Chapter 47 Real Property Outline

The key points in this chapter include:

1. Basic interests in real property ownership.

2. The priorities of competing claims under recording statutes.

3. The acquisition of title to property by adverse possession.

4. Limitations on the rights of property owners.

This chapter covers ownership rights in real property, including the nature of those rights and their transfer. The chapter also outlines the right of the government to take private land for public use, zoning laws, and other restrictions on ownership.

I. THE NATURE OF REAL PROPERTY
Real property consists of land and the buildings, plants, and trees on it.

A. LAND
Includes the soil on the surface of the earth, natural products or artificial structures attached to it, the water on or under it, and the air space above.

B. AIR AND SUBSURFACE RIGHTS
Limitations on air rights or subsurface rights normally have to be indicated on the deed transferring title at the time of purchase.

1. Air Rights
Flights over private land do not normally violate the owners’ rights.

2. Subsurface Rights
Ownership of the surface can be separated from ownership of the subsurface. In excavating, if a subsurface owner causes the land to subside, he or she may be liable to the owner of the surface.

C. PLANT LIFE AND VEGETATION
A sale of land with growing crops on it includes the crops, unless otherwise agreed. When crops are sold by themselves, they are personal property.

II. OWNERSHIP INTERESTS IN REAL PROPERTY

A. FEE SIMPLE
A fee simple absolute owner has the most rights possible—he or she can give the property away, sell it, transfer it by will, use it for virtually any purpose, and possess it to the exclusion of all the world—potentially forever.

B. LIFE ESTATES
Lasts for the life of a specified individual (“to A for his life”). A life tenant can use the land (but cannot commit waste), mortgage the life estate, and create liens, easements, and leases (but not longer than the life defining the estate).

C. LEASEHOLD ESTATES
Created when an owner or landlord conveys the right to possess and use property to a tenant for a certain period of time. The rights and duties of landlord and tenant are outlined in Chapter 51.

1. Tenancy for Years
Created by contract (which can sometimes be oral) by which property is leased for a specific period (a month, a year, a period of years). At the end of the period, the lease ends (without notice). If the tenant dies during the lease, the lease interest passes to the tenant’s heirs.

2. Periodic Tenancy
Created by a lease that specifies only that rent is to be paid at certain intervals. Automatically renews unless terminated. Can arise if a landlord allows a tenant for years to hold over. Terminates, at common law, on one period’s notice.

3. Tenancy at Will
A tenancy for as long as the landlord and tenant agree. Exists when a tenant for years retains possession after termination with the landlord’s consent before payment of the next rent (when it becomes a periodic tenancy). Terminates on the death of either party.

4. Tenancy at Sufferance
Possession of land without right (without the owner’s permission).

D. NONPOSSESSORY INTERESTS

1. Easements and Profits
Easement: the right of a person to make limited use of another person’s land without taking anything from the property. Profit: the right to go onto another’s land and take away a part or product of the land.

a. Creation of an Easement or Profit
By deed, will, contract, implication, necessity, or prescription.

b. Effect of a Sale of Property
The benefit of an easement or profit goes with the land. The burden goes with the land only if the new owner recognizes it, or knew or should have known of it.

c. Termination of an Easement or Profit
Terminates when deeded back to the owner of the land that is burdened; its owner becomes the owner of the property burdened; or it is abandoned with the intent to relinquish the right to it.

2. Licenses
The revocable right of a person to come onto another person’s land.

III. TRANSFER OF OWNERSHIP

A. DEEDS
Possession and title to land can be passed by deed without consideration.

1. Requirements
(1) Names of the grantor and grantee, (2) words evidencing an intent to convey, (3) legally sufficient description of the land, (4) grantor’s (and usually the spouse’s) signature, and (5) delivery.

2. Warranty Deed
Provides the most protection against defects of title—covenants that the grantor has title to, and the power to convey, the property; that the buyer will not be disturbed in his or her possession of the land; and that transfer is made without unknown adverse claims of third parties.

3. Special Warranty Deed
Warrants only that the grantor has done nothing to lessen the value of the property. If all liens and encumbrances are disclosed, the seller is not liable if a third person interferes with the buyer’s ownership.

4. Quitclaim Deed
Warrants less than any other deed. Conveys to the grantee only whatever interest the grantor had.

5. Grant Deed
By statute, may impliedly warrant that the grantor owns the property and has not encumbered it or conveyed it to another.

6. Sheriff’s Deed
Gives ownership rights to a buyer at a sheriff’s sale.

7. Recording Statutes
Require transfers to be recorded in public records (generally in the county in which the property is located) to prevent fraud. Many states require the grantor’s signature and two witnesses’ signatures.

a. Race Statute
The first person to record a deed has superior rights to the property, whether he or she knew of another previous, unrecorded transfer.

b. Pure Notice Statute
A person who does not know of a previous, unrecorded transfer can claim priority, whether or not he or she records first.

c. Notice-Race Statute
A person who does not know of a previous, unrecorded transfer and who files first can claim priority.

B. CONTRACTS FOR THE SALE OF REAL ESTATE

1. Formation of the Contract
An offer to buy includes a deposit of earnest money (forfeited if the offer is withdrawn). Normally, the contract must be in writing to be enforceable; the writing should identify the parties, describe the property, and state the price.

a. Marketable Title
A contract for a sale of land includes an implied warranty that the seller will deliver marketable title. Defects that render title unmarketable include breaks in the chain of title and liens.

b. Risk of Loss
Unless the parties agree otherwise, in most states the risk is on the buyer until title passes. The buyer must pay the contract price even if the property is destroyed (unless the destruction is due to the seller’s negligence).

2. Escrow
The seller may give the deed to an escrow agent to deliver to the buyer when the conditions of sale are met. Once those conditions are met, passage of title relates back to the time of delivery of the deed to escrow (thus, if the grantor dies, title still passes).

3. Financing
A mortgage is a loan for which real property is given as security. If payments are not made, the mortgagee loses the right to title.

4. Fitness of the Property

a. Caveat Emptor
In a few states, the seller makes no warranties with respect to fitness (unless the deed or contract specifies otherwise). The buyer takes the property “as is.”

b. Implied Warranty of Habitability
In most states, the seller of a new house impliedly warrants that it will be fit for human habitation (in reasonable working order and of reasonably sound construction). In a few states, a later buyer can recover from the original builder under this warranty.

c. Duty to Disclose
In many states, sellers must disclose any known defect that materially affects the value of the property and that the buyer could not reasonably discover.

C. TRANSFER BY INHERITANCE
Outlined in Chapter 53.

D. ADVERSE POSSESSION
A person who possesses another’s property acquires title good against the original owner if the possession is (1) actual and exclusive; (2) open, visible, and notorious; (3) continuous and peaceable for a statutorily required period of time; and (4) hostile, as against the whole world.

IV. LIMITATIONS ON THE RIGHTS OF PROPERTY OWNERS

A. EMINENT DOMAIN
The government can take private property for public use. To obtain title, a condemnation proceeding is brought. The Fifth Amendment requires that just compensation be paid for a taking; thus, in a separate proceeding a court determines the land’s fair value (usually market value) to pay the owner.

B. ZONING Under its police power, a state can pass zoning laws to regulate uses of land without having to compensate the landowner.

1. Limits on the State’s Power
Regulation cannot be (1) confiscatory (or the owner must be paid just compensation); (2) arbitrary or unreasonable (taking without due process under the Fourteenth Amendment); or (3) discriminatory, under the Fourteenth Amendment.

2. Variances
An owner can obtain a variance if (1) it is impossible to realize a reasonable return on the land as zoned, (2) the ordinance adversely affects only the owner (and not all owners), and (3) granting a variance will not substantially alter the essential character of the zoned area.

C. RESTRICTIVE COVENANTS

1. Covenants Running with the Land
A covenant runs with the land (the original parties and their successors are entitled to its benefit or burdened with its obligation) if—

a. It is created in a written agreement (usually the document that conveys the land).

b. The parties intend that it run with the land (the agreement states that all the promisor’s “successors, heirs, or assigns” will be bound).

c. The covenant touches and concerns the land
(limits on the burdened land must have some connection to the land).

d. The original parties are in privity of estate when the covenant is created.

2. Illegal Restrictive Covenants
A covenant cannot be discriminatory.