978-0078023194 Chapter 24 Lecture Notes

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Essentials of Business Law, 9th edition

INSTRUCTOR’S MANUAL

Chapter 24 Real and Personal Property

LESSON OVERVIEW

While Part 4 of the book dealt with commercial paper and its various essentials, Chapter 24 will deal

with real and personal property. The chapter describes the characteristics of property and provides

examples of items considered property. It further distinguishes between real and personal property and

identifies the common ways in which title to personal property can be acquired, the different forms of

property ownership, the characteristics of real property, the ownership interests in real property in terms

of freehold and leasehold estates, the transfer of real property, including the various types of deeds, the

delivery and recording of deeds, and transfers made through eminent domain and adverse possession.

Finally, students’ understanding of the topics is evaluated through objective-type questions, discussion

questions, and case scenarios. Students are encouraged to conduct their own research through the use of

the Internet and other sources.

CHAPTER OUTLINE

A. CHARACTERISTICS OF PROPERTY (p. 394)

B. DISTINCTION BETWEEN REAL AND PERSONAL PROPERTY (p. 394)

1. Real Property (p. 394)

2. Personal Property (p. 394)

3. Real Property Can Become Personal Property (p. 394)

4. Personal Property Can Become Real Property (p. 394)

C. ACQUIRING TITLE TO PERSONAL PROPERTY (pp. 395-398)

1. Finding Lost Personal Property (pp. 395-396)

2. Abandoned Property (p. 396)

3. Gifts (pp. 396-397)

4. Accession (p.398)

D. OWNERSHIP OF REAL OR PERSONAL PROPERTY (pp. 398-399)

1. Severalty Ownership (p. 398)

2. Multiple Ownership (pp. 398-399)

E. REAL PROPERTY (pp. 399-400)

1. Land (p. 399)

2. Buildings and Fixtures (p. 400)

3. Rights in Land Other Than Ownership (p. 400)

F. OWNERSHIP INTERESTS IN REAL PROPERTY (pp. 401-402)

1. Freehold Estates (p. 401)

2. Leasehold Estates (p. 402)

G. TRANSFER OF REAL PROPERTY (pp. 402-404)

1. Types of Deeds (p. 402)

2. Delivery and Recording of Deeds (pp. 402-403)

3. Other Transfers of Real Property (pp. 403-404)

H. CHAPTER SUMMARY (pp. 404-405)

I. CHAPTER ASSESSMENT (pp. 405-411)

1. Matching Key Terms (pp. 405-406)

2. True/False Quiz (p. 406)

3. Discussion Questions (pp. 406-407)

4. Thinking Critically About the Law (pp. 407-408)

5. Case Questions (pp. 408-409)

6. Case Analysis (pp. 409-410)

7. Legal Research (p. 411)

KEY TERMS

Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed

in bold in the copy. They are listed here for your quick reference.

§ real property (p. 394)

§ personal property (p.394)

§ inter vivos gift (p. 397)

§ gift in causa mortis (p. 397)

§ accession (p. 398)

§ severalty (p. 398)

§ joint tenancy (p. 398)

§ tenancy by the entirety (p. 398)

§ tenancy in common (p.399)

§ community property (p. 399)

§ easement (p. 400)

§ freehold estate (p. 401)

§ leasehold estate (p. 401)

§ fee simple (p. 401)

§ life estate (p. 401)

§ deed (p. 402)

§ eminent domain (p. 403)

§ condemnation (p. 403)

§ title insurance (p. 403)

§ adverse possession (p. 404)

LEARNING OUTCOMES

The chapter Learning Outcomes will help you and the students discover the concepts and information

that should be understood upon completion of the chapter. You may want to access the PowerPoint

(PPT) slides for Chapter 24 when you begin the study of the chapter and discuss each Learning

Outcome. Each Learning Outcome will be covered separately in the Instructor Notes, but they are

shown here in total as an overview of the sections being presented in Chapter 24. The corresponding

text page numbers and PPT slides are listed next to each outcome. These slides should be used to

reinforce the main points of the lecture.

After completing this chapter, the students will be able to:

1. Describe the characteristics of property and provide examples of items considered property. (p.

394, PPT slide 2)

2. Distinguish between real and personal property. (p. 394, PPT slides 3-4)

3. Identify and discuss common ways in which title to personal property can be acquired. (pp.

395-398), PPT slides 5-13)

4. Discuss the different forms of property ownership. (pp. 398-399, PPT slides 14-17)

5. Discuss the characteristics of real property. (pp. 399-400, PPT slides 18-24)

6. Describe ownership interests in real property in terms of freehold and leasehold estates. (pp.

401-402, PPT slides 25-26)

7. Discuss the transfer of real property, including (a) the various types of deeds, (b) the delivery and

recording of deeds, and (c) transfers made through eminent domain and adverse possession. (pp.

402-404, PPT slides 27-31)

LECTURE OUTLINE

A. CHARACTERISTICS OF PROPERTY

To many people, the term property suggests land. Actually, property should be viewed more broadly

because it also includes tangible goods such as automobiles, furniture, clothing, and even pets. In

addition, there are intangible possessions, such as patents, rights to drill for oil on someone else’s land,

and copyrights of creative works such as books. These intangible possessions are also property.

B. DISTINCTION BETWEEN REAL AND PERSONAL PROPERTY

The law distinguishes between real and personal property and governs each in different ways.

1. Real Property

Under common law, ownership of real property extended from the center of the earth to

the highest point in the sky. A person owned not only a portion of the earth’s crust but

also the ground under it and the airspace above it. As a result, real property comprises

land and everything attached to the land.

2. Personal Property

Personal property includes all property other than real property, both tangible and

intangible.

3. Real Property Can Become Personal Property

Because real property consists of land and things permanently attached to it, it follows

logically that when things are removed from real property, they become personal

property. When a tree is cut down, for example, it becomes personal property.

4. Personal Property Can Become Real Property

Personal property, such as trees or shrubbery purchased at a nursery, become real

property when they are planted. Similarly, personal property, such as lumber and bricks,

become real property when they are used to erect a building on real property.

C. ACQUIRING TITLE TO PERSONAL PROPERTY

Title to personal property is the actual ownership of property, not just the evidence of ownership, such

as a certificate of title

1. Finding Lost Personal Property

The finder of lost property holds it in trust, that is, in safekeeping, at least for a time, for

the real owner. As a result, the finder is a custodian acting for the true owner. The finder

of lost property has ownership rights superior to everyone except the true owner.

2. Abandoned Property

Personal property is considered abandoned when the owner disposes of it with the

apparent intention of disclaiming ownership. Title to such property is transferred to the

first person who takes control over it.

3. Gifts

A gift is the voluntary transfer of property by one person to another without

consideration or payment of any kind. While gift giving is a common act, it takes on

added dimensions when viewed from a legal standpoint.

4. Accession

Accession is the right of an owner of property such as plants or animals to any increase

in the property.

D. OWNERSHIP OF REAL OR PERSONAL PROPERTY

Title is actual ownership, not just evidence of ownership.

1. Severalty Ownership

Ownership is held in severalty when all the rights of ownership in a particular piece of

property are held by one person.

2. Multiple Ownership

For various reasons, it is sometimes desirable for multiple people to own real or

personal property jointly. However, certain types of property, such as businesses, boats,

cars, and planes, cannot be divided among the owners.

E. REAL PROPERTY

Real property is distinguished from personal property in a number of ways. Unlike most forms of

personal property, the supply of land is limited. Moreover, land is unique, and one piece of land is not

the same as any other.

1. Land

The law relating to real property treats land as extending down to the center of the earth

and also includes things that are permanently attached to it, such as houses, buildings,

and trees.

2. Buildings and Fixtures

A building is a structure built on land. Such a structure can be almost any building

permanently placed or constructed on or beneath the surface of the land. When items of

personal property are added to land or to buildings in such a way that they become a part

of these, they are known as fixtures.

3. Rights in Land Other Than Ownership

Rights in land can be separated from the land itself, except in the case of easements.

F. OWNERSHIP INTERESTS IN REAL PROPERTY

Interests in real property can relate to either ownership or possession. The term estate is used to

identify the interest or the right a person has in real property. An estate can be either a freehold estate,

by which a person owns the land either for life or forever, or a leasehold estate, by which a person has

an interest in real property that comes from a lease.

1. Freehold Estates

There are a number of ways in which freehold estates can be held that provide absolute

(total) ownership lasting for either the lifetime of the holder or forever. Consequently, a

holder of a freehold estate in land can transfer the estate (ownership) by sale, by gift, or

by leaving it to his or her heirs.

2. Leasehold Estates

An estate that does not involve an ownership interest in real property is known as a

leasehold estate.

G. TRANSFER OF REAL PROPERTY

The transfer of real property is, in many ways, more complex than the transfer of personal property.

Consequently, a number of specialized terms are used. A deed is the instrument, or document, that

conveys an interest in real property between parties.

1. Types of Deeds

Deeds can be classified by the kind of ownership interest being transferred.

A quitclaim deed transfers whatever interest a grantor has in real property, if any. It

states that the grantor claims no interest in the property for which the deed is given.

A warranty deed is one in which the grantor asserts that he or she has title and that the

property is free of the claims of others.

A bargain and sale deed simply states that the grantor is transferring the real property to

the grantee.

2. Delivery and Recording of Deeds

When a deed has been completed and signed by the grantor, it must be delivered to the

grantee to bring about a legally enforceable transfer of ownership.

3. Other Transfers of Real Property

In addition to the above, there are two other ways in which real property may be

transferred under the doctrines of eminent domain and adverse possession.

4. Title Insurance. Title insurance protects individuals against financial loss

resulting from defects in their title to (ownership of) real property or from issues

associated with their mortgage liens.

INSTRUCTOR NOTES

A resulting answer or explanation is provided below for each Learning Outcome in Chapter 24. Every

outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter

assessment exercises and activities for ease of reference and use.

LO1. Describe the characteristics of property and provide examples of items considered property.

Property includes land; tangible goods such as automobiles, furniture, clothing, and pets; and intangible

possessions, such as patents, rights to drill for oil on someone else’s land, and copyrights of creative

works such as books. Consequently, the broad term property includes, in addition to land, both tangible

and intangible personal property.

Text Pages: 394

PowerPoint: Slide 2

Thinking Critically About the Law: 32

LO2. Distinguish between real and personal property.

Real property is the ground and everything permanently attached to it, including land, buildings,

trees, and shrubs. The airspace above and the ground below the land also are included. Personal

property is everything, tangible and intangible, that is not real property.

Text Pages: 394

PowerPoint: Slides 3-4

Discussion Questions: 26

LO3. Identify and discuss common ways in which title to personal property can be acquired.

A finder of lost property has a responsibility to make a reasonable effort to find the true owner.

However, property that is abandoned with the apparent intention of disclaiming it belongs to the first

person who takes control of it. An object is considered mislaid, rather than lost, when it has been

intentionally left in a certain place and then forgotten by the owner. If an object has not been

intentionally left in the custody of someone else, it is considered lost. A gift inter vivos is one between

the living; a gift in causa mortis is given by a living person who expects to die from a known cause.

Text Pages: 395-398

PowerPoint: Slides 5-13

Discussion Questions: 27

Thinking Critically About the Law: 34

Case Questions: 38

Case Analysis: 43-44

LO4. Discuss the different forms of property ownership.

Title is actual ownership, not just evidence of ownership. Different forms of ownership include single-

and multiple-person ownership, which apply to both real and personal property. Severalty ownership

exists when all the rights of ownership in property are held by one person. Joint tenancy occurs when

two or more people own equal shares in property with the right of survivorship. Tenancy by the entirety

is a form of joint ownership by husband and wife in which both have a right to the entire property and

the right of survivorship. Tenancy in common is a form of ownership by two or more persons that can

be sold, transferred, or inherited. Community property is property acquired during marriage that, in

some states, belongs to both husband and wife.

Text Pages: 398-399

PowerPoint: Slides 14-17

Discussion Questions: 28

Thinking Critically About the Law: 35-36

Case Questions: 37, 39, 40

LO5. Discuss the characteristics of real property.

The law relating to real property treats land as extending down to the center of the earth and also

includes things that are permanently attached to it, such as houses, buildings, and trees. Moreover,

rights to land include the airspace above the land to an indefinite height, subject to the rights of aircraft

in flight that do not pose a hazard to persons or property on the land. Land also includes rights to

minerals such as oil, coal, or iron ore, except in states where the state retains an interest in certain

minerals.

Text Pages: 399-400

PowerPoint: Slides 18-24

Discussion Questions: 29-30

Case Analysis: 42

LO6. Describe ownership interests in real property in terms of freehold and leasehold estates.

A freehold estate is one in which a person owns the land for life or forever. A leasehold estate is one in

which a person has an interest in real property that comes from a lease. One type of freehold estate is

an estate in fee simple, in which the owner of a freehold estate holds it absolutely. A second type of

freehold estate is a life estate, in which the owner owns the estate only for his or her lifetime.

Text Pages: 401-402

PowerPoint: Slides 25-26

Case Analysis: 41

LO7. Discuss the transfer of real property, including (a) the various types of deeds, (b) the delivery

and recording of deeds, and (c) transfers made through eminent domain and adverse possession.

The transfer of real property may be effected by deed, eminent domain, or adverse possession. A deed

is an instrument that conveys an interest in real property between parties. Types of deeds include a

quitclaim deed, a warranty deed, and a bargain and sale deed. Real property also can be transferred by

eminent domain (when it is taken by the government and the owner is compensated) or adverse

possession (when land is acquired as a result of a person’s actual, continuous, open, known, and hostile

use of land for a certain period of time).

Text Pages: 402-404

PowerPoint: Slides 25-26

Discussion Questions: 31

Thinking Critically About the Law: 33