Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
1
Chapter 49
Real Property and Landlord-Tenant Law
INTRODUCTION
This chapter examines the ways in which ownership rights in property can be held; the nature of ownership
rights in real property; the legal requirements for the transfer of real property, including the types of rights that are
transferred by various deeds; and adverse possession. Other topics include eminent domain and the government’s
responsibility to pay compensation when condemning private land for public use.
This chapter also examines the landlord-tenant relationship, briefly discussing the rights and responsibilities
of the landlord and tenant in negotiating a lease, in using and maintaining the leased property, in paying and
collecting rent, and in transferring interests in the property.
CHAPTER OUTLINE
I. The Nature of Real Property
Real property usually refers to land, but it also includes subsurface rights, air rights, and fixtures.
A. LAND AND STRUCTURES
Land includes the soil on the surface of the earth, the natural products or artificial structures attached to
it, water on or under its surface, and the air space above it.
2 UNIT TEN: PROPERTY AND ITS PROTECTION
ADDITIONAL BACKGROUND—
Land
The distinction between real property and personal property is usually fairly easy to make. Real property
consists of land and any vegetation and artificial structures such as houses and barns on the land. Personal
property, by contrast, is property other than land that may be moved by the holder such as jewelry or stocks
or clothes or automobiles.
Many contracts involving the lease or sale of land use the terms “property,” “land,” and “premises”
interchangeably but these terms are distinguishable.
• “Property” refers to both the land and the premises.
• “Land” is generally used to refer to the land itself as well as any mineral deposits or vegetation.
• “Premises” is typically used to refer to the artificial structures on the land regardless of whether they
are buildings or houses or sheds.
A lease or sale of developed property (land with permanent improvements such as a farmhouse) should
use the term “property” to refer to the land and building together because the use of the term “land” may
suggest that the parties intended to exclude the farmhouse while the use of the term “premises” may be
regarded as a reference merely to the farmhouse itself.
B. AIRSPACE AND SUBSURFACE RIGHTS
Significant limitations on air or subsurface rights normally have to be indicated on the deed.
1. Airspace Rights
Generally, plane flights do not violate owners’ rights, but strung wires, leaning buildings, and pro-
jecting roofs do).
2. Subsurface Rights
Ownership of land’s surface and subsurface can be separate. Rights to the subsurface can be
valuable when minerals, oil, or natural gas is there. Conflicts may arise between surface and
subsurface owners when attempts are made to excavate. Generally, the owners of subsurface
rights are absolutely liable if their excavation causes the surface to subside.
C. PLANT LIFE AND VEGETATION
When land with growing crops is sold, the sale includes the crops, unless otherwise specified. Crops
sold by themselves are goods (and the sale is covered by the UCC [UCC 2–107(2)]).
D. FIXTURES
Fixtures—items affixed or attached to real property in a permanent way—are included in a sale of land if
the contract does not provide otherwise.
1. Typical Fixtures
Flooring, cabinets, and windows are typical fixtures. An item will be deemed a fixture if—
CHAPTER 49: REAL PROPERTY AND LANDLORD-TENANT LAW 3
• It cannot be removed without substantial damage to the remaining realty.
• It is so adapted to the rest of the realty as to be part of it.
2. The Role of Intent
The key to determining whether something is a fixture is the intent of its owner.
3. Trade Fixtures Are Personal Property
Unlike other fixtures, trade fixtures generally remain the tenant’s property.
II. Ownership and Other Interests in Real Property
A. OWNERSHIP IN FEE SIMPLE
An owner in fee simple has the greatest aggregation of rights, privileges, and power.
• A fee simple absolute is limited absolutely to a person and his or her heirs and is assigned forever
without limitation or condition.
• The rights that accompany a fee simple absolute include the right to use the land for whatever
purpose the owner sees fit (but not to unreasonably interfere with others’ use of their land).
B. LIFE ESTATES
A life estate lasts for the life of some specified individual. The tenant of a life estate has certain rights
with limits—use without waste, extraction of resources by existing facilities only, mortgage for periods
shorter than the life term. A life tenant’s duties include maintaining the value of the property.
CASE SYNOPSIS—
Case 49.1: Main Omni Realty Corp. v. Matus
Craig Matus held a life estate in certain residential real property in Huntington, New York. On the
termination of the life estate, title to the property was to transfer to Main Omni Realty Corp., a wholly owned
subsidiary of New York Community Bank. For a dozen years, Matus refused to pay taxes on the property,
resulting in tax liens. Main Omni paid the liens to avoid a foreclosure and sale of the property, which thereby
preserved its interest. Main Omni then filed a suit in a New York state court against Matus to extinguish the
life estate, based on his refusal to pay the taxes. The court denied Main Omni’s motion for summary
judgment. Main Omni appealed.
A state intermediate appellate court reversed. “As life tenant, the defendant was obligated to pay the
property taxes * * * and the intentional failure to do so constitutes waste. * * * The defendant was unjustly
enriched by the plaintiffs' payment of these expenses. * * * Equity warrants extinguishing his life estate.”
..................................................................................................................................................
Notes and Questions
How does the intentional failure to pay property taxes constitute waste? To commit waste is to use
property carelessly, fail to use it productively, or to otherwise fail to exploit its potential. Matus intentionally
failed to pay the property taxes on the property at the center of this case and clearly expressed an intention
4 UNIT TEN: PROPERTY AND ITS PROTECTION
not to do so in the future. Under these circumstances, Main Omni’s interest in the property was in constant
danger of forfeiture in a tax lien sale (unless of course Main Omni continued to pay the taxes that Matus was
otherwise obligated to pay). The appellate court held that Matus’s failure to satisfy his obligation constituted
waste.
C. CONCURRENT OWNERSHIP
Concurrent owners include tenants in common, joint tenants, tenants by the entirety, and community
property owners.
1. Tenancy in Common
Tenants in common each own an undivided fractional interest in the property. On one tenant’s
death, that interest passes to his or her heirs.
2. Joint Tenancy
Joint tenants each own an undivided interest in the whole.
a. Right of Survivorship
A deceased joint tenant’s interest passes to the surviving joint tenant or tenants. The
surviving joint tenant or tenants acquires a deceased tenant’s interest—instead of the interest
passing to the deceased tenant’s heirs.
b. Termination of a Joint Tenancy
A joint tenant’s transfer of his or her interest without the other joint tenant’s consent
extinguishes the joint tenancy. The transferee becomes a tenant in common.
3. Tenancy by the Entirety
A tenancy by the entirety is ownership by a husband and wife. Neither spouse may transfer
separately his or her interest during his or her life.
ADDITIONAL BACKGROUND—
Joint Tenancy and Tenancy by the Entirety
Both the joint tenancy and tenancy by the entirety require that certain preconditions exist before a valid
tenancy can be said to exist. First, the owners of the estate must have both received their interests at the
same time (unity of time). Second, the owners of the estate must both draw their title from the same deed or
document (unity of title). Third, the owners of the estate must have equal interests in the land (unity of
interest). Fourth, the owners must have an unrestricted right to use the entire property (unity of possession).
A tenancy in common may exist without any of these unities except that relating to the unity of possession
because tenants in common, despite the unevenness of their respective interests in the property, still have
the right to use the entire property.
4. Community Property
Only some states allow property to be owned as community property. If property is held as
community property, each spouse technically owns an undivided one-half interest in it.
CHAPTER 49: REAL PROPERTY AND LANDLORD-TENANT LAW 5
D. LEASEHOLD ESTATES
1. Fixed-Term Tenancy
A fixed-term tenancy, or tenancy for years, is created by an express contract (which can sometimes
2. Periodic Tenancy
A periodic tenancy is created by a lease that does not specify how long it is to last but does specify
3. Tenancy at Will
4. Tenancy at Sufferance
A tenancy at sufferance is the possession of land without right, created when another tenancy ends
and the tenant remains in possession without the owner’s consent.
E. NONPOSSESSORY INTERESTS
An easement allows a person to use land without taking anything from it. A profit allows a person to take
something from the land.
1. Easement or Profit Appurtenant
An easement or profit appurtenant attaches to adjacent property.
2. Easement or Profit in Gross
3. Creation of an Easement or Profit
Profits and easements are created by—
4. Termination of an Easement or Profit
Nonuse of an easement or profit is not enough to terminate it unless accompanied by an overt act
showing intent to abandon. There are three methods of termination—
5. License
A license is the revocable right of a person to come onto another person’s land. The text provides
the example of a ticket to a movie.
III. Transfer of Ownership
A. REAL ESTATE SALES CONTRACTS
• Due in part to the complexity of a real estate transaction, licensed real estate brokers or agents
assist the buyer and seller in the deal.
1. Closing Date and Escrow
The buyer may deposit funds with, and the seller may give a deed to, an escrow agent to transfer
when the conditions of sale are met.
2. Marketable Title
A seller is required to deliver marketable title—title free from undisclosed encumbrances and
defects. Title insurance ensures the buyer from losses from defects in title.
ADDITIONAL BACKGROUND—
Title Insurance
Title insurance companies issue title insurance policies to insure title to real property against defects
that might otherwise render title unmarketable. The amount of the policy is usually equal to the purchase
price of the property being purchased. Typically, title insurance companies issue title insurance policies after
a title search of the property has been conducted but before closing has occurred. A title insurance policy
does not affect the quality of the title being purchased but simply provides a guarantee of accuracy regarding
the quality of title to the land itself. A property owner could file an action against the title insurance company if
some defect that was not disclosed in the title insurance policy rendered title unmarketable, but that very
same property owner would have no right to proceed against the title insurance company simply because its
investigation revealed that there are defects in the title.
3. Implied Warranties in the Sales of New Homes
In a few states, a seller makes no warranties (unless the deed or contract specifies otherwise)—a
buyer takes the property “as is.” In most states, a seller of a new house impliedly warrants that it is
fit for human habitation (in reasonable working order and of reasonably sound construction). In a
few states, a later buyer can recover from the original builder under this warranty.
4. Seller’s Duty to Disclose Hidden Defects
In most states, sellers must disclose any known defect that materially affects the value of the prop-
erty and that the buyer could not reasonably discover.
CASE SYNOPSIS—
Case 49.2: Stambovsky v. Ackley
Helen Ackley believed that her house in Nyack, New York, was haunted, and promoted and profited from
this belief through interviews and tours. Later, Jeffrey Stambovsky contracted to buy the house, unaware of its
reputation. The reputation proved to impair its resale value, however, and Stambovsky filed a suit to rescind
the contract.
The court allowed rescission. Ackley had created the story of the house that harmed its resale value. She
knew that its reputation was not likely to be known by Stambovsky, or any other buyer from out of town, and
so had an obligation to disclose it. Her failure to do so amounted to an unfair advantage, and thus she could
not enforce the contract.
..................................................................................................................................................
Notes and Questions
Suppose that the house legitimately appeared to be populated by poltergeists, but Ackley had not
disclosed this to Stambovsky. Would the result have been the same? Why or why not? Yes, the result
would likely have been the same—the court would have permitted the buyer to rescind the contract on the
B. DEEDS
Possession and title to land can be passed by deed without consideration. A deed requires—
• The names of the grantor and grantee.
• Words evidencing an intent to convey.
• A legally sufficient description of the land.
• The grantor’s (and spouse’s) signature.
• Delivery.
8 UNIT TEN: PROPERTY AND ITS PROTECTION
ENHANCING YOUR LECTURE—
REAL ESTATE ADVERTISED ONLINE
The Internet has transformed the real estate business, just as it has transformed other industries. Today’s
real estate professionals market properties—and themselves—online. Given that the Internet knows no
physical borders, what happens when an online advertisement reaches people outside the state in which the
real estate professional is licensed? Is this illegal? Can the agent be sued for fraud if the ad contains
misrepresentations? Such questions are likely to arise in the future as more and more people use the
Internet to search for properties.
STATE LICENSING STATUTES AND ADVERTISING
Every state requires anyone who sells or offers to sell real property in that state to obtain a license. To be
licensed, a person normally must pass a state examination and pay a fee and then must take a minimum
number of continuing education courses periodically (every year or two) to maintain the license. The purpose
of requiring real estate licenses is to protect the public and to maintain quality standards for real property
ACTIONS FOR MISREPRESENTATIONS (FRAUD)
Suppose that a real estate agent, either inadvertently or intentionally, makes a misstatement online about
some important aspect of real property that is for sale. Someone, relying on the statements, responds to the
ad and eventually contracts to buy the property, only to discover later that the ad misrepresented it. What
remedies does the buyer have? In this situation, the buyer can complain to the state authority that granted
CHAPTER 49: REAL PROPERTY AND LANDLORD-TENANT LAW 9
FOR CRITICAL ANALYSIS
Do your students think that the federal government should regulate the advertising of real
property on the Internet to protect consumers from potential fraud? If so, what kind of regulations
would be appropriate, and how might they be enforced?
1. Warranty Deeds
This provides the most protection against defects of title—covenants that the grantor has title to,
and the power to convey, the property; that the buyer will not be disturbed in possession of the
land; and that transfer is made without unknown adverse claims of third parties.
2. Special Warranty Deed
This warrants only that the grantor held good title during his or her ownership of the property, not
that there were no title defects when others owned it. If all liens and encumbrances are disclosed,
the seller is not liable if a third person interferes with the buyer’s ownership.
ADDITIONAL BACKGROUND—
Deeds
A deed must contain a legal description of the property being conveyed in order to transfer title to the
buyer. A metes and bounds legal description involves the use of compass directions and distances from a
specific point of beginning around the boundaries of the property. In earlier times, metes and bounds
3. Quitclaim Deed
This warrants less than other deeds, conveying only whatever interest the grantor has.
C. RECORDING STATUTES
These statutes require transfers to be recorded in public records (generally in the county in which the
property is located) to prevent fraud. Many states require the grantor’s and two witnesses’ signatures.
ADDITIONAL BACKGROUND—
Recording Statutes
Recording statutes are in force in every jurisdiction. Their purpose is to provide prospective buyers with a
way to check whether there has been an earlier transaction. Hence, recording a deed gives constructive
notice to the world that a certain person is now the owner of a particular parcel of real estate.
There are three basic types of recording statutes:
• Race statutes, which provide that the first purchaser to record a deed has superior rights to the
property, regardless of whether he or she knew that someone else had already bought it but had failed to
record the deed.
D. ADVERSE POSSESSION
Adverse possession is a means of obtaining title to land without delivery of a deed.
1. Elements of Adverse Possession
The possession must be—
• Actual and exclusive.
• Open, visible, and notorious.
• Continuous and peaceable for the requisite time.
• Hostile and adverse.
CASE SYNOPSIS—
Case 49.3: Montgomery County v. Bhatt
Ajay Bhatt owned a single-family residential lot that abutted a Montgomery County hiker/biker trail. Before
being established as a trail, the right-of-way had been a privately owned rail line. The previous owners of
Bhatt’s lot had built a fence and shed that encroached on the right-of-way. The county cited Bhatt for a
..................................................................................................................................................
Notes and Questions
If the county had done nothing on the disputed land except to claim title, and Bhatt had made
significant use of it, would the result have been different? No. Even with a more exercise of use over the
How might the Internet have facilitated either party’s claim in this case? Depending on the public
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Adverse Possession
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
a disputed parcel, as well as mowing the grass and building a shed on the property, established the owner’s
intent to adversely possess the parcel, even though the owner said that he did not intend to possess the land
of another).
2. Purpose of the Doctrine
Adverse possession statutes—
12 UNIT TEN: PROPERTY AND ITS PROTECTION
IV. Limitations on the Rights of Property Owners
Limitations not discussed below include tax and environmental laws.
A. EMINENT DOMAIN
Eminent domain is a power of the government to take land for public use. Of course, exercise of the
power of eminent domain is subject to the Constitution and whatever other law applies.
1. The Taking
Under the takings clause of the Fifth Amendment, the government may not take private property for
public use without just compensation.
2. The 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 (which is generally its market value).
ADDITIONAL CASES ADDRESSING THIS ISSUE —
The Taking
Cases in which the government was held to have engaged in a taking include the following.
• Rogers v. United States, __ Fed.Cl. __ (Fed.Cl. 2009) (a deed granting a right-of-way easement across
land so long as the land was used for railroad purposes did not contemplate the use of the land as a public
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,
and inevitably recurring flooding that supported the state agency’s claim for a compensable taking).
CHAPTER 49: REAL PROPERTY AND LANDLORD-TENANT LAW 13
B. INVERSE CONDEMNATION
Inverse condemnation occurs when a government takes private property without paying for it. This may
be accomplished by use or occupation of the land, or through the imposition of regulations that cause
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
subsequent owners of the property must know of it.
ENHANCING YOUR LECTURE—
A SHED IS ONE THING, A GARAGE QUITE ANOTHER
Shortly after Richard and Laura Dufrane purchased a home with an attached garage in a subdivision in
Greenfield, Wisconsin, they began constructing a detached garage on the edge of their property. Their
neighbor, Mary Pietrowski, told the Dufranes “multiple times” that the garage violated a restrictive covenant
that prevented property owners in the subdivision from erecting any buildings other than one house and one
garage on their land. After the garage had been built, Pietrowski asked a court to issue an order that the
garage be razed (destroyed).
THE BOTTOM LINE
Those who purchase real estate should check carefully to determine what restrictive covenants, if any,
apply to the property.
ADDITIONAL BACKGROUND—
