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C H A P T E R 1 8
REAL PROPERTY AND LAND USE
This chapter discusses the forms of real estate ownership and the transfer of ownership, the role
of brokers, and the effect of express and implied warranties concerning the condition of the
property. The chapter outlines the alternatives to acquiring real property for cash. Finally, the
I. FORMS OF OWNERSHIP. Real property can be held in a variety of ways.
A. Individual ownership is common, but imposes personal liability.
1. Tenancy in Common.
2. Joint Tenancy.
B. General Partnership. Partners have rights similar to those of co-tenants.
C. Limited Partnership. Partners manage real property. Each partners’ liability is
restricted to their capital contribution.
II. TRANSFER OF OWNERSHIP. Transfers of land from seller/grantor to buyer/grantee
require a deed.
A. Title. Marketable title is property free from defects.
B. Types of Deeds. An interest in real property, conveyed only by a signed deed.
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1. Quitclaim Deed contains no warranties; the grantor only conveys whatever
right, title, and interest it holds, if any.
C. Adverse Possession. Doctrine designed to ensure land is used in the most
efficient, publicly beneficial manner.
D. Representations, Warranties, and the Duty to Disclose. Current law rejects the
old rule of caveat emptor.
1. Implied Warranty of Habitability.
CASE 18.1 Strawn v. Canuso, 657 A.2d 420 (N.J. 1995). Developers
of new houses and real estate brokers marketing the new
3. Contractual Protections and Due Diligence.
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III. RECORDING STATUTES AND TITLE INSURANCE. Deeds and other instruments of
conveyance must be recorded. The Uniform Real Property Electronic Recording Act
A. Title Searches, Insurance, and Escrows. Title insurance companies offer some
safeguard about the title or priority of one’s property interest.
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IV. BROKERS serve to maintain the market by putting together buyers and sellers.
A. Compensation.
B. Listing Agreements.
1. Open Listing.
C. Regulation of Brokers.
1. Licensing.
V. ACQUISITIONS AND DISPOSITIONS.
A. Sales.
B. Tax-Deferred Exchanges. Seller exchanges property for another piece of
property, usually with favorable tax advantages.
VI. ENVIRONMENTAL DUE DILIGENCE. Liability under CERCLA, is toxic mold the ‘new
asbestos’?
VII. PRELIMINARY AGREEMENTS.
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A. Option Contract. Must be in writing and consideration paid to the seller.
VIII. FINANCING. Financing the purchase of real estate often involves borrowing funds, with
such being secured through a mortgage.
A. Permanent Loans are usually repaid over five or ten years, and sometimes up to
twenty years.
1. Fixed-Interest Loans.
B. Construction Loans are provided for construction projects.
C. Development Loans are made in relation to the acquisition, subdivision,
improvement, and sale of residential properties.
F. Foreclosure and Rights of Redemption.
CASE 18.2 U.S. National Bank Association v. Ibanez, 941 N.E.2d 40 (Mass.
IX. APPRAISAL METHODS. Different methods of appraising commercial property: (i) cost
approach, (ii) market approach, or (iii) income approach.
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X. PROTECTIVE LAWS FOR BORROWERS. Usury, equity participation, and fair lending
laws
XI. COMMERCIAL LEASING.
A. Types of Leases.
1. Offices Leases.
B. Assignments and Subleases.
C. Hidden Issues. Early termination and “out” clauses.
XII. ENVIRONMENTAL ISSUES. States and local governments have varied rules about land
use and environmental regulations.
A. National Environmental Policy Act and State Counterparts.
XIII. GOVERNMENT REGULATION OF LAND USE. Land is heavily regulated at the local
level by the state’s police power is the inherent authority of government to regulate
activity tied to public health, safety, and welfare.
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CASE 18.3 Kelo v. City of New London, 545 U.S. 469 (2005). The City of
New London, Connecticut, wanted to develop a nonblighted
residential area in order to revitalize its ailing economy. In
particular, the city had approved a development plan that called for
C. Regulatory Takings (“inverse condemnation”) are unconstitutional when the
D. Regulatory Schemes. The fundamental components of most land-use regulatory
schemes are a general plan, a zoning ordinance, and a subdivision ordinance.
1. The General Plan and Other Planning Documents.
2. Zoning Regulations.
• Traditional Zoning – residential, commercial, industrial.
3. Subdivision Process.
E. Conditions and Unconstitutional Takings. Nollan, Dolan, and Del Monte Dunes.
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F. Vested Development Rights.
XIV. PHYSICAL ACCESSIBILITY TO COMMERCIAL FACILITIES AND PLACES OF PUBLIC
ACCOMMODATION. The ADA requires full and equal enjoyment of accommodation in
THE RESPONSIBLE MANAGER: TEACHING SUGGESTIONS
1. Discuss the implications and the impact, pro and con, of the Kelo case. Do your students
agree with the dissent’s observation that the “[The beneficiaries of this decision] are
2. What conditions, if any, should apply to foreign ownership of real property in the United
States? Compare the laws of Mexico with those of the United States. Should foreigners
be able to acquire a “fee simple” ownership of land? And what are the policy and
financial implications of foreign nationals owning real property in America?