CHAPTER 29: REAL PROPERTY AND LANDLORD-TENANT LAW 11
whole or in part.
Adverse possession statutes aid in the resolution of boundary disputes and in quieting title when it
is in dispute, adverse possession statutes encourage the use of property by assuring that it remains
in the stream of commerce, by depriving owners who sit on their rights too long of their property,
and by rewarding possessors who put land to productive use.
believed that their common boundary ran along the northern edge of a gravel road. Scarborough believed that
the road, as well as “a grassy area” across its northern edge, was entirely his property. Scarborough filed a
complaint in a Mississippi state court against Rollins to confirm title according to his interpretation. Rollins filed
a counterclaim to confirm title based on her belief. The court entered a judgment for Rollins. Scarborough
appealed.
………………….………….………………………….………….………………………….………………..…………….
Notes and Questions
If Rollins had done nothing on the disputed land except to claim title, and Scarborough had made
ANSWER TO “WHAT IF THE FACTS WERE DIFFERENT?”
QUESTION IN CASE 29.2
support to Scarborough’s claim, but it would not have sufficiently undercut Rollins’s proof of her claim to
succeed. Without an exercise of use over the property on Scarborough’s part, it would have been difficult to
successfully assert possession. According to the elements cited by the court, the use must be actual, open,
visible, continuous, hostile, and exclusive to the interests of others to constitute possession sufficient to
ANSWER TO “THE E-COMMERCE DIMENSION”
QUESTION IN CASE 29.2
How might the Internet have facilitated either party’s claim to the disputed property? Depending on
the public records available online, the parties might have found it easier to check documents—old maps,
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Other cases applying the principles of adverse possession include the following:
• Dickson v. Young, 79 Ark.App. 241, 85 S.W.3d 924 (2002) (landowners’ maintaining four garden areas on
intent to adversely possess the parcel, even though the owner said that he did not intend to possess the land
of another).
• Amrhein v. Eden, 779 N.E.2d 1197 (Ind.App. 2002) (the parties did not attain ownership of a certain
when the disputed property was a public way until recently vacated during a suit to eject the neighbors from
their use of the parcel).
IV. Limitations on the Rights of Property Owners
1. Public Use Requirement
Under the takings clause of the Fifth Amendment, the government may not take private property for
public use without just compensation. Separate proceedings are used to determine that land is
necessary for public use, to obtain title, and to determine the land’s fair value.
CHAPTER 29: REAL PROPERTY AND LANDLORD-TENANT LAW 13
whole or in part.
The power of eminent domain can be used to further economic development, but most states limit
local governments’ ability to take private property to benefit private developers.
CASE SYNOPSIS—
property. Fifteen owners challenged the action in a North Carolina state court. The court ruled in Midland’s
favor. The owners appealed, claiming that Midland’s condemnation was not for public use or benefit, because
the town had no concrete plan to tap the line.
A state intermediate appellate court affirmed. Under a broad interpretation of the relevant state statutes, a
………………….………….………………………….………….………………………….………………..…………….
Notes and Questions
Why should the power of eminent domain be used to further economic development? In Kelo v.
government. There is, moreover, no principled way of distinguishing economic development from the other
public purposes that we have recognized. In our cases upholding takings that facilitated agriculture and
mining, for example, we emphasized the importance of those industries to the welfare of the States in
question [and in a third case] we endorsed the purpose of transforming a blighted area into a well-balanced
community through redevelopment . . . . Clearly, there is no basis for exempting economic development from
14 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
that a city has the power to establish a public utility when it plans to develop the infrastructure and capability
even if it does not plan to furnish the service. The court reasoned that Midland’s installation of the pipeline,
and its potential to provide natural gas service, was likely to spur growth, as well as provide the town with an
advantage in attracting new industries. These opportunities were for the public benefit of the citizens of
Midland.
providing natural gas to residents in another town. Even the idea of making natural gas available to your town
at some point in the future seems like a benefit too distant to justify the immediate condemnation of your
property. On the other hand, the city could argue that the condemnation of the property to provide access to a
natural gas pipeline provides a direct benefit to the community. As the court noted, the potential for cheaper
natural gas may spur growth and provide the city with an advantage in recruiting industries to the area. These
pipeline, and presumably this means that the city intends to do so at some point.
for the property it acquired through eminent domain. Is it right to make the citizens of one town pay
for a pipeline constructed for another town? Discuss. In times of recession, the people of Midland would
likely complain about footing the bill for a pipeline expansion that will not provide them with any financial
benefit in the short term. Even if the properties involved had a relatively low value, such as $100,000 each,
Midland would still have to pay the fifteen owners a substantial amount (for the $100,000 example, $1.5
Monroe was paying to construct the pipeline, and that amount could have greatly exceeded the cost of
acquiring the fifteen properties. In that event, it may have been a bargain for Midland to pay for the properties
and receive the associated benefits.
4. Suppose that Midland had used its eminent domain authority to acquire property for the town to
whole or in part.
areas. The idea is that allowing the government to take private property and give it to private developers
whole or in part.
In favor of such action, it might be argued that promoting economic development is a traditional and long
accepted function of government. When economic development benefits a community, there is almost no way
beneficiaries of such a use are likely to be citizens with disproportionate influence and power in the local
political process, including large corporations and development firms.
• Rogers v. United States, __ Fed.Cl. __ (Fed.Cl. 2009) (a deed granting a right–of-way easement across
trail, and thus governmental action converting the railroad right–of-way to a public trail right–of-way effected a
taking of the property).
• Arkansas Game and Fish Commission v. United States, 87 Fed.Cl. 594 (Fed.Cl. 2009) (Army Corps of
Engineers’ release of water downstream from dam that inundated Arkansas Game and Fish Commission’s
property in wildlife management area during growing season for hardwood trees was intermittent, frequent,
• United States Postal Service v. Sunshine Development, Inc., __ F.Supp.2d __ (M.D.Pa. 2009) (temporary
takings, like those which are permanent in nature, are compensable, and a federal government lessee that
holds over after the expiration of a lease term is subject to liability for taking private property without just
compensation).
• Estate of Kirkpatrick v. City of Olathe, 289 Kan. 554, 215 P.3d 561 (2009) (damage to property, resulting
from an alteration in the flow of groundwater caused by a city’s construction of a roundabout adjacent to the
property, was compensable in an inverse condemnation action under the state Eminent Domain Procedure
Act).
land to lose its value. The former owner must sue to obtain compensation.
C. RESTRICTIVE COVENANTS
A restrictive covenant is a private restriction on the use of land. It runs with the land if the original parties
and their successors are entitled to its benefit or burdened with its obligation. It must be in writing and
ADDITIONAL BACKGROUND—
The Fair Housing Act
Act of 1968 was signed by President Lyndon Johnson seven days after the death of the Reverend Martin
The act condemns discrimination on the basis of race, color, religion, national origin, or gender in the sale
and rental of most housing in the United States, whether or not the seller or landlord has an express policy of
excluding certain persons. In 1988, the act was amended to prohibit discrimination on the basis of a mental or
physical handicap and on the basis of “family status” (marital status, pregnancy, children).
units, single-family homes sold in real estate developments that are not owned by private parties, and any
(HUD). To obtain relief under the Fair Housing Act, first a complaint must be filed with the secretary of HUD
for conciliation or referral to a state agency when local housing laws provide “substantially equivalent rights
and remedies.”
If the issue is not satisfactorily resolved, a public agency or the injured party can sue in federal court and
of force or threats to interfere with federally protected activities, such as participation in a government–
administered program (e.g., a HUD program).
V. Zoning and Government Regulations
things, zoning ordinances classify land by permissible use as part of a comprehensive plan.
1. Permissible Uses of Land
Generally, municipalities divide land into districts according to present and future uses. The districts
may be divided into subdistricts (for example, a residential district may be subdivided into areas for
whole or in part.
• Residential. Here, buildings are constructed for human habitation.
• Commercial. This land is designated for business or government activities—stores, offices,
hotels, theaters, sports stadiums, and courthouses, for example.
• Industrial. This category encompasses manufacturing, shipping, and transportation. Because
aesthetics (for example, height and width) of a commercial building, and the location and operation
of certain businesses to regulate traffic and for other purposes.
B. EXCEPTIONS TO ZONING LAWS
• No change to the essential character of the neighborhood.
a. Hardship Situations
A variance may be granted in a hardship situation but a hardship cannot be self-created (that
is, a party cannot buy property for a purpose that is not permitted and argue that a variance is
• Public hearing.
• Decision. A hearing examiner determines whether the variance will be granted. If so, it
applies only to the specific parcel of land for which it was requested.
2. Special-Use Permits
preservation of historical homes) or support environmental goals (energy efficient buildings).
VI. Landlord-Tenant Relationships
• The temporary nature of possession distinguishes a tenant from a purchaser. The exclusivity of pos-
whole or in part.
• Leases may be oral or written. In most states, leases must be in writing for some tenancies (such as
those exceeding one year). State or local law often dictates permissible lease terms.
Generally, an entrepreneur starting a business is well advised to lease rather than buy property because
the future success of the business is uncertain. By leasing instead of purchasing property, persons just
starting out in business allow themselves some time to determine whether business profits will warrant the
outright purchase of property.
square foot (per month or per year). In commercial leases to retail stores, part or all of the rent commonly
consists of a percentage of the tenant’s sales made on the premises during the term of the lease. Bear in
mind, too, that the nature of your business should determine, to a great extent, the location of the leased
premises. If you are involved in a mail-order business, for example, you need not pay the extra price for a
prime location that might be required for a restaurant business.
success in negotiating favorable lease terms will depend on the market. If the rental market is “good” (that is,
if you have numerous other rental options at favorable rates), you may be able to convince the landlord to be
responsible for taxes, insurance, maintenance, and the like, and possibly for improvements to the property
necessary for your business. Therefore, it is important to investigate the status of the market before you begin
negotiations with a potential landlord.
1. When you are starting a business, leasing can be beneficial because it reduces your liability in the event
that your business is unsuccessful.
2. Realize that although lease contracts normally favor the landlord, you usually can negotiate ad–
vantageous terms for your lease of the premises.
3. Make sure that the lease clearly indicates whether the landlord or the tenant is to be responsible for taxes
on the property, expenses relating to necessary maintenance and repairs, and utility costs. By comparison
whole or in part.
4. To protect yourself in the event your business is unsuccessful, start with a short-term initial lease,
perhaps with an option to renew the lease in the future.
• The covenant of quiet enjoyment is the essence of the landlord–tenant relationship, as the text
points out. A breach creates liability for damages.
• An eviction occurs when a landlord deprives a tenant of possession of the leased property or
2. Use and Maintenance of the Premises
Generally, a tenant may use leased property in any manner within the terms of the lease (which
impliedly includes uses that are legal, that reasonably relate to the ordinary use of the property, and
that do not harm the landlord’s interest). The tenant is responsible for damages, but not ordinary
wear and tear. The landlord must comply with local building codes, which sometimes require that
The French civil law in effect in Louisiana at the beginning of the nineteenth century required a landlord to
keep premises in a condition suitable for a tenant’s intended use. Early in their history, California,
Georgia, Montana, and the Dakotas also imposed on landlords a similar duty.
salaries were often low, giving rise to corruption. Landlords found it easy to obtain variances on the basis of
political considerations, and public prosecutors did not enforce the codes vigorously.
In the first decades of the twentieth century, Iowa, Connecticut, and New York adopted legislation
authorizing tenants to withhold rent if their landlords failed to correct housing code violations that made the
property uninhabitable. In the 1960s, during an increasing awareness of social problems and political
attempts to solve them, other states adopted rent-withholding statutes. In the last twenty years, Oregon has
enacted a statutory warranty of habitability and recognized the remedy of rent-withholding.
support to Scarborough’s claim, but it would not have sufficiently undercut Rollins’s proof of her claim to
succeed. Without an exercise of use over the property on Scarborough’s part, it would have been difficult to
successfully assert possession. According to the elements cited by the court, the use must be actual, open,
visible, continuous, hostile, and exclusive to the interests of others to constitute possession sufficient to
ANSWER TO “THE E-COMMERCE DIMENSION”
QUESTION IN CASE 29.2
How might the Internet have facilitated either party’s claim to the disputed property? Depending on
the public records available online, the parties might have found it easier to check documents—old maps,
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Other cases applying the principles of adverse possession include the following:
• Dickson v. Young, 79 Ark.App. 241, 85 S.W.3d 924 (2002) (landowners’ maintaining four garden areas on
intent to adversely possess the parcel, even though the owner said that he did not intend to possess the land
of another).
• Amrhein v. Eden, 779 N.E.2d 1197 (Ind.App. 2002) (the parties did not attain ownership of a certain
when the disputed property was a public way until recently vacated during a suit to eject the neighbors from
their use of the parcel).
IV. Limitations on the Rights of Property Owners
1. Public Use Requirement
Under the takings clause of the Fifth Amendment, the government may not take private property for
public use without just compensation. Separate proceedings are used to determine that land is
necessary for public use, to obtain title, and to determine the land’s fair value.
CHAPTER 29: REAL PROPERTY AND LANDLORD-TENANT LAW 13
whole or in part.
The power of eminent domain can be used to further economic development, but most states limit
local governments’ ability to take private property to benefit private developers.
CASE SYNOPSIS—
property. Fifteen owners challenged the action in a North Carolina state court. The court ruled in Midland’s
favor. The owners appealed, claiming that Midland’s condemnation was not for public use or benefit, because
the town had no concrete plan to tap the line.
A state intermediate appellate court affirmed. Under a broad interpretation of the relevant state statutes, a
………………….………….………………………….………….………………………….………………..…………….
Notes and Questions
Why should the power of eminent domain be used to further economic development? In Kelo v.
government. There is, moreover, no principled way of distinguishing economic development from the other
public purposes that we have recognized. In our cases upholding takings that facilitated agriculture and
mining, for example, we emphasized the importance of those industries to the welfare of the States in
question [and in a third case] we endorsed the purpose of transforming a blighted area into a well-balanced
community through redevelopment . . . . Clearly, there is no basis for exempting economic development from
14 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
whole or in part.
that a city has the power to establish a public utility when it plans to develop the infrastructure and capability
even if it does not plan to furnish the service. The court reasoned that Midland’s installation of the pipeline,
and its potential to provide natural gas service, was likely to spur growth, as well as provide the town with an
advantage in attracting new industries. These opportunities were for the public benefit of the citizens of
Midland.
providing natural gas to residents in another town. Even the idea of making natural gas available to your town
at some point in the future seems like a benefit too distant to justify the immediate condemnation of your
property. On the other hand, the city could argue that the condemnation of the property to provide access to a
natural gas pipeline provides a direct benefit to the community. As the court noted, the potential for cheaper
natural gas may spur growth and provide the city with an advantage in recruiting industries to the area. These
pipeline, and presumably this means that the city intends to do so at some point.
for the property it acquired through eminent domain. Is it right to make the citizens of one town pay
for a pipeline constructed for another town? Discuss. In times of recession, the people of Midland would
likely complain about footing the bill for a pipeline expansion that will not provide them with any financial
benefit in the short term. Even if the properties involved had a relatively low value, such as $100,000 each,
Midland would still have to pay the fifteen owners a substantial amount (for the $100,000 example, $1.5
Monroe was paying to construct the pipeline, and that amount could have greatly exceeded the cost of
acquiring the fifteen properties. In that event, it may have been a bargain for Midland to pay for the properties
and receive the associated benefits.
4. Suppose that Midland had used its eminent domain authority to acquire property for the town to
whole or in part.
areas. The idea is that allowing the government to take private property and give it to private developers
whole or in part.
In favor of such action, it might be argued that promoting economic development is a traditional and long
accepted function of government. When economic development benefits a community, there is almost no way
beneficiaries of such a use are likely to be citizens with disproportionate influence and power in the local
political process, including large corporations and development firms.
• Rogers v. United States, __ Fed.Cl. __ (Fed.Cl. 2009) (a deed granting a right–of-way easement across
trail, and thus governmental action converting the railroad right–of-way to a public trail right–of-way effected a
taking of the property).
• Arkansas Game and Fish Commission v. United States, 87 Fed.Cl. 594 (Fed.Cl. 2009) (Army Corps of
Engineers’ release of water downstream from dam that inundated Arkansas Game and Fish Commission’s
property in wildlife management area during growing season for hardwood trees was intermittent, frequent,
• United States Postal Service v. Sunshine Development, Inc., __ F.Supp.2d __ (M.D.Pa. 2009) (temporary
takings, like those which are permanent in nature, are compensable, and a federal government lessee that
holds over after the expiration of a lease term is subject to liability for taking private property without just
compensation).
• Estate of Kirkpatrick v. City of Olathe, 289 Kan. 554, 215 P.3d 561 (2009) (damage to property, resulting
from an alteration in the flow of groundwater caused by a city’s construction of a roundabout adjacent to the
property, was compensable in an inverse condemnation action under the state Eminent Domain Procedure
Act).
land to lose its value. The former owner must sue to obtain compensation.
C. RESTRICTIVE COVENANTS
A restrictive covenant is a private restriction on the use of land. It runs with the land if the original parties
and their successors are entitled to its benefit or burdened with its obligation. It must be in writing and
ADDITIONAL BACKGROUND—
The Fair Housing Act
Act of 1968 was signed by President Lyndon Johnson seven days after the death of the Reverend Martin
The act condemns discrimination on the basis of race, color, religion, national origin, or gender in the sale
and rental of most housing in the United States, whether or not the seller or landlord has an express policy of
excluding certain persons. In 1988, the act was amended to prohibit discrimination on the basis of a mental or
physical handicap and on the basis of “family status” (marital status, pregnancy, children).
units, single-family homes sold in real estate developments that are not owned by private parties, and any
(HUD). To obtain relief under the Fair Housing Act, first a complaint must be filed with the secretary of HUD
for conciliation or referral to a state agency when local housing laws provide “substantially equivalent rights
and remedies.”
If the issue is not satisfactorily resolved, a public agency or the injured party can sue in federal court and
of force or threats to interfere with federally protected activities, such as participation in a government–
administered program (e.g., a HUD program).
V. Zoning and Government Regulations
things, zoning ordinances classify land by permissible use as part of a comprehensive plan.
1. Permissible Uses of Land
Generally, municipalities divide land into districts according to present and future uses. The districts
may be divided into subdistricts (for example, a residential district may be subdivided into areas for
whole or in part.
• Residential. Here, buildings are constructed for human habitation.
• Commercial. This land is designated for business or government activities—stores, offices,
hotels, theaters, sports stadiums, and courthouses, for example.
• Industrial. This category encompasses manufacturing, shipping, and transportation. Because
aesthetics (for example, height and width) of a commercial building, and the location and operation
of certain businesses to regulate traffic and for other purposes.
B. EXCEPTIONS TO ZONING LAWS
• No change to the essential character of the neighborhood.
a. Hardship Situations
A variance may be granted in a hardship situation but a hardship cannot be self-created (that
is, a party cannot buy property for a purpose that is not permitted and argue that a variance is
• Public hearing.
• Decision. A hearing examiner determines whether the variance will be granted. If so, it
applies only to the specific parcel of land for which it was requested.
2. Special-Use Permits
preservation of historical homes) or support environmental goals (energy efficient buildings).
VI. Landlord-Tenant Relationships
• The temporary nature of possession distinguishes a tenant from a purchaser. The exclusivity of pos-
whole or in part.
• Leases may be oral or written. In most states, leases must be in writing for some tenancies (such as
those exceeding one year). State or local law often dictates permissible lease terms.
Generally, an entrepreneur starting a business is well advised to lease rather than buy property because
the future success of the business is uncertain. By leasing instead of purchasing property, persons just
starting out in business allow themselves some time to determine whether business profits will warrant the
outright purchase of property.
square foot (per month or per year). In commercial leases to retail stores, part or all of the rent commonly
consists of a percentage of the tenant’s sales made on the premises during the term of the lease. Bear in
mind, too, that the nature of your business should determine, to a great extent, the location of the leased
premises. If you are involved in a mail-order business, for example, you need not pay the extra price for a
prime location that might be required for a restaurant business.
success in negotiating favorable lease terms will depend on the market. If the rental market is “good” (that is,
if you have numerous other rental options at favorable rates), you may be able to convince the landlord to be
responsible for taxes, insurance, maintenance, and the like, and possibly for improvements to the property
necessary for your business. Therefore, it is important to investigate the status of the market before you begin
negotiations with a potential landlord.
1. When you are starting a business, leasing can be beneficial because it reduces your liability in the event
that your business is unsuccessful.
2. Realize that although lease contracts normally favor the landlord, you usually can negotiate ad–
vantageous terms for your lease of the premises.
3. Make sure that the lease clearly indicates whether the landlord or the tenant is to be responsible for taxes
on the property, expenses relating to necessary maintenance and repairs, and utility costs. By comparison
whole or in part.
4. To protect yourself in the event your business is unsuccessful, start with a short-term initial lease,
perhaps with an option to renew the lease in the future.
• The covenant of quiet enjoyment is the essence of the landlord–tenant relationship, as the text
points out. A breach creates liability for damages.
• An eviction occurs when a landlord deprives a tenant of possession of the leased property or
2. Use and Maintenance of the Premises
Generally, a tenant may use leased property in any manner within the terms of the lease (which
impliedly includes uses that are legal, that reasonably relate to the ordinary use of the property, and
that do not harm the landlord’s interest). The tenant is responsible for damages, but not ordinary
wear and tear. The landlord must comply with local building codes, which sometimes require that
The French civil law in effect in Louisiana at the beginning of the nineteenth century required a landlord to
keep premises in a condition suitable for a tenant’s intended use. Early in their history, California,
Georgia, Montana, and the Dakotas also imposed on landlords a similar duty.
salaries were often low, giving rise to corruption. Landlords found it easy to obtain variances on the basis of
political considerations, and public prosecutors did not enforce the codes vigorously.
In the first decades of the twentieth century, Iowa, Connecticut, and New York adopted legislation
authorizing tenants to withhold rent if their landlords failed to correct housing code violations that made the
property uninhabitable. In the 1960s, during an increasing awareness of social problems and political
attempts to solve them, other states adopted rent-withholding statutes. In the last twenty years, Oregon has
enacted a statutory warranty of habitability and recognized the remedy of rent-withholding.