Chapter 8 - Economics

Real and Personal
Chapter 8
Law of Property
• Oldest part of common
• Real Property:
immovable (i.e. land,
• Concepts from common
trees, houses)
law developed in England • Personal Property
from 12th to 16th centuries
(chattel): moveable (i.e.
• Right guaranteed and
furniture and clothing)
protected by government
• Contract law is used to
make arrangements
about the property use
Real Property
• Land
– under - oil, minerals
– attached - buildings, trees
• Property - “legally protected expectation
of being able to use a thing for one’s
• Owner has a “bundle of legal rights”.
• Governmental regulations may restrict
property owner’s common-law land use
– (i.e. Endangered Species Act re: rare plants
and animal protection)
Ownership of Land
• Deeds
Most common way to transfer ownership—warranty
deeds most popular
ID original owner, describe land, ID new owner & state
that ownership is transferred, possibly subject to
certain conditions
• Titles
Comes from receipt of valid deed; is means by which
owner has legal possession of the property
“Formal right of ownership”–sell, use, give–control it
Titles are recorded by state officials (usually county)
When property is transferred, usual to obtain title
insurance (depends on state)
Forms of Ownership
• Fee Simple - indefinite time
and right to dispose of it
• up in the air “to the skies”
• down to the core “to the
center of the earth”
– these rights can be sold
– subsurface mineral rights
(profits) often legally separated
– in all other countries, mineral
rights belong to government
• Can be inherited, transferred,
sold in part or in whole
Forms of Ownership
• Joint tenancy
– Each tenant has same interest in undivided possession of
– Right of survivorship – if one tenant dies, ownership passes to
other owner
– Joint tenants can force an end to joint tenancy by transferring an
interest into a tenancy in common
• Tenancy in Common
– Each tenant (owner) has undivided interest in property
– If one tenant dies, that interest passes to estate/heirs
• Tenancy by the Entirety
– Available only to married couples; available in ½ of the states
– One tenant cannot force an end to it except by divorcing the other
• Life Estates
– Have use of land for life of “tenant for life”- but can’t ruin it.
• Form of ownership through common law
• Separates legal and beneficial ownership of property
• Settlor (grantor) places property into a trust (often
through what is call a deed of trust).
• Trustee owns legal title.
• Beneficiary holds an equitable title to the property.
• Trustee has a duty to manage the property for benefit
of the beneficiary
• Business Trusts often used in place of partnerships or
– Beneficiaries receive certificates of beneficial ownership
– Can be traded like stocks & bonds
Evolving Property Law:
• Not seen much before 1960s
• Fee simple estate applies
• Living space in building is
owned in fee simple
(numerous conditions
• BUT land building sits on, as
well as elevators & lobbies,
are held in common (for
condo owners) by another
person (business)
• Most states have statutes to
simplify the legal process of
modern living arrangements
consistent with traditional
property law.
• Servitudes
– property requirements imposed by an owner
– positive and negative requirements
– easements and covenants most important servitudes
• Easements
– right to enter land of another and make use of it or
take something
– example: sidewalks, utilities
– becoming common in connection with solar and wind
• Neighbors cannot block sunlight or solar collectors.
• Can’t block wind from turbines.
Adverse Possession
• Must be:
– Actual - does in fact possess
– Open - visible so owner is on
– Hostile - without consent of
– Exclusive - not shared with
others who have no right
– Continuous - goes on without
major interruption
– State laws vary on time
required – from 5-20 years
Moran v. Sims
• Sims owned property for decades surrounded by Moran property.
• Sims built a home in 1991. Had access to property by driveway across
the property bought by Moran in 1996.
• Sims asked the court to grant him an easement.
• Trial court held that Sims has a prescriptive easement; allowed use of
driveway on Moran’s property. Moran appealed.
• HELD: Affirmed. Elements of adverse possession proven.
• Use of the property was
– Open and visible: Sims used the driveway since 1985
– Hostile: No proof Moran consented for Sims to use drive
– Claim of Ownership: Sims bought gravel for drive & hired it spread
– Exclusive: Driveway used by Sims family & those they permitted
to use it
– Peaceful: No evidence of dispute of use of driveway
– Continuous/Uninterrupted for 10 years+
• Covenants or Covenant Running With the Land
– Not actual legal interest in an estate
– More like a contract with an estate
– Most residential subdivisions have
– May burden or benefit the land
– Tool for developing real estate
– Goes with the estate from owner to owner
• “Covenant runs with the land”
Powell v. Washburn
• 1988, Washburn, real estate developer, recorded Declarations of
Covenants, Conditions and Restrictions (CC&R) for Indian Hills
Airpark, an aviation-related community.
• Referenced incorporation of the La Paz County zoning ordinances
• Zoning permitted 3 residential uses: mobile or manufactured homes,
constructed homes, and hanger-houses (homes incorporating an
airplane hanger).
• In 1996, County amended ordinances to permit use of recreational
vehicles (RVs) as residences.
• In 2002 Powell sued Washburn requesting injunction against use of
RVs as residences within the Airpark.
• Trial Court held CC&R did not permit RVs as residents.
• Appeals court reversed. Decision appealed to state supreme court.
• HELD: Vacated and affirmed the trial court
• No RV’s permitted as residences
• Look at the intention of the parties that created a restrictive covenant
• The plain intent of the CC&R’s was to limit residents to mobile or
manufactured homes, constructed homes or hanger-homes.
Landlords & Tenants
• Landlords and tenants
– rented property is called a
– landlord has interest of some
– tenant possesses estate for a
fixed period or at will as
determined by landlord
– Leased property is assumed
at law to have an implied
warranty of habitability.
Can be commercial or residential
ID parties
describe premises being leased
state how long in effect
state how much rent is to be paid
does not have to state a specific end
– can go month to month
• usually also:
who pays utilities, taxes, insurance
where/when rent is paid
terms of damage deposit
who is responsible for repairs/maintenance
termination provision
Rights/Duties of a
• Right of possession
during lease
• Can exclude other
• Landlord must make
essential repairs or
may have
constructive eviction
• Can’t:
– abuse property
– commit waste
– remove valuable
– be nuisance to
– engage in illegal
activities on property
Commercial Leases
• Commercial leases often drafted by the
lessor’s legal department
• Based on state law requirements and
experiences with previous tenants
• Tend to be long
• Cover many issues in detail
• Description of leased space is often defined
by terms used by the Building Owners and
Mangers Association (BOMA)
– Recognized authority in setting
standards for commercial leases
Nielson v. Gold’s Gym
• Peterson signed lease with Nielsen to lease “premises”
in a strip mall for a gym for 3 years at $0.85 annual per
square foot.
• Nielsen still building at the time of the lease.
• Contractor told Peterson it would cost $168,000 to
improve the building shell for the gym.
• Peterson discussed with Nielsen who would pay for the
interior improvements.
• Couldn’t reach agreement. Peterson walked away.
Nielsen leased to another party.
• Nielsen sued for $112,000 for breach of contract & loss
for renting space for less than Peterson had agreed to.
• Court held lease was unenforceable: no agreement of
the nature and extent of property to be leased. Appeal.
Nielson v. Gold’s Gym
• HELD: Affirmed. Lease unenforceable for lack of mutual
assent to terms of who will pay for the improvement.
• Building was a shell when lease was signed.
• Not clear from the lease who would pay for modifications.
• No evidence of industry standards of who would be
responsible for payment in this situation.
• Costs of improvements would have consumed more than
half the rent over the 3-year lease term.
• Payment for improvements is not essential to every
commercial lease agreement.
• HOWEVER, here it was an essential part of the bargain to
be reached.
• Missing term creates an ambiguous lease and no mutual
assent by the parties.
Public Control of Real Property
• Eminent Domain
– Government can force sale of property or granting of
easement without consent of owner
– Must prove need for a public purpose
– 5th Amendment requires “just compensation”
• Police powers
– Control land use with regulations (i.e. zoning)
– Is there compensation? Maybe, but when property
loses value, compensation may not appear to be
“just” to an owner.
– Sometimes negotiated & sometimes statutes help
court or jury decides amount to be paid
Saadala v. East Brunswick Zoning
Board of Adjustment
7-Eleven has a store with 6 parking spaces on ½ acre lot in NJ
Part of lot is zoned residential, but store existed before zoning
Store was “grandfathered in” as a preexisting nonconforming use
Next to 7-Eleven is vacant Shell gas station also “grandfathered in”
7-Eleven wanted to take over the gas station property and build retail
gas operation
Requested preexisting nonconforming use be extended
Saadala, area resident, opposed classification
Zoning Board approved it anyway
Decision affirmed by County Trial Court
Saadala appealed
Saadala v. East Brunswick Zoning Board
of Adjustment
• HELD: Judgment reversed. 7-Eleven loses.
• Court looked at N.J. statute re: repair and restoration of structure
existing at time of passage of new ordinance
• Purpose of limited nonconforming uses is to prevent any increase
or change in nonconformity
• Under 7-Eleven’s redevelopment plan, new business operation
would involve construction of 3 new islands to dispense gas and a
kiosk, as well as 11 new parking spaces
• This is not simply an expansion of the convenience store or former
Shell gas station; it is a substantial change in use of the properties
• 7-Eleven failed to show the property “peculiarly fitted” for a minimart
• Failed to show “special reasons” for approval of a use variance for
its redevelopment plan; proposal rejected
Torts Against Property
• Trespass to Land: Unauthorized intrusion that interferes with
another’s peaceful enjoyment of their property
– Belief by trespasser that property belongs to him/her is not relevant -still a trespass
– Property owner may not intentionally harm trespasser or set a trap – but
usually no duty to warn of dangerous conditions on the property
• Private Nuisance: interference with use & enjoyment of land
– Destruction of crops, causing health risks from pollution,
throwing objects on the land, using the neighboring
house for drug deals
• Public Nuisance: Interference with a right held in common by
general public
– Illegal gambling, bad odors, obstruction of a highway
• Trespass to Personal Property: Interference with the right of
an owner to the exclusive use and enjoyment of property
• Conversion: Unlawful control of another’s personal property
• Misappropriation: Invasion of property rights such as
trademarks or trade secrets
Smith v. Kulig
Kulig owns building with apartments on second floor.
Back of building is a fire escape.
Tenants are not to use fire escape unless an emergency.
Smith visited Wolf at his apartment in the building.
Smith went on fire escape; collapsed; Smith fell to his death.
Estate sued Kulig.
Trial court dismissed, holding Smith was a trespasser. Appealed.
• Held: Affirmed. Wrongful death action dismissed with prejudice.
• Trespasser is person who enters premises without privilege/consent.
• Building contained no trespass signs, as did door leading to and from
fire escape.
• Ladder to the fire escape had no trespassing sign.
• Smith did not have the right to use fire escape–no emergency.
• Landowner owes no duty to trespasser other than not harming him in
wanton or willful manner.
Atkinson v. City of Pierre
• Tour Ice produced ice at its plant in business district
of Pierre for years. Trucks come and go..
• Atkinson moved into apartment across street from ice
plant. Complained to Tour Ice and City about noise–
got nowhere.
• Sued for nuisance.
• Trial Court held for defendants. Atkinson appealed.
• HELD: Affirmed. Business is not a nuisance.
• There were no other complaints from any other
residents near the plant.
• City has authority to declare what constitutes a
• City’s decision was reasonable.
Torts Against
Property Owners
• Is a person harmed on the property a
trespasser or an invitee?
• Customers are invitees, not trespassers.
• What duty of care must property owners
take to insure safety on their property?
• In business, a major tort is “premises
Premises Liability
• Accidents that result from negligence of the
• Common are “slip-and-fall” cases
• Duty to keep premises reasonably safe under
the circumstances
• Duty to inspect premises for dangers and
correct problem or warn invitees
• If a danger is obvious, people have duty to
protect themselves by acting reasonably.
See Campisi v. Acme Markets, Inc.
Campisi v. Acme Markets, Inc.
• Blind employee worked at Acme grocery store. Was walking, using
his white aluminum cane.
• Campisi walking down another aisle; rounded the corner; tripped
over cane; suffered injuries.
• She sued Acme for premises liability based on negligence: store
should post a sign that it had a blind employee using cane, then
customers would be more cautious.
• Jury awarded a verdict for Campisi. Trial Court granted Acme
judgment notwithstanding the verdict. Campisi appealed.
• HELD: Affirmed. Verdict in favor of Acme.
• Businesses owe invitees high duty of care for known or reasonably
foreseeable risks or dangers.
• Customers must be aware of sudden occurrences in shopping
markets – shopping carts, other customer’s foot, someone’s cane, or
obstacles when exiting an aisle.
• Duty of ordinary care includes looking what is in the aisles. No award
to Campisi.
Premises Liability
• Accidents that result from negligence of the business
• Common are “slip-and-fall” cases
• Not providing sufficient security to prevent crimes from
occurring on the property
– Problems are especially in high crime areas
– Issue: Owner “knew or should of known” of problem
in the area
– Issue: Did owner act “reasonably” to protect
– Ways owners may protect themselves: lighting,
safety patrols, posters, warnings
Erichsen v. No-Frills
Supermarkets of Omaha
• Erichsen went grocery shopping at No-Frills.
• Returned to her car, assaulted, beaten, robbed, dragged a mile
hanging from the car of assailant. Suffered serious injuries.
• Sued No-Frills and owner of shopping center for negligently failing to
warn of criminal activity.
• Said defendants failed to protect her from foreseeable criminal
activities (10 criminal events within 16-month period).
• Trial court held defendants did not violate duty of care to Erichsen.
• She appealed.
• HELD: Remanded back to trial court for further proceedings.
• Property owner is not an insurer of safety until he knows that acts of
3rd persons are occurring or could occur.
• If owner has “reason to know, from past experience” that there is
danger, he has a duty to take precautions: warnings or guards.
• One incident not enough to create danger.
• However, here there were many prior criminal events in the area.
• Erichsen can go to trial with facts of the case against defendants.