement Considerations. The owner or developer of real property is not totally adrift in this seeming miasma of onerous, confusing, and often conflicting regulatory schemes. Certain tactical and strategic moves should be considered, depending on the nature of the development situation

16. © Cavico & Mujtaba, 2008 Summary After reading this chapter, one should be able to understand the definition and nature of real property law, distinguish between real and personal property and owning versus leasing real property, as well as understand the legal complexities of transferring real property, real estate mortgages, and the regulation of real property, especially in relation to Eminent Domain. This chapter has also focused on property law in the U.S. compared with other countries and legal systems, and discussed in detail land use permitting in the United States

17. © Cavico & Mujtaba, 2008 Reference 1.Cavico, F. & Mujtaba, B. G., (2008). Business Law for the Entrepreneur and Manager. ILEAD Academy Publications; Davie, Florida, USA. ISBN: 978-0-9774-2115-2. 2.Cavico, F. and Mujtaba, B. G. (2008). Legal Challenges for the Global Manager and Entrepreneur. Kendal Hunt Publishing; United States.