Chapter 48
Real Property
Business Law
Legal, E-Commerce, Ethical, and International Environments
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
49 - 1
Real Property
• Real property is immovable or
attached to immovable land or
buildings
– Land
– Buildings
– Subsurface Rights
– Plant Life and Vegetation
– Fixtures
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Land and Buildings
• Most common form of real
property.
• Landowner usually purchases
surface rights.
• Buildings constructed on land
are real property.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Subsurface Rights
• These are mineral rights to
the earth located beneath
surface.
• Are often sold separately
from surface rights.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Plant Life and Vegetation
• These are considered real
property until they are
harvested.
• Includes both natural and
cultivated plants.
• Sold with land.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Fixtures
• Personal property that is so
closely associated with real
property that it cannot be
separated without damaging
real property.
• Becomes part of the realty.
• Included in sale of building.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Estates in Land
• Ownership rights in real property.
• Bundle of legal rights that the
owner has to possess, use, and
enjoy the property.
• The type of estate is determined
from the deed, will, lease, or other
document that transferred the
ownership rights.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Freehold Estate
• An estate where the owner has a
present possessory interest in the
real property.
• Estates in Fee
– Fee simple absolute
– Fee simple defeasible
• Life Estates
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Estates in Fee
Fee Simple Absolute
• Highest form of owner-ship of real
property.
• Ownership:
– Is infinite in duration
– Has no limitation on inheritability
– Does not end upon the occurrence or
non-occurrence of an event
Fee Simple Defeasible
• Grants owner all of the incidents of a
fee simple absolute except that it may
be taken away if a specified condition
occurs or does not occur.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Life Estate
• Interest in property that lasts for
the life of a specified person.
• Called estate pour autre vie.
• A life estate terminates upon the
death of a named person and
reverts back to the grantor.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Concurrent Ownership
• When two or more persons own a
piece of real property.
• Also called co-ownership.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Forms of Co-ownership
Joint Tenancy
Tenancy in
Common
Tenancy by
the Entirety
Community
Property
Condominium
Cooperative
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Joint Tenancy
• Words must clearly show
intent to create.
• Co-owners have right of
survivorship.
– Deceased partner’s property
automatically passes to
surviving partner.
– Contrary provisions in will
ineffective.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Tenants in Common
• Interests of deceased partner
passes by will, not by
survivorship.
• May encumber, sell, gift, or
devise their interest at any
time.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Tenants by the Entirety
• Co-ownership form that can
only be used by married
couples.
• Created by express wording.
• Surviving spouse has right of
survivorship.
• Neither spouse may sell, gift,
devise, or otherwise transfer
property without permission
of other spouse.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Community Property
• Nine states recognize this
form of co-ownership.
• Applies only to married
couples
• Each spouse owns one-half
of assets acquired by income
during marriage.
• Property received by gift or
inheritance or held before
marriage belong to that
partner alone.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Concurrent Ownership
Form of
Ownership
Right of
Survivorship
Tenant May
Unilaterally Transfer
His or Her Interest
Joint Tenancy
Yes. Deceased
tenant’s interest
automatically
passes to cotenants.
Yes. Tenant may
transfer his or her
interest without the
consent of co-tenants.
Transfer severs joint
tenancy.
Tenancy in
Common
No. Deceased
tenant’s interest
passes to his or
her estate.
Yes. Tenant may
transfer his or her
interest without the
consent of co-tenants.
Transfer does not sever
tenancy in common.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Concurrent Ownership (continued)
Form of
Ownership
Right of
Survivorship
Tenant May
Unilaterally Transfer
His or Her Interest
Tenancy by the
Entirety
Yes. Deceased
tenant’s interest
automatically passes
to his or her spouse.
No. Neither spouse
may transfer his or
her interest without
the other spouse’s
consent.
Community
Property
Yes. When a spouse
dies, surviving
spouse automatically
receives one-half of
the community
property; other half
passes to the heirs of
the deceased spouse
as directed by will.
No. Neither spouse
may transfer his or
her interest without
the other spouse’s
consent.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Condominium
• Common form of ownership in a
multiple-dwelling building.
• Purchasers of a condominium:
– Have title to their individual
units.
– Own the common areas as a
tenant in common with the
other condominium owners.
• Owners may sell or mortgage their
units without the permission of the
other owners.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Cooperative
• Form of co-ownership of a
multiple-dwelling building.
– A corporation owns the
building
– The residents own shares in the
corporation
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Future Interests
• The interest that the grantor
retains for himself or a third party.
• Reversion – a right of possession
that returns to the grantor after
the expiration of a limited or
contingent estate.
– Implied by law
– Do not have to be express
• Remainder – a right of possession
that goes to a third party upon
the expiration of a limited or
contingent estate.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Sale of Real Estate
• The passing of title from a
seller to a buyer for a price.
• Also called a conveyance.
• Closing – the finalization of a
real estate sales transaction
that passes title to the
property from the seller to the
buyer.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Deeds
• A writing that describes a person’s
ownership interest in a piece of
real property.
– Warranty Deed
– Quitclaim Deed
• Grantor – the party who transfers
an ownership interest in real
property.
• Grantee – the party to whom an
interest in real property is
transferred.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Recording Statutes
• A state statute that requires the
mortgage or deed of trust to be
recorded in the county recorder’s
office of the county in which the
real property is located.
– Gives constructive notice of interest in
property.
• Quiet title action is brought by a
party concerned about ownership
rights in a parcel of real property
– Can have a court determine the
extent of those rights.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Marketable Title
• Title that is free from any
encumbrances or other
defects that are not
disclosed but would affect
the value of the property.
– Attorney’s Opinion
– Torrens System
– Title Insurance
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Tax Sale
• A method of transferring
property ownership that
involves a government lien
on property for unpaid
property taxes.
• If the lien remains unpaid
after a certain amount of
time, a tax sale is held to
satisfy the lien.
• Most states provide for a
period of redemption
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Gift, Will, or Inheritance
• Gift
– A transfer of property from one person
to another without exchange of
money.
• Will
– If a person dies with a will, his or her
property is distributed to the
beneficiaries as designated in the will.
• Inheritance
– If a person dies without a will, his or
her property is distributed to the heirs
as stipulated in the state’s intestate
statute.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Adverse Possession
• Occurs when a person who
wrongfully possesses someone
else’s real property obtains title to
that property if certain statutory
requirements are met.
–
–
–
–
–
Statutorily prescribed time period
Open, visible, and notorious
Actual and exclusive
Continuous and peaceful
Hostile and adverse
• Property owned by federal and
state governments are not subject
to adverse possession.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Nonpossessory Interests
Easements
Licenses
Profits
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Easement
• A given or required right to make
limited use of someone else’s land
without owning or leasing it.
– Easement Appurtenant
created when the owner of
one piece of land is given an
easement over an adjacent
piece of land.
– Easement in Gross authorizes a
person who does not own
adjacent land the right to use
another’s land.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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License
• Grants a person the right to enter
upon another’s property for a
specified and usually short period
of time.
• A license does not transfer any
interest in the property.
• A license is a personal privilege
that may be revoked by the
licensor at any time.
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
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Profit
• Grants a person the right to
remove something from another’s
real property.
– Gravel, minerals, grain, or timber
– Profit Appurtenant – grants the owner
of one piece of land the right to go
onto another’s adjacent land and
remove things from it.
– Profit in Gross – authorizes someone
who does not own adjacent land the
right to go onto another’s property
and remove things from it.
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