MBA535 - Instructor s Outline and Notes Module 2 1. What object other than land may be deemed real property within the context of the law? Real property fundamentally is land. However, land itself is merely the starting point of the legal definition of real property. Real property is the land plus anything attached or embedded in the land, whether placed there by nature or by man. The object attached to the land may be large or small; it is of no consequence before the law. What matters is simply whether the object is attached or embedded or not. 2. What are examples of objects that may also be deemed real property in addition to the land? Examples of objects that would be considered real property when attached or embedded in the land fall into two categories, an object placed on the land by man or an object placed on the land by nature. Examples of objects placed on the land by man include buildings, wells, fencing, roads and irrigation systems. Examples of objects placed by nature would include trees, grasses, minerals, natural produce (such as apple trees, blackberry patches, etc.). 3. What is the primary qualifier used to determine whether an object on the land is real property or not? The primary question to be answered by the court to determine if an object is real property is simply "Is the objected attached or embedded in the land? For example, an apple tree growing naturally on the land (not purposely placed there in a farming effort) is attached to the land. Therefore the tree itself is also real property. Further, an apple hanging on the branch of the tree is also considered real property. Why? The apple is attached to the land as well (via the tree). It is of no consequence that the apple's attachment is by a small stem connected to the tree; the apple is nonetheless attached. Attachment to the land is not limited to living vegetation either. For example, a large boulder partially embedded in the ground would also constitute real property. It is clearly attached or embedded. If 90% of the boulder were above the ground, the boulder would still be considered real property because, again, it is attached or embedded. It is critical to remember that if it is attached or embedded at all, then it is to be considered real property. If a large boulder was merely sitting on the surface of the land (regardless of the size of the boulder; it could be the size of a house!), then the boulder would be considered personal property. Remember, all property must be either real or personal. It is important to remember that property may pass from one state to the other and therefore change its status. For example, an apple hanging from a tree that falls to the ground (naturally) passes from real property to personal property. The moment the apple is no longer attached to the land, it becomes personal property. Even something as large as a residential home, should it be dug up and moved, becomes personal property the instant it is no longer attached to or embedded in the land. The converse is also true. An object may pass from a state of personal property to real property very easily. For example, a new fence post laying on the surface of the land is personal property, however, the instant that the fence post is driven into the ground it becomes real property because it is now attached or embedded. Modern day courts sometimes make a distinction between cultivated crops or produce (crops purposively planted on the land) and natural crops or produce (crops placed on the land by nature), however, it is important to note that the original common law made no such distinction. An object is either attached or embedded or not; if attached or embedded to the land at all, it was deemed real property. For our purposes in this court, we will apply the original common law in our scenarios.
4. How is water considered with regard to real property? There are three considerations in determining the relationship of water to real property: self-enclosed lakes or ponds, nonnavigable rivers and streams and navigable rivers and streams. With self-enclosed lakes or ponds, the owner of the real property surrounding the lake or ponds owns both the water and the land underneath in its entirety. Nonnavigable rivers or streams flowing through real property change the ownership of the water. In this instance, the landowner owns the riverbed (the land immediately beneath the stream), however, the landowner does not own the water, nor can the land- owner take any action to divert or modify the water s natural path (because such an action could be to the detriment of land owners downstream). If there are two separate landowners on either side of a stream, each owns the land beneath the stream to the center of the stream, but again, neither may take any action to divert the natural flow of the stream. If the river or stream is navigable (may be traveled by boat carrying a person or persons, regardless of size of the boat), then a landowner owns only to the edge of the water at the normal low-water mark. The landowner does not have any ownership of the land beneath the river at the point that the low-water mark begins. 5. What is a fixture? A fixture is simply man-made personal property that has been attached to the land, or real property, in such a manner that it has become part of the land or real property. It is critical to remember that all fixtures must start off as man-made personal property. A farmer planting an orange tree does not create a fixture; the tree is not a man-made object to begin with. An example of a fixture is a window air conditioner unit attached to the window of a home, or an oil tank attached to a home though the home s heating unit. Any major household appliance that is placed in a home and connected to a wall or foundation could constitute a fixture. Certainly, there are gray areas in the law in considering whether an object may be a fixture or not. Some appliances may be easily removed without creating damage (even minor damage) to the property; however, it is more likely that the appliance's removal would damage the home, if even to a small degree. Ceiling fans, bathtubs, chandeliers and other home improvements may well be considered fixtures if the connection to the property was one of a somewhat permanent nature. In the buying and selling of real property, the parties can and should determine between themselves exactly which items shall be considered fixtures or not. The law allows the parties to make this distinction. If the parties agree in the contract that an item is a fixture, then the court will honor that decision, regardless of whether the item is actually attached or not. For example, a child's swing set in a back yard is often not attached to the land or home, but two contracting parties may agree to consider it a fixture for the purposes of their contract; therefore the court will consider such a fixture. The opposite is also true. Even if an object is clearly a fixture, the parties may consider the item (for example, a chandelier) not to be a fixture. The law only becomes involved when there is a dispute about whether an item is a fixture of not. 6. What are the four primary instruments of real property ownership? Real property may be owned as tenants in common, joint tenancy, tenancy by the entirety and community property. Tenants in common occur when two or more persons own real property and any of the owners have the right to leave their respective interest to their heirs or descendents by will upon death. If three persons owned a parcel of land as tenants in common and one of the three died, his interest would pass to whomever he left it to by will. The remaining original owners would not receive the deceased owner's portion (otherwise known as the right of survivorship). Also, during any of the owner's lifetimes, each could sell or gift his interest to another person without limitation. The new owner would then own the same one-third undivided interests that the original owners owned. Owning an undivided one-third interest means that each of the owners owns one-third of the entire parcel of land, not that there exits
three divided portions of land where each owned one of the portions. All of the owners are entitled to use and enjoyment of the entire real property. For example, if three people owned a house as tenants in common, each owns a one-third undivided interest in the house. Each of the three may use any or all portions of the house without limitation. Each of the three may sell, gift, or leave by will her interest to another at any time and the new owner would have the same rights and privileges as the original owner. Joint tenancy is similar to the tenancy in common, however, here if one of the original owners dies, the remaining two persons would have the right of survivorship of the deceased owner's portion. At that point, each of the two remaining owners would have a one-half interest in the undivided whole of the house. However, just because property is owned as joint tenants, there is no limitation on any of the others to sell or gift their interest during his/her lifetime. If one of the owners sells or gifts her interests during her lifetime, the joint tenancy is destroyed and the new owners own the property as tenants in common. If the deceased owner attempted to leave her interests by will, at the time of her death, the gift by would have no legal effect. Tenancy by the entirety is essentially a joint tenancy owned by a married couple. The only distinction between the joint tenancy and the tenancy by the entirety is the requirement that both are required to agree and execute signatures to gift or sell the property and that a creditor of one of the couple (husband or wife) cannot lay claim to the property because of the other's ownership. Community property is an ownership mechanism used by a minority of states in the United States. Under the concept of community property, if a married person purchases property, then the spouse automatically owns an undivided one-half interest in the property. The sole exception is if the couple agrees in writing prior to acquiring the property that one or the other may own the property solely. 7. What are the three primary estates of real property? The three primary estates of real property are the fee simple estate, the fee simple defeasible estate and the life estate. The fee simple estate is the most common estate. In the fee simple estate, the owner owns all of the rights to the property without exception. Most real property is owned in fee simple estates. The owner owns the land and any and all interests below the land, such as mineral rights, oil, gas, etc. The owner of a fee simple estate can gift or sell the estate without any restriction. Further, the owner may do as she pleases with the estate, even to the point of committing waste or destruction of the estate. The fee defeasible estate is ownership of property in which there exists a condition subsequent which passes to the new owner. For example, "To John Jones, so long as the property is used for farming" may be placed in the deed and contract. With the fee defeasible estate, the new owner is obliged to follow the condition subsequent. If the new owner fails to do so, the ownership returns to the seller of the property or the seller s other designee. This is known as the reversion interest. The life estate occurs when one person receives the right of exclusive use and enjoyment of the property during her respective life (or another person s designated life). An example would be, "To my wife, Sarah, for the remainder of her life and then to my son, John Jones, Jr." The owner of the life estate may use the property as she wishes, however, she must not commit any waste or destruction of the property in any way. At the end of Sarah's life, John Jones, Jr. would receive the property in fee simple. John Jones, Jr.'s interest in the land at the time of his mother s life is called the remainder interest. The remainder interest becomes a fee simple upon his mother's death. 8. What is a non-possessor interest in real property? A non-possessor interest in real property is a right that entitles a third party (not the owner of the property) to have some limited right to the property of another. The two fundamental rights include easements and licenses.
An easement is a third party right that is specified in the language of a deed that creates a right for the third person. Examples of typical easements include; the right to drive an automobile over the land of another to reach a landlocked parcel, the right to place railroad track across property to extend a railroad line, the right to lay fiber optic cable underground through the property to extend cable service, or the right to extend telephone lines over the property of another. The right of the license differs from the easement rights in two respects. A license is a personal revocable privilege granted by a landowner to a third party, for example, a landowner giving a hunter the right to hunt on his land, or the right to fish in a pond on the landowner s property, or to have a picnic. A license is not written into the deed and the landowner may revoke the privilege at any time. Finally, a person receiving a license may not transfer the privilege to anyone else. 9. How and why is real property transferred by the mechanism of Adverse Possession? Adverse possession is an ancient common law practice also know by its' vernacular name, "squatter's rights." What occurs with adverse possession is essentially that a person (or persons) comes to live on a parcel of land of which she is not the actual true title holder. The person may or may not know who the actual true title holder is, but regardless chooses to live on the property and to hold herself out as the true owner. If the "squatter" continues to live on the property for seven years and the true title owner refuses to take any action to assert ownership, the "squatter" may request recognition by the court as the new true title owner. The legal premise behind this notion is that land should be utilized, not wasted or left dormant. Further, that a true title owner has the obligation to contest rightful ownership if a situation arises in which such apparent right becomes unclear. 10. How is real property transferred by sale, gift or inheritance? Transfer of real property in the United States requires an exchange of a legally binding document entitled deed. Very often, but not always, transfer of title to real property includes a contract as well as a deed. The contract typically occurs when the occasion of the transfer of the property occurs by means of a sale. When the transfer occurs by will or lifetime gift, there is no need for a contract. To transfer real property, a grantor (person owning the real property) must execute (sign) a deed and deliver that properly drafted and executed deed to the grantee (person receiving the property). Delivery of the deed to the grantee from the grantor is essential. If no deliver occurs, either directly or by the grantor s appointed agent (attorney, real estate broker, etc.), then no transfer has occurred and the grantor retains ownership over the real property. All deeds have the same six essential requirements to be valid. The deed must describe the parties (the person transferring the property and the person receiving the property), a description of the property (usually the physical/mailing address along with the legal description), a description of consideration (monies) provided for the transfer, any covenants (promises made-either from the grantor to grantee or vice versa), a signature of the grantor (person transferring the property) on the deed (no signature is required of the grantee) and an acknowledgment (an official recognition and stamp of a notary or other state approved office of authentication). Covenants (promises) made in the deed may include two separate types. The affirmative covenant is an agreement that sets forth a requirement that the grantee or grantor must do in the future, such as maintain the lawn, trim all trees, maintain a driveway or garage, etc., etc. The negative covenant requires the grantee or grantor to not cause to be allowed a forbidden activity of the property, such as using the property for farming, business or other activity. With very little exception, all covenants listed in a deed "run with the land", that is, any subsequent owner of the property is obligated and bound by the covenants set forth in the previous owner s deed.
11. What are the two fundament types of deed? All deeds fall into one of two broad types, the quit-claim deed or the warranty deed. A quit-claim deed is a document that transfers ownership of real property using all of the six elements set forth above. The fundamental distinction of the quit-claim deed is that the grantor is "quitting" any all interests the grantor MAY have in the property. If the grantor executes and delivers a proper quit-claim deed of property in which the grantor owns all interests, then all interests of the grantor are transferred. If, however, the grantor is mistaken and does not actually own any interests in the real property that he purports to transfer, then NO interests are transferred. Further, the grantor is not liable because he has only agreed to quit (transfer) any interests that he MAY have owned. He has not warranted (promised) that he owns any interests at all. In contrast, the warranty deed does warrant (promise) that the grantor does in fact own the property he is attempting to convey (transfer). The required elements of the warranty deed are identical to that of the quit-claim deed; however, here the grantor promises that he does, in fact, own the property. If he does not own the property, he is liable to the grantee. Warranty deeds include two forms: the general warranty deed gives the greatest promise. Here the promise is that the grantor owns the property and that there are no limitations or impediments to the transfer or sale of the property. In contrast, the special warranty deed makes only a single promise; that is, that the grantor has the right to sell the property (nothing more). There may be numerous and varied problems with the title to the property, but if in fact, the grantor was entitled to transfer the property, then the grantor has honored his promise. 12. What actions are necessary to conclude and protect the transfer of the property with title/deed? After the grantee receives the deed, the deed should be recorded in the county records by the public official authorized to do such. If the grantee fails to record the deed, the grantee still owns the property, but if the grantor transfers the same property to another and the other records his deed, then the second deed is superior (overrides) the first. Further, if any liens or judgments are filed against the grantor, then such liens or judgments would affect all property owned and OF RECORD to the county (which would include the property conveyed). Recording the delivered deed protects the new owner (grantee) from any purported sales or transfers later. In addition to recording the deed, the grantee should obtain an abstract of title. An abstract of title is a complete history of all ownership past and present of the property. An abstract of title will show if there are any potential problems, such as outstanding mortgages, liens or unpaid taxes. The final safeguard recommended is title insurance from a title company. If a property owner obtains title insurance at the time of the transfer, should it be the case that there is a problem that causes the new owner to lose his interest in the property, then the title insurance would provide monies to the grantee to reimburse the fair market value of the property not properly transferred.