32
Essentials of Business Law -- 4th Edition
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Click your mouse
anywhere on the
screen when you are
ready to advance the
text within each slide.
After the starburst appears behind the blue
triangles, the slide is completely shown.
You may click one of the blue triangles to
move to the next slide or the previous slide.
Essentials of Business Law -- 4th Edition
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32
“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
Essentials of Business Law -- 4th Edition
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32
 The grantor is the conveyor of property;
the grantee is the one receiving it.
 Real property includes:
•
•
•
•
•
•
Land
Buildings
Subsurface Rights
Air Rights
Plants
Fixtures --an object considered to be a
permanent part of the property.
Essentials of Business Law -- 4th Edition
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32
 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.
32
Essentials of Business Law -- 4th Edition
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 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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32
 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
 Tenancy by the entirety and community
property forms of ownership apply to
married couples in some states.
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32
 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 the rights to
enter a portion of the land.)
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32
 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 the real
estate.
Essentials of Business Law -- 4th Edition
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 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.
32
Essentials of Business Law -- 4th Edition
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



A contract for sale of real property must be in
writing and must include names, description of
property, price and signatures.
Before the sale is complete, someone must do
a title search – to ensure there are no other
claims on this property.
When all arrangements are made, the parties
are ready for closing – a meeting where the
deed is signed over to the new owner.
The deed must then be recorded – filed with
the official state registry.
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32
 Zoning
• State laws that permit local communities to
regulate building and land use.
• An owner or builder may seek a variance –
permission to build something that does not
fit the zoning laws.
 Eminent Domain
• Eminent domain is the power of the
government to take (at a fair price) private
property for public use.
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 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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32
 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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 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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 The landlord’s first important duty is to
deliver possession.
• In most states the landlord must remove a
previous tenant if he does not leave
willingly.
• Some states allow the new tenant to
either evict the old tenant, or collect rent
from her.
32
Essentials of Business Law -- 4th Edition
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 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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32
 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.
Essentials of Business Law -- 4th Edition
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 Different states allow various 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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32
 The landlord must return a security
deposit within 30 days after a tenant
vacates.
 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.
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32
 Duty to Pay Rent – this is the tenant’s
foremost obligation.
 Duty to Use Premises for Proper
Purposes
 Landlord’s Remedies for Nonpayment
of Rent:
• Apply security deposit to rent.
• Sue tenant for non-payment.
• Evict tenant.
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 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.
Essentials of Business Law -- 4th Edition
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32
 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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 Physical Delivery – method usually
used to deliver the gift.
 Constructive Delivery -- made by
transferring ownership without a
physical delivery.
32
Essentials of Business Law -- 4th Edition
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 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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32
 A bailment is the rightful possession of
goods by one who is not the owner.
 The parties generally-but not alwayscreate 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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 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.
 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, which
is determined by the type of bailment.
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 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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 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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 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.
32
Essentials of Business Law -- 4th Edition
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Essentials of Business Law -- 4th Edition
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