Chapter 49 Business Law Powerpoint

Real Property
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• LO49-1: Outline the interests in real
property that someone can hold
• LO49-2: Explain how real property is
voluntarily transferred
• LO49-3: Explain how real property is
involuntarily transferred
• LO49-4: Describe how the use of property
is restricted 49-2
• Thomas and Allison Puryear, in the market for their first home as a newly
married couple, were very impressed with the house they had just toured on
1173 Ambrosia Lane. The living room had especially intrigued them. Both were
avid readers, and custom-made, freestanding bookshelves ran the entire length
of two of the living room walls. Thomas Puryear had already picked out one of
the bookshelves for his rather large collection of World War II books, and his wife
planned to use the other bookshelf for her collection of biographies.
The couple closed on the Ambrosia Lane house on Monday morning and
immediately drove their rented U-Tote truck to their new address. When they
opened the front door, they were shocked to see a completely empty living
room—even empty of the lovely bookshelves they had so admired.
• Are the Puryears entitled to ownership of the bookshelves, or is the seller of the
home entitled to keep them? From an ethical perspective, should the seller have
disclosed that the bookshelves were not part of the real estate transaction? 49-3
Chapter 49 Hypothetical Case 2
• John Franklin and Ruby Huss are next-door neighbors. A narrow dirt road from the state-
maintained highway to Franklin's house is approximately two-tenths of a mile long and runs along
the edge of his property. On the left side of Franklin's road is a drainage ditch that runs the length
of the road, and on the right side is the property line dividing the two neighbors' land holdings.
One day, Huss was out gardening and Franklin approached her with the following question: "Ruby,
I am going to line the road to my house with gravel, and I would like to lay enough gravel to
expand the road by about four feet in width. I can't expand it on the left side because of the
drainage ditch, so I was wondering if you would mind if I widened the road on the right side. It
sure would mean a lot to me, since the road is so narrow right now that I have a hard time driving
my truck up to the house."
This meant that the gravel would extend approximately four feet onto Huss's property. Huss
believed in the power and value of friendly neighbor relations. She responded, "Yes, Jack, you may
do that. That gravel won't do me or my property any harm."
• Based on the facts presented, is Ruby's four-foot-wide strip of land subject to Franklin's adverse
possession of it? If the gravel remains on this strip of land for the statutorily prescribed period of
time for adverse possession (20 years, in many states), will Franklin become its owner? 49-4
• Real property: Land, including anything
permanently affixed to the land
• Fixture: Any item that was originally a
piece of personal property but became
part of realty after it became permanently
attached to real property
49-5
• Written agreement between parties that
specific items will continue to be treated
as personal property
• Personal property attached to realty for
use of a business renting the property (in a
commercial lease arrangement)
• Such property is known as a trade fixture
• Example: Barber chairs in a barber-shop
49-6
• The airspace above the land, extending to the
atmosphere, is also part of the legal concept of
real property
• The owner of real property also has water rights,
the legal ability to use water flowing across or
underneath the property
• Ownership of real property extends to mineral
rights
• Ownership of these subsurface rights includes the
right to enter onto the property to remove the
underground materials 49-7
• Fee simple absolute: Right to possess for life and devise (will)
to heirs upon death; the most complete interest in real
property
• Conditional estate: Interest comparable to fee simple
absolute, except that interest will terminate on
occurrence/nonoccurrence of a specified condition
• Life estate: Granted for lifetime of an individual; right to
possess property terminates upon life estate holder's death,
and property will pass to another party designated by original
grantor
• Future interest: Person's right to property ownership and
possession in the future
• Leasehold estate: Right to possess property for a stipulated
49-8
period of time
• Easement: Irrevocable right to use some part of
another's land for a specific purpose without taking
anything from the land
• Example: Utility easement
• Profit: Right to enter another's land and take part of
the land, or take away a product of it
• Example: Right to harvest timber
• License: Temporary, revocable right to use another's
property
• Example: Theater ticket 49-9
Co-ownership of Real Property
• Tenancy in common: Equal/unequal shares may be held, creditors can
attach any owner's interest, and deceased owner's share is transferred
to heirs
• Joint tenancy: Equal share, creditors can attach any owner's interest,
and deceased owner's share reapportioned equally among surviving
joint tenants
• Tenancy by the entirety: Available to married couples only; shares are
equal, one owner's creditors cannot attach property, and deceased
owner's share passes to surviving spouse
• Condominium ownership: Owner acquires title to a unit within a
building, with undivided interest in the land, buildings, and
improvements of the common areas of the development
• Cooperative ownership: Investor resident acquires stock in the
corporation owning a facility and receives a permanent lease on one 49-10
unit of the facility
Voluntary Transfer of Real Property
• Voluntary transfer of real property requires:
• Execution: Preparation and signing of deed
• Delivery: Transfer of deed to grantee, with
intent of transferring ownership to grantee
• Acceptance: Grantee's expression of intent to
possess and own property
• Recording: Filing deed with appropriate county
office to protect interests of grantee
49-11
• Identification of grantor
• Expression of grantor's intent to convey
the property
• Legally sufficient description of the
property (including its physical boundaries
and any easements)
• Any warranties/promises made by grantor
with the conveyance 49-12
• General warranty deed contains the following
promises/representations:
• Grantor owns interest he/she is conveying
• Grantor has right to convey the property
• No mortgages/liens against property that are not stated in deed
• Grantee will not be disturbed by anyone who has better claim to
property title, with promise to defend grantee's title against such
claims or to reimburse grantee for any money spent in defense
and/or settlement of such claims
• Grantor will provide grantee with any additional documents that
grantee needs to perfect his/her title to property
49-13
• Special warranty deed: No representation
of guarantees contained in general
warranty deed; grantor is merely
promising that he/she has not done
anything to lessen value of property
transferred
• Quitclaim deed: No warranties; grantor
simply conveys whatever interest he/she
holds 49-14
• Negotiation of a sales contract
• Seller’s duty to disclose
• Title examination
• Financing
• Closing
49-15
• Adverse possession: When person openly
treats real property as his/her own, without
protest/permission from real owner, for
statutorily established period of time,
ownership is automatically vested in that
person
• Condemnation: Government acquires
ownership of private property for public use
for just compensation over the protest of the 49-16
property owner
• Restrictive covenants: Promises to use/not
to use land in particular ways
• Zoning: Restriction of use of property to
allow for the orderly growth and
development of community and to protect
the health, safety, and welfare of its
citizens
49-17
• Tim Ackers is a stay-at-home dad living in Falling Waters subdivision in
Olympia, Washington. Ackers's wife, Julia, earns a six-figure income at the
largest accounting firm in Olympia, and both husband and wife feel
fortunate that one of them is able to stay at home with their two young
children, four-year-old Hope and two-year-old Matthew.
Ackers is part of the community watch organization in his subdivision, and

as a stay-at-home parent, he has ample opportunity to observe the daily
neighborhood goings-on. For the past six months, Ackers has noticed
heightened activity at a house down the street owned by Clara and
Jonathan Pennington. Approximately 8 to 12 cars come and go from the
Pennington driveway every day, and four months ago, handicap-access
ramps were installed at the front and back entrances to the home. On
several occasions, Ackers has seen elderly people sitting in wheelchairs on
the Penningtons' front porch.
49-18
• Curious, Ackers knocks on the front door of the Pennington home one Monday
morning, and Clara Pennington answers. Ackers says, "Good morning, Clara. I know
the old saying that 'curiosity killed the cat,' but I can't help myself. What's going on at
your house? Why are all these elderly people here? I thought both of your parents
were deceased, and I thought Jonathan's parents had passed on as well. Are these
people related to you?"
Clara responds, "Tim, Jonathan and I decided six months ago to open up an elderly
care facility. We didn't have the money to purchase a separate building, so we
decided to care for the elderly in our home. This gives me a wonderful opportunity to
stay at home, and I wouldn't be able to do that just on Jonathan's income. Plus, think
of the advantages for our clients. Isn't this so much better than a regular rest home?
These folks have cried tears of joy, and they thank me every day for providing them
the quality of care they had hoped for in their golden years."
• The Falling Waters subdivision is zoned as exclusively residential. Should Ackers report
the Penningtons' zoning violation? What ethical issues are involved in Ackers's 49-19
decision?
• Herbert and Molly Wainstock, a childless couple, had lived in their large
two-story home at 450 Wood Lane in Cedar Grove for 45 years. One
November afternoon, the fire department was summoned to the house and
found the dining room ablaze. The cause was an electrical short, but the fire
moved quickly because the Wainstocks were hoarders. Almost every room
in the home was stuffed floor to ceiling with old newspapers and
magazines, food packaging, and other trash. Fighting the fire was difficult,
but eventually the firefighters got it under control.
The Wainstocks' neighbors had not seen them very often in the past three
years. All were shocked to learn that both were suffering from dementia,
which had exacerbated their tendencies to hoard. The neighbors were
unable to find any relatives who were willing to help the couple, so they
enlisted the help of Cedar Grove's town officials and social workers to find
them a safe place to live. The couple moved into a community that 49-20
specialized in memory care services.
• Their home was damaged by the fire, but the
Wainstocks' insurance would cover the loss—including
cleaning out the years of accumulated trash in the home.
But Cedar Grove officials moved to condemn the house
and have it torn down. The move made the Wainstocks'
neighbors suspicious, however, because they were aware
that a developer who was friendly with Cedar Grove's
mayor had been interested in the property for some
time.
• What is Cedar Grove obligated to do for the Wainstocks 49-21

as part of the condemnation process? Is the town legally
able to condemn the property?

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Real Property

Ackers is part of the community watch organization in his subdivision, and

• What is Cedar Grove obligated to do for the Wainstocks 49-21

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