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1
Legal Environment 4th Ed.
COPYRIGHT © 2011 South-Western/Cengage Learning.
24
Quotes of the Day
“It is a comfortable feeling to know
that you stand on your own ground.
Land is about the only thing that
can’t fly away.”
Anthony Trollope,
English author
“The manner of giving is worth more
than the gift.”
Pierre Corneille,
French playwright
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Legal Environment 4th Ed.
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Nature of Real Property
 The grantor is the conveyor of property;
the grantee is the one receiving it.
 Real property includes:
• Land
• Buildings
• Subsurface Rights
• Air Rights
• Plant Life
• Fixtures --an object considered to be a
permanent part of the property.
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Legal Environment 4th Ed.
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Estates in Real Property
 Rights in real estate usage and
ownership vary from unrestricted use
and right to sell, to a lesser right of
usage, but not the right to transfer it.
 The rights that someone can hold are
called estates, or interests.
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Legal Environment 4th Ed.
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Freehold Estates
 The owner of a freehold estate has the
present right to possess the property
and to use it in any lawful way.
 A fee simple absolute provides the
owner with the greatest control.
 A fee simple defeasible may terminate
upon the occurrence of some event.
 A life estate is an estate for the life of
some named person.
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Concurrent Estates
 A concurrent estate is when two or
more own property at the same time.
• Tenancy in Common – two or more people
own the property, each with the right to
convey her interests or to pass it down to
her heirs.
• A joint tenancy includes the right of
survivorship
 All co-tenants have an absolute right to
partition (division of property).
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Concurrent Estates in Marriage
 Tenancy by the Entirety
• The husband and wife each own the entire
property, and they both have a right of
survivorship.
 Community Property
• Property brought to the marriage or given to
one spouse may remain individually owned,
called separate property.
• Income or assets earned during the
marriage is community property, which
must be equally shared.
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Concurrent Estates -Condominiums and Cooperatives
 In a condominium, the owner of the
apartment typically has a fee simple
absolute in his particular unit.
 In a cooperative, the residents generally
do not own their particular unit.
Instead, they are shareholders in a
corporation that owns the building.
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Legal Environment 4th Ed.
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Nonpossessory Interests
 An easement gives one person the right
to enter land belonging to another and
make a limited use of it, without taking
anything away.
• An easement can be created when the
landowner expressly grants it, when he
implies it (such as in granting permission to
access an area accessible only by crossing
your land), or by reservation (when an
owner sells land but keeps some right to
enter it.)
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Nonpossessory Interests (cont'd)
 A profit gives one person the right to
enter land belonging to another and
take something away.
 A license given the holder temporary
permission to enter upon another’s
property.
 A mortgage is a security interest in real
property, given to the institution loaning
a buyer the money to buy real estate.
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Sale of Real Property
 Seller’s Obligation Concerning Property
• Most states now impose an implied
warranty of habitability on a builder who
sells a new home.
• The seller of a home must disclose facts
that a buyer does not know and cannot
readily observe, if they materially affect the
property’s value.
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11
Legal Environment 4th Ed.
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Sales Contracts and Title
Examination
 The Statute of Frauds requires that the
agreement to sell real property must be
in writing.
• Must contain names of all parties, precise
description of property, price and
signatures.
 Once an agreement is made, the
buyer’s lawyer makes a title
examination, to ensure that the seller
has valid title to the property.
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Closing and Deeds
 After the title examination is complete
and financing is arranged, the parties
arrange a closing. At this meeting, the
seller hands over the deed (the
document proving ownership of the
property) in exchange for payment,
either by the buyer or by a lender.
 If a lender pays all or part of the price,
the buyer executes a mortgage as part
of the closing.
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Recording
 Recording a deed means to file it with
the official state registry.
• Filing a deed protects the buyer and gives
notice to the public of the official owner of
the land. This keeps someone from trying
to sell land that he does not own.
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Legal Environment 4th Ed.
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Land Use Regulation
 Zoning
• State laws that permit local communities to
regulate building and land use.
 Eminent Domain
• Eminent domain is the power of the
government to take private property for
public use.
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15
Legal Environment 4th Ed.
COPYRIGHT © 2011 South-Western/Cengage Learning.
Landlord-Tenant Law
 When an owner of a freehold estate
allows another person temporary,
exclusive possession of the property,
the parties have created a landlordtenant relationship.
 Three legal areas are combined
• An interest in real property is conveyed.
• A lease is a contract.
• Negligence law may be involved also.
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Lease
 The statute of frauds generally requires
that a lease be in writing.
 Some short-term oral contracts may be
enforceable, but a written contract is
clearer and safer.
 A written contract usually includes
covenants (promises) from the landlord
and the tenant; these details are
determined by the parties.
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Types of Tenancy
 Any lease for a stated, fixed period is a
tenancy for years.
 A periodic tenancy is created for a fixed
period and then automatically continues
for additional periods until either party
notifies the other of termination.
 A tenancy at will has no fixed duration
and may be terminated by either party.
 A tenancy at sufferance occurs when a
tenant remains on the premises, against
the wishes of the landlord, after the
expiration of a true tenancy.
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Landlord’s Duties
 The landlord’s first important duty is to
deliver possession of the premises.
• The “English rule” obligates the landlord to
remove a previous tenant if he does not
leave willingly.
• The “American rule” (which is actually the
minority rule in the United States) allows
the new tenant to either evict the old tenant,
or collect rent from her.
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Legal Environment 4th Ed.
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Quiet Enjoyment
 All tenants are entitled to the right to
use the property without the
interference of the landlord.
 Actual Eviction
• If a landlord prevents the tenant from
possessing the premises, he has actually
evicted her.
 Constructive Eviction
• If a landlord substantially interferes with the
tenant’s use and enjoyment of the
premises, he has constructively evicted her.
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Legal Environment 4th Ed.
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Duty to Maintain Premises
 A landlord has a duty to deliver the
premises in a habitable condition and to
maintain a habitable condition.
 Building codes may require stricter than
normal standards for rental property.
 Implied Warranty of Habitability
• The implied warranty of habitability requires
that a landlord meet all standards set by the
local building code, or that the premises be
fit for human habitation.
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Legal Environment 4th Ed.
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Tenant Remedies for
Defective Conditions
 Rent Abatement – a court-ordered
reduction in rent owed.
 Rent Withholding – the tenant refuses
to pay part or all of the rent, in
proportion to the defective conditions.
 Repair and Deduct – the tenant may, in
some cases, have the repair made and
deduct the cost from the rent.
 Suit for Damages – in some cases, the
tenant may file suit against the landlord.
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Legal Environment 4th Ed.
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Duty to Return Security
Deposit
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
The landlord must return a security deposit
after a tenant vacates.

In some states, landlords must pay interest
earned on the deposit to the tenant.

If any of the deposit is withheld to pay for
damage, a written accounting of the damage
is required.

If the landlord fails to comply, the tenant is
entitled to double the deposit amount, and
sometimes double or triple damages.
Legal Environment 4th Ed.
COPYRIGHT © 2011 South-Western/Cengage Learning.
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Tenant’s Duties
 Duty to Pay Rent – this is the tenant’s
foremost obligation.
 Landlord’s Remedies for Nonpayment
of Rent:
• Apply security deposit to rent.
• Sue tenant for non-payment.
• Evict tenant.
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Legal Environment 4th Ed.
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More Duties and Remedies
 Duty to Use Premises Properly
 Duty Not to Damage Premises
• A tenant is liable to the landlord for any
significant damage he causes to the
property.
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Legal Environment 4th Ed.
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Injuries
 Tenant’s Liability
• A tenant is generally liable for injuries
occurring within the leased premises.
 Landlord’s Liability
• The landlord is generally liable for injuries
occurring in common areas (such as a
sidewalk) where the tenant has no control.
• Common law holds the landlord liable for
latent defects and negligent repairs.
• A landlord can sometimes be held liable for
a crime committed on the property.
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Legal Environment 4th Ed.
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Personal Property -- Gifts
 A gift is a voluntary transfer of property
from one person to another without any
consideration.
 A gift involves three elements:
• The donor intends to transfer ownership of
the property to the donee immediately.
• The donor delivers the property to the
donee.
• The donee accepts the property.
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Delivery
 Physical Delivery – method usually
used to deliver the gift.
 Constructive Delivery -- made by
transferring ownership without a
physical delivery.
 Delivery to the donee’s agent is a valid
gift; delivery to the donor’s agent is not.
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Legal Environment 4th Ed.
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Inter Vivos & Causa Mortis
 An inter vivos gift – is a gift given during
life and with no expectation of death.
• The gift is valid, if it meets the basic
conditions of a gift.
 A gift causa mortis – is a gift given in
expectation of dying soon.
• The gift is valid, if it meets the conditions of
a gift, and the giver dies as expected.
• The giver may rescind the gift at any time,
and it is automatically rescinded if the giver
does not die as expected.
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Legal Environment 4th Ed.
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Bailment
 A bailment is the rightful possession of
goods by one who is not the owner.
 The parties generally-but not always-
create a bailment by agreement.
 A bailment without agreement is called
a constructive, or involuntary, bailment.
 To create a bailment, the bailee must
assume physical control with intent to
possess.
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Legal Environment 4th Ed.
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Rights of the Bailee
 The bailee’s primary right is possession
of the property.
 Anyone who interferes with the bailee’s
rightful possession is liable to her.
 The bailee is typically, though not
always, permitted to use the property.
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Legal Environment 4th Ed.
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Duties of the Bailee
 The bailee is strictly liable to redeliver
the goods on time to the bailor or to
whomever the bailor designates.
 The bailee must exercise due care.
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Legal Environment 4th Ed.
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Due Care
 The level of care required depends
upon who receives the benefits of the
bailment.
• Extraordinary care of the property is
required when the bailment is for the sole
benefit of the bailee (as when a neighbor
borrows your tractor.)
• Ordinary care is required in the case of
mutual benefit (renting a car at a cost.)
• Slight care is all that is required when only
the bailor benefits. The bailee is liable for
loss only in gross negligence.
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Legal Environment 4th Ed.
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Burden of Proof
 Once the bailor has proven the
existence of a bailment and loss or
harm to the goods, a presumptive of
negligence arises, and the burden shifts
to the bailee to prove adequate care.
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Legal Environment 4th Ed.
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Rights and Duties of Bailor
 Liability for Defects
• If the bailment is for the sole benefit of the
bailee, the bailor must notify the bailee of
any known defects.
• In a mutual-benefit bailment, the bailor is
liable not only for known defects but also
for unknown defects that the bailor could
have discovered with reasonable diligence.
• If the bailor is in the business of renting
property, the bailment is probably subject to
implied warranties.
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Legal Environment 4th Ed.
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“Real property is ancient in
origin and terminology, but
every bit as potent as it was
1,000 years ago.”
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Legal Environment 4th Ed.
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