REAL AND PERSONAL
PROPERTY
Chapter 8
Meiners, Ringleb & Edwards
The Legal Environment of Business, 12th Edition
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LAW OF PROPERTY

Oldest part of common
law

Real Property:
immovable (i.e. land)

Concepts from common
law developed in England
from 12th to 16th centuries

Personal Property
(chattel): moveable (i.e.
furniture and clothing)

Right guaranteed and
protected by government

Contract law is used to
make arrangements
about the property use.
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REAL PROPERTY

Land

Under - oil, minerals

Attached - buildings, trees

Property - “legally protected expectation of being able
to use a thing for one’s advantage.’’

Owner has a “bundle of legal rights”.

Governmental regulations may restrict property
owner’s land use.

(i.e. Endangered Species Act re: rare plants and animal
protection)
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DEEDS AND TITLES
Deeds
o
Most common way to transfer
ownership
o
Quitclaim Deed vs. Warranty
Deed vs. Special Warranty Deed
o
ID original owner, describe land,
ID new owner, & state that the
ownership is being transferred,
possibly subject to certain
conditions
o
Warranty deeds most often used
in business property
transactions – safer.
•
Titles
o
Comes from receipt of valid
deed; is means by which owner
has legal possession of the
property
o
“Formal right of ownership” –
sell, enjoy, give it – control it
o
Titles are recorded by state
officials (usually county)
o
When property is transferred,
usual to obtain title insurance
Warrant there are no liens or
encumbrances on property
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FEE SIMPLE

Fee Simple - Indefinite time and right to dispose of
real property; strongest form of ownership

Up in the air “to the skies”

Down to the core “to the center of the earth”


these rights can be sold separately

subsurface mineral rights often legally separated

in Civil Law countries, all mineral rights belong to
government
Can be inherited, transferred, sold in part or in whole
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TENANCIES




Tenancy in Common
 Each tenant (owner) has undivided interest in property
 If one tenant dies, that interest passes to estate/heirs
Joint tenancy
 Each tenant has same interest in undivided possession of property
 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 by the Entirety
 Available only to married couples
 Used in little more than 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!
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TRUSTS

Form of ownership through common law

Separates the 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 commonly used in place of partnerships
or corporations

Beneficiaries receive certificates of beneficial ownership

Can be traded like stocks & bonds
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INTERNATIONAL PERSPECTIVE
“INSECURE PROPERTY RIGHTS”

In U.S., property ownership is by private parties or the government. Not
so in other parts of the world.

Farmers do not own land they farm; city dwellers do not own land under
the houses they have built.

Philippines: 1/3 of agricultural land and 43% of dwellings have clear title

Peru: 81% of farmed land isn’t owned; only 1/2 of urban dwellings have
clear title

Haiti: 97% farm land not owned, just occupied by users

Egypt: 92% of urban dwellings and 83% of farms are “unowned”

Theory is that the persistence of poverty in such countries reduces the
chance to capitalize on the value people place in farms and houses.

With no secure property rights, economic progress is enjoyed by a
minority who live in the formal economy.
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EVOLVING PROPERTY LAW: CONDOMINIUMS

Not seen much before 1960s; law adapts to how people
want to live.

Fee simple estate may apply

Living space in building is owned in fee simple
(numerous conditions attached)

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.
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SERVITUDES


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

If permanent, “runs with the land”

Examples: sidewalks, utilities

Becoming common in connection with solar and wind energy

Neighbors usually cannot block sunlight or solar collectors.

Can’t block wind from turbines.
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ADVERSE POSSESSION

Must be:

Actual - does in fact possess property

Open - visible so owner is on notice

Hostile - without consent of owner

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
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CASE
MORAN V. SIMS

Sims owned property surrounded by Moran property. Deed was recorded in
1985, but property in the family for over 50 years. Sims built a home in 1991.

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.

Morans 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 Morans consented (as owners) 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: Deed recorded in 1985; property in
the family for 50 years.
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COVENANTS

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 covenants

May burden or benefit the land

Tool for developing real estate

Goes with the estate from owner to owner


“Covenant runs with the land”
See Thayer v. Hollinger
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CASE
THAYLER V. HOLLINGER

Hollinger and Williams bought a lake and 800 acres around it in 1965.

Subdivided the land around lake – 75 lots – sold as “lakeshore lots”.

Developers of Big Sky Lake also built Perimeter Road around the lake.

Homeowner lots are on lakeside of road.

Homeowners association now owns the road.

Hollinger and Williams kept land on the outside of the road.

That land has trails on it that Hollinger allowed use by lakeside lot
owners for hiking and horseback riding

When lot owners began to drive motorized vehicles (including ATVs,
snowmobiles, motorcycles) on trails, Hollinger blocked access.

Group of lot owners sued, contending they had an easement to use
trails with motorized vehicles.

Said that use was establish by covenants on the property.

District Court Held: Had no right of access.

Lot owners appealed.
(Continued)
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CASE
THAYLER V. HOLLINGER

Easement for right of way is a servitude (servient tenement) in favor of another
parcel of land (dominant tenement). Homeowners claimed right of way attached to
their lots as dominant tenements.

Homeowners claim their right of way arises from documents that documents
established easement rights across Hollinger's’ land

Homeowners relied on “Restrictive Covenants for Big Sky Lake” recorded in 1968
– as source of easements. Those covenants granted them right of way for ingress
and egress “over roads as the same have been constructed by the Company.”
This was “applicable to the perimeter road, which shall be the outer boundary of
each tract and subdivision” and to the “middle access of roads.” Thus connecting
the perimeter road to roads leading to each lakeshore lot.

HELD: Affirmed. No established right of homeowners to easements over
Hollinger's’ land.

Hollinger's’ land is all outside the Perimeter Road.

Easements in documents limited to roads constructed by the Company after 1965.

No evidence that Company constructed the Hollinger roads after 1965.

Restrictive Covenants do not provide any clear description of any roads on the
Hollinger's’ land.
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LANDLORDS AND TENANTS

Landlords and tenants

Rented property is called a leasehold

Landlord has interest of some length

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.
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LEASES






Can be commercial or residential
ID parties
Describes premises being leased
States how long in effect
States 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

Subleasing

Termination provision
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RIGHTS AND DUTIES OF A TENANT

Right of possession during
lease

Can exclude other parties

Landlord must make
essential repairs or may
have constructive eviction

Tenant may not:

Abuse property

Commit waste

Remove valuable
property

Be nuisance to
neighbors

Engage in illegal
activities on property
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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 and detailed

Cover many issues

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
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CASE
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 annually per square foot.
Nielsen was still constructing the 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.
Trial court held lease was unenforceable for lack of agreement of
the nature and extent of the property to be leased.
(Continued)
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CASE
NIELSON V. GOLD’S GYM








HELD: Affirmed. Lease is unenforceable for lack of mutual assent
of 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 of
the rents 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.
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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
 Zoning: Control land use with regulations
 Is there compensation? Yes, but when property loses value,
compensation may not appear to be “just” to an owner.
 Sometimes negotiated & sometimes statutes provide method
for valuation.

See Saadala v. East Brunswick Zoning Board of Adjustment

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CASE
SAADALA V. EAST BRUNSWICK ZONING
BOARD OF ADJUSTMENT











7-Eleven had a store with 6 parking spaces on ½ acre lot in East
Brunswick, NJ.
Part of the lot is zoned residential, but store existed before zoning.
Store was “grandfathered in” as a preexisting nonconforming use.
Next to 7-Eleven is vacant Shall gas station.
It also was “grandfathered in”.
7-Eleven wanted to take over the gas station property and build retail
gas operation .
Requested the preexisting nonconforming use be extended.
Saadala, area resident, opposed classification.
Zoning Board approved it anyway.
Decision affirmed by County Trial Court.
Saadala appealed.
(Continued)
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CASE
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
mean 3 new islands to dispense gas, a kiosk, and 11 new parking
spaces. This is not simply an expansion of the convenience store or
former Shell gas station.
Is a substantial change in use of the property.
7-Eleven failed to show this property “peculiarly fitted” for a mini-mart
Failed to show “special reasons” for approval of a use variance for its
redevelopment plan
7-Eleven cannot use property as they proposed.
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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 (next chapter)
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CASE
SMITH V. KULIG
Kulig owns building with apartments on second floor.
 Street door to apartments locked; only tenants and their
guests can access. Back of building is a fire escape.
 Tenants are not to use fire escape unless an
emergency.
 “No trespassing” signs posted on fire escape.
 Smith visited Wolf at his apartment in the building.
 Smith went to fire escape; some bolts detached from
wall; Smith fell to his death. Estate sued Kulig.
 Trial Court: Dismissed, holding Smith was a trespasser.
Appealed.

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CASE
SMITH V. KULIG
Held: Affirmed. Wrongful death action dismissed
with prejudice.
 Trespasser is a person who enters or remains on
premises without privilege or 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 as
entry or exit to building – there was no emergency
situation here.
 Landowner does not owe duty to trespasser other
than not harming him in wanton or willful manner.

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CASE
SOWERS V. FOREST HILLS SUBDIVISION
Sowers wanted to build a wind turbine to generate
electricity on his residential property
 Neighbors not pleased.





Turbine would generate noise
Would cause shadow flicker
Ruin their view
Reduce property values
Members of subdivision sued for permanent injunction
from construction of turbine
 Said it was a nuisance.
 District Court granted injunction.
 Sowers appealed.

(Continued)
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CASE
SOWERS V. FOREST HILLS SUBDIVISION





Several kinds of nuisances
 Nuisance per se: nuisance at all times under any circumstances,
regardless of location/surroundings
 Nuisance in fact (nuisance per accidents): nuisance by reasons of
circumstances/surroundings
Test: Whether business or use of property constitutes a nuisance is the
reasonableness of the operation particular to a locality and existing
circumstances. Whether property use is a nuisance to neighbors?
Balance competing interests. Was turbine so unreasonable and
substantial to amount to nuisance versus the utility of the conduct
(turbine use)? Activity is substantial if normal persons would regard it
as “offensive, seriously annoying or intolerable.”
Means “gravity of harm outweighs the social value of the activity”
HELD: The turbine is a nuisance in fact. Permanent Injunction issued.
Noise, diminution of property value, shadow flicker and aesthetics
outweigh the utility of the wind turbine.
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ISSUE SPOTTER
“PROTECTING COMPANY PROPERTY”

Problems with theft of company property

Pens

Staplers

Reams of paper

More expensive items

It all adds up

Can a policy informs employees that taking supplies
is theft of company property and makes them subject
to dismissal?

Do we have to notify employees of this policy at all?
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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, the big tort is premises liability.
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PREMISES LIABILITY

Accidents that result from negligence of the business

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

However, if a danger is obvious, people have duty to
protect themselves by acting reasonably.

See DiPietro v. Farmington Sports Arena, LLC

See Issue Spotter “Duties to Elderly Customers”
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CASE
DIPIETRO V. FARMINGTON SPORTS ARENA, LLC

Michelle DiPietro (age 11) playing soccer at Farmington
Indoor Sports Arena.

Foot “stuck” on playing surface (Astroturf-like carpet).

Fell. Suffered severe ankle injury.

Mother brought lawsuit.

Did fall result from “a “dangerous and defective condition
with playing surface?”

Inspection found surface was in good condition – No
problems like tear or hole.

No player ever complained of problem.

Trial Court: Summary judgment for defendants.
(Continued)
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CASE
DIPIETRO V. FARMINGTON SPORTS ARENA, LLC

Owner has duty to keep premises safe and warn of
unexpected dangers.

Notice to invitees of unsafe condition.

HELD: Affirmed.

No breach of business owner’s duty to invitees unless
they had actual or constructive notice of that danger

Plaintiff failed to establish issue of material fact that
business had actual or constructive notice of
dangerousness of carpet.
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CASE
ERICHSEN V. NO-FRILLS SUPERMARKETS OF OMAHA
Erichsen went grocery shopping at No-Frills one morning.
 Returned to her car, assaulted, beaten, robbed, dragged
over one 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-months).
 Trial court held defendants did not violate duty of care to
Erichsen. She appealed.

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CASE
ERICHSEN V. NO-FRILLS SUPERMARKETS
OF
OMAHA
HELD: Remanded 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, e.g.
warnings, servants to offer protection.
 One incident does not constitute notice of criminal
activities that were foreseeable.
 However, here there were prior criminal events in the
area.
 Erichsen can go to trial with facts of the case against
defendants.

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