Intro to Law Property Law Unit Textbook

Intro to Law Property Law Unit Textbook Property Law 1

UNIT OUTLINE Personal Property and Bailment A. Personal Property B. Ownership of Personal Property 1. Possession or Capture 2. Purchase 3. Production 4. Gift C. Mislaid, Lost, and Abandoned Personal Property 1. Mislaid Property 2. Lost Property 3. Abandoned Property D. Bailment E. Elements Necessary to Create a Bailment Real Property A. Land and Buildings B. Subsurface Rights C. Plant Life and Vegetation D. Fixtures E. Air Rights Property Law 2

PERSONAL PROPERTY AND BAILMENT Private ownership of property forms the foundation of our economic system. Therefore, a comprehensive body of law has been developed to protect property rights. The law protects the rights of owners of personal property to use, sell, dispose of, control, and prevent others from trespassing on their rights. Sometimes personal property is delivered to another party for transfer, safekeeping, or some other purpose. This is called a BAILMENT. For example, goods are often entrusted to common carriers for transport and delivery. The bailee and bailor owe certain duties to each other. This section discusses the kinds of personal property, methods of acquiring ownership in personal property, property rights in mislaid, lost, and abandoned property, and bailment. PERSONAL PROPERTY There are two kinds of property: real property and personal property. REAL PROPERTY includes land and property that is permanently attached to it. For example, minerals, crops, timber, and buildings that are attached to land are generally considered real property. PERSONAL PROPERTY (sometimes referred to as goods or chattels) consists of everything that is not real property; it is often defined as assets that are movable. Real property can become personal property if it is removed from the land. For example, a tree that is part of a forest is real property; a tree that is cut down is personal property. Personal property that is permanently affixed to land or buildings is called a fixture. Such property, which includes things like heating systems and storm windows, is categorized as real property. Unless otherwise agreed, fixtures remain with a building when it is sold. Personal property (such as furniture, pictures, and other easily portable household items) may be removed by the seller prior to sale. Personal property can be either tangible or intangible. Tangible property includes physically defined property, such as goods, animals, and minerals. Intangible property represents rights that cannot be reduced to physical form, such as stock certificates, certificates of deposit, bonds, and copyrights. Intellectual property is a broad category of intangible personal property that will be discussed in a subsequent unit. Real and personal property may be owned by one person or by more than one person. If property is owned by two or more persons at the same time, there is concurrent ownership. OWNERSHIP OF PERSONAL PROPERTY Personal property can be acquired or transferred with a minimum of formality. Commerce would be severely curtailed if the transfer of such items were difficult. The methods for acquiring ownership in personal property are possession or capture, purchase, production, gift, will, inheritance, and divorce. Many of these methods are discussed in the following paragraphs. Property Law 3

POSSESSION OR CAPTURE A person can acquire ownership in unowned personal property by taking possession of it, or capturing it. The most notable unowned objects are things in their natural state. This type of property acquisition was important when this country was being developed. In today's urbanized society, however, there are few unowned objects, and this method of acquiring ownership in personal property has become less important. Example: Someone who obtains the proper fishing license acquires ownership of all the fish he or she catches. PURCHASE The most common method of acquiring title to personal property is by purchasing the property from its owner. Example: Urban Concrete owns a large piece of equipment. City Builders purchases the equipment from Urban Concrete for $100,000. Urban Concrete transfers title to the equipment to City Builders. City Builders is now the owner of the equipment. PRODUCTION Production is a common method of acquiring ownership in personal property. A manufacturer that purchases raw materials and produces a finished product owns that product. Example: A soda manufacturer purchases carbonated water, fructose corn syrup, phosphoric acid, coloring, and other ingredients and produces a brand of soda. The finished product is owned by the soda manufacturer. GIFT A GIFT is a voluntary transfer of property without consideration. The lack of consideration is what distinguishes a gift from a purchase. The person giving a gift is called the DONOR. The person who receives a gift is called the DONEE. The three elements of a valid gift are donative intent, delivery, and acceptance. Donative intent can be inferred from the circumstances or language used by the donor. The courts also consider such factors as the relationship of the parties, the size of the gift, and the mental capacity of the donor. Acceptance is usually not a problem because most donees readily accept gifts. In fact, the courts presume acceptance unless there is proof that the gift was refused. Nevertheless, a person cannot be forced to accept an unwanted gift. MISLAID, LOST, AND ABANDONED PERSONAL PROPERTY Often, people find other people's personal property. Ownership rights to found property differ, depending on whether the property was mislaid, lost, or abandoned. The following paragraphs discuss these legal rules. Property Law 4

MISLAID PROPERTY Property is considered MISLAID PROPERTY when its owner voluntarily places the property somewhere and then inadvertently forgets it. It is likely that the owner will return for the property upon realizing that it was misplaced. The owner of the premises where the property is mislaid is entitled to take possession of the property against all except the rightful owner. This right is superior to the rights of the person who finds it. Such possession does not involve a change of title. Instead, the owner of the premises becomes an involuntary bailee of the property and owes a duty to take reasonable care of the property until it is reclaimed by the owner. Bailments are discussed later in this unit. Example: Felicity is on a business trip and stays in a hotel during her trip. Felicity accidentally leaves her diamond engagement ring in the hotel room she has stayed in and checks out of the hotel. The engagement ring is mislaid property, and the hotel has a duty to return it to Felicity, its rightful owner. LOST PROPERTY Property is considered LOST PROPERTY when its owner negligently, carelessly or inadvertently leaves it somewhere. The finder obtains title to such property against the whole world except the true owner. The lost property must be returned to its rightful owner, whether the finder discovers the loser's identity or the loser finds the finder. A finder who refuses to return the property to the loser is liable for the tort of conversion and the crime of larceny. Some states require the finder to conduct a reasonable search (such as placing an advertisement in a newspaper) to find the rightful owner. Example: If a commuter finds a laptop computer on the floor of a subway station in New York City, the computer is considered lost property. The finder can claim title to the computer against the whole world except the true owner. If the true owner discovers that the finder has her computer, they may recover it from the finder. If there is identification of the owner on the computer (such as the name, address, and telephone number), the finder owes a duty to contact the rightful owner and give back the computer. ABANDONED PROPERTY Property is classified as ABANDONED PROPERTY if (1) an owner discards the property with the intent to relinquish his or her rights in it or (2) an owner of mislaid or lost property gives up any further attempts to locate it. Anyone who finds abandoned property acquires title to it. The title is good against the whole world, including the original owner. Example: Property left at a garbage dump is abandoned property. It belongs to the first person who claims it. Property Law 5

BAILMENT A BAILMENT occurs when the owner of personal property delivers his or her property to another person, either to be held, stored, delivered, or for some other purpose. In a bailment, the owner of the property is the BAILOR. The party to whom the property is delivered for safekeeping, storage, or delivery (e.g., warehouse, common carrier) is the BAILEE. The law of bailment establishes the rights, duties, and liabilities of parties to a bailment. A bailment is different from a sale or a gift because title to the goods does not transfer to the bailee. Instead, the bailee must follow the bailor's directions concerning the goods. Example: Hudson Corporation is relocating offices and hires American Van Lines to move its office furniture and equipment to the new location. American Van Lines (the bailee) must follow Hudson's (the bailor's) instructions regarding delivery. ELEMENTS NECESSARY TO CREATE A BAILMENT Three elements are necessary to create a bailment: 1. Bailment of personal property. Only personal property can be bailed. The property can be tangible (such as automobiles, jewelry, animals) or intangible (such as stocks, bonds, promissory notes). 2. Delivery of possession. Delivery of possession involves two elements: (A) The bailee must have exclusive control over the personal property, and (B) The bailee must knowingly accept the personal property. Examples: No bailment is created if a patron goes into a restaurant and hangs her coat on an unattended coat rack because other patrons have access to the coat. However, a bailment is created if a patron checks her coat with a coatroom attendant because the restaurant has assumed exclusive control over the coat. If valuable property was left in the pocket of the coat, there would be no bailment of that property because the checkroom attendant did not knowingly accept it. 3. Bailment agreement. The creation of a bailment does not require any formality. A bailment may be either express or implied. Most express bailments can be either written or oral and agreements generally must be in writing if it is for more than one year. An example of an implied bailment is the finding and safeguarding of lost property. Property Law 6

REAL PROPERTY Property and ownership rights in real property play an important part in the society and economy of the United States. Individuals and families own houses, farmers and ranchers own farmland and ranches, and businesses own commercial and office buildings. The concept of real property is concerned with the legal rights to the property rather than the physical attributes of the tangible land. Thus, real property includes some items of personal property that are affixed to real property (such as fixtures) and other rights (such as minerals and air). Although the United States has the most advanced private property system in the world, the ownership and possession of real estate are not free from government regulation. Pursuant to constitutional authority, federal, state, and local governments have enacted countless laws that regulate the ownership, possession, lease, and use of real property. These laws include zoning laws and the like. This section covers the law concerning the ownership and transfer of real property. As mentioned, property is usually classified as either real or personal property. Real property is immovable or attached to immovable land or buildings, whereas personal property is movable. The various types of real property are described in the following paragraphs. LAND AND BUILDINGS Land is the most common form of real property. A landowner usually purchases the surface rights to the land that is, the right to occupy the land. The owner may use, enjoy, and develop the property as he or she sees fit, subject to any applicable government regulation. Buildings constructed on land are real property. Houses, apartment buildings, manufacturing plants, and office buildings constructed on land are real property. Such things as radio towers and bridges are usually considered real property as well. SUBSURFACE RIGHTS The owner of land possesses SUBSURFACE RIGHTS, or mineral rights, to the earth located beneath the surface of the land. These rights can be very valuable. Gold, uranium, oil, or natural gas may lie beneath the surface of the land. Theoretically, mineral rights extend to the center of the earth. In reality, mines and oil wells usually extend only several miles into the earth. Subsurface rights may be sold separately from surface rights. PLANT LIFE AND VEGETATION Plant life and vegetation growing on the surface of land are considered real property. Such vegetation includes both natural plant life (such as trees) and cultivated plant life (such as crops). When land is sold, any plant life growing on the land is included, unless the parties agree otherwise. Plant life that is severed from the land is considered personal property. Property Law 7

FIXTURES Certain personal property is so closely associated with real property that it becomes part of the realty. Such items are called FIXTURES. Kitchen cabinets, carpet, and doorknobs are fixtures, but throw rugs and furniture are personal property. Unless otherwise provided, if a building is sold, the fixtures are included in the sale. If the sale agreement is silent as to whether an item is a fixture, the courts make their determination on the basis of whether the item can be removed without causing substantial damage to the realty. AIR RIGHTS AIR RIGHTS are a type of development right in real estate, referring to the empty space above a property. Generally speaking, owning or renting land or a building gives one the right to use and develop the air rights. Unlimited air rights existed when people began owning real estate. It was not something that anyone really concerned themselves with before the 20 th century. The first legal limits placed on air rights came about because of the airplane. Eventually, owners only had rights to airspace that they could reasonably use. It would be impractical for the development of air travel for individual landowners to own all the air above them, because airplanes would be constantly trespassing. An air space parcel is the air space above the surface of the earth of an owner's real property. Air rights are quite valuable, particularly in densely populated metropolitan areas, where building property is scarce. Examples: Railroads have made money by leasing or selling air rights over their railroad tracks. For example, the Grand Central Terminal in New York City sold air rights over its railroad property for the construction of the PanAm Building (now MetLife Building) next to Grand Central Terminal. Many other developments have been built in air space parcels in New York City. In addition, owners of highways including states and cities often sell or lease air rights over the highways. Fast food restaurants and gasoline stations are often located on air rights over freeways. Owners of air rights, and parties who want to build on those air rights, will continue to come up with unique solutions to meet building needs. Property Law 8