P A R T
5
Property
Personal Property and Bailments
Real Property
Landlord and Tenant
Estates and Trusts
Insurance Law
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
C H A P T E R
24
Real Property
“Study how a society uses its land, and you can
come to pretty reliable conclusions as to what its
future will be.”
E.F. Schumacher, Small is Beautiful (1973)
Learning Objectives
 Scope
of real property
 Rights and interests in real property
 Acquisition of real property and
transfer by sale
 Obligations related to property
condition
 Land use
24 - 4
Overview

Real property land and
things attached to or
embedded in land:
buildings, trees, crops,
surface and ground water,
minerals, airspace above
the land
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Fixtures

A fixture is an item of personal property that
has become so attached to real property that
it becomes part of real property



Real property owner now owns fixtures
Relevant factors to determine transformation:
attachment, adaptation, intent
An exception is trade fixtures

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Remain tenant’s personal property
Estates in Land & Co-Ownership

Estate refers to a person’s ownership interest
in real property, freehold or nonfreehold



Freehold estates are ownership interests of
uncertain duration
Nonfreehold (or leasehold) estates are those
held by persons who lease real property
Co-ownership of real property exists when
two or more persons share the same
ownership interest in property
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Easement, Profit, & License

An easement is a right to make use of another
person’s property (affirmative) or prevent
another from using property (negative)

Restrictive covenants also restrict use of real
property
A profit is a right to enter another’s land and
remove some product or part of land
 A license is a temporary right to enter
another’s land for a specific purpose

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Acquiring Real Property
Title to real property may be acquired by
purchase, gift, will or inheritance, tax sale,
and adverse possession
 A valid conveyance of real property occurs
through execution and delivery of a deed



Quitclaim, warranty, grant deeds
Adverse possession occurs when person
wrongfully occupies land and acts in open
and hostile manner as if he were the owner
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Assuring Title
In a title opinion, an attorney examines the
abstract of title and gives an opinion about
whether the grantor has marketable title
 Under the Torrens system of registration (in
a few states), one who owns land in fee
simple obtains a certificate of title
 Purchasing a policy of title insurance is the
preferred and most common means of
protecting title to real property

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Defective & Dangerous Premises

Implied warranty of habitability guarantees a
residence is free of hidden defects making
it unsafe or unsuited to human habitation


Similar to implied warranties for sale of goods
Premises liability refers to negligence cases
in which property owners or possessors
(e.g., businesses leasing commercial real
estate) are held liable to persons injured
while on the property
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Land Use Control
Nuisance occurs when one owner’s use of
property unreasonably interferes with
another person’s property use
 Zoning ordinances organize a municipality
into districts according to the allowed uses
for property in those districts

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Land Use Control
The Fifth Amendment guarantees that
private property shall not be “taken for
public use” without “just compensation”
 Implies government’s power of eminent
domain to effect the taking



Key is “just compensation”
Eminent domain is controversial, perhaps
more so given the Kelo decision
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Test Your Knowledge

True=A, False = B
 For his two dogs, Brett built a dog kennel and
run of wood posts and wire fencing behind his
house. When Brett sells his house, the kennel is
a fixture that has become real property.
 Carol opened a restaurant in an empty leased
space in the food court of Shopping Center.
Carol equipped the space with ovens, shelving,
and refrigerators. When Carol’s lease is over,
Carol must leave the ovens and refrigerators.
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Test Your Knowledge

True=A, False = B



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Sheila has a drainage ditch behind her house
that is described in the written deed. Sheila is
not permitted to alter the ditch in any way.
The drainage ditch is an easement.
An implied warranty of habitability promises
that a house has no hidden defects rendering
it unsafe or unsuitable for human habitation
A warranty deed contains promises about the
quality of the house construction
Test Your Knowledge

Multiple Choice

Chris slipped on a tomato that had fallen on
the grocery store’s produce section. If Chris
sues the store, what type of law will apply?
(a)
 (b)
 (c)
 (d)
 (e)

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Tort law
Premises liability law
Breach of contract
Both A and B
All of the above
Test Your Knowledge

Multiple Choice

Newton owned 500 acres and leased 300 to
Kevin for farming beans. When Kevin is
working the 300 acres he leased, he is:
(a) an invitee with the right to take the bean
crop as a license
 (b) a lessor with the right to work the bean
crop for the benefit of Newton
 (c) a licensee with the right to take the bean
crop as a profit
 (e) none of the above

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Thought Questions
Is the cliché, “good fences make good
neighbors,” a true statement?
 What is your opinion of the Kelo decision?

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