Law of Property

This article will explain the broad areas that are covered by the law of property. The overview provides an introduction to the concepts and principles of law that govern estates in land, land conveyancing and security interests in real property. In addition, factors that affect the use of land are discussed including nuisance regulations, zoning regulations and the government's exercise of its eminent domain and regulatory takings powers. To help illustrate how the law of property applies to many common real estate transactions, a discussion of landlord-tenant relationships, the use and exploitation of natural resources and instances in which one person may gain rights in another's land is included. The following sections will explain these concepts in more detail.

Keywords Adverse Possession; Covenant; Easement; Estates in Land; Fixture; Gift; Lien; Mortgage; Personal Property; Real Property

Law > Law of Property

Overview

The law of property can be divided into two distinctive fields — real property and personal property. Real property is immovable, but personal property is movable. Thus, the law of real property governs laws regarding land and anything affixed to it as well as ownership and security interests in real estate whereas the law of personal property includes anything that is not real property, such as clothing, automobiles, financial instruments or other personal assets. However, while real property and personal property are generally distinctive areas, there are a few areas where there is a fine line distinction between the two. For instance, crops that grow organically on the ground are considered real property while crops that are planted by humans are considered personal property.

This article primarily focuses on the law of real property. When people discuss the law of property, they are typically referring to the law of real property. The laws governing real property are extensive because there are many different aspects of real property. The primary fields included in the law of real property are estates in land, conveyancing land, and security interests in real estate. In addition, significant factors can affect the right to use and enjoy property, such as nuisance regulations, zoning regulations and the right of the government to exercise its eminent domain or regulatory takings power. Also, the law of property plays an important role in many common matters involving real estate transactions, such as establishing and regulating landlord-tenant relationships and the use and exploitation of natural resources. Finally, property law also governs the areas of adverse possession and easements, which come into play when one person gains rights in land that belongs to another person. These major areas of the law of property will be discussed in more detail below.

Estates in Land

The law of real property is an area of law that has been greatly colored and shaped by both culture and the concept of land ownership over the centuries of history. Some cultures, such as the Anglo-Saxons of Great Britain or Native Americans that migrated and settled throughout North America, have viewed real property largely as communal property. In these cultures, members built communal structures where the entire community gathered to eat, celebrate, govern or take shelter from the environment or raiding armies. While individual families may have constructed temporary forms of individual housing, these cultures were often nomadic and thus they viewed their relationship to the land as fluid and a function of necessity. They worked and ate from the land where they lived and when necessity dictated that they relocate, they moved to a new area and settled on land that was conducive to their needs. Other non-nomadic cultures took a different view of land ownership and developed the concept of individual rights in plots of land. Still other cultures viewed the land as belonging to a king, ruler or patriarch of a region or to the aristocratic class that possessed sufficient wealth to own and maintain large plots of land.

In addition to these various concepts of land ownership, the law of property that took shape in the United States was also greatly influenced by the feudal institutions of England and Europe. Although feudalism took many forms, particularly during the Middle Ages, its basic structure included a lord, who was an aristocrat or a noble entitled to land ownership; vassals, whom the lord charged with managing sections of the land; and peasants, who actually worked the land. As this system became increasingly complicated and social classes became less stratified, the structure of feudalism faded into the system of estates in land that now govern ownership interests in real property in the United States. The following section provides a more in-depth explanation of the concept of estates in land.

Common Forms of Estates in Land

Under the system of feudalism, one person could be entitled to manage land as if he owned the land, although the property was actually owned by another individual. This concept separated land ownership from land possession. Over the years, various estates in land developed that defined the various rights to ownership and possession of land that were commonly used. Today, the basic form of interest in real property that gives the holder the right to both own and possess the land is known as a present possessory estate. For instance, a fee simple, which is how property is commonly held today and represents absolute ownership in property, is a form of a present possessory estate. However, another form of a present possessory estate is a life estate, which entitles the holder to present possession of land for the life of one or more persons, although the land reverts to the ownership and possession of another at the end of the person's life by whom the life estate is defined. For instance, Landowner A could convey property to Individual B for her life, with the estate reverting back to Landowner A upon Individual B's death.

In addition to a present possessory estate, another type of estate in land is a future interest. A future interest entitles its holder to the right or possibility of possession of an estate in land in the future. For instance, Landowner A may convey property to Individual B on the condition that the land not be used for specified purposes, and if the land is so used, its ownership will revert to Individual C. Thus, while a future interest is a legally protected right in property, there is no guarantee that the estate will become possessory because the land will not convert to Individual C unless Individual B violates the conditions of the conveyance set by Landowner A. While there are other types of estates in land, present possessory estates and future interests are the most common forms of land ownership and possession.

Ownership of Estates in Land

Estates in land may be held individually or concurrently by several people. If an estate is held concurrently, all of the owners have the right to use and possess the land. For instance, one common form of a concurrent estate is a joint tenancy. “When two or more people own property as joint tenants and one owner dies, the other owners automatically gain ownership of the deceased owner’s share. For example, if a brother and sister own a house as joint tenants and the brother dies, the sister automatically becomes full owner” (“Joint tenancy,” 2007). This form of land ownership is often used because of its automatic right of survivorship. No will is required to transfer the property because ownership automatically vests in the surviving joint tenant and this feature eliminates the time and expense of probate. Another type of concurrent estate is known as tenancy by the entirety. This estate generally arises presumptively in any property that is conveyed to a husband and wife. Under a tenancy by the entirety, the husband and wife each have an undivided interest in the entire estate and a right of survivorship in the property. Thus, “both spouses have the right to enjoy the entire property, and when one spouse dies, the surviving spouse gets title to the property” (“Tenancy by entirety,” 2007).

Conveyancing Land

Conveyancing is the name given to the process of transferring ownership of land from one person to another. There are three stages involved in the process of land conveyance. The first stage includes the time after an agreement in principle is reached between a buyer and a seller, but before the seller and buyer are bound by contract to proceed with the transaction. This may involve settling certain questions about condition of the property or financing terms. The second stage occurs after the contract has been signed but before the transaction has closed and property ownership actually transfers. Issues involving the condition of the property, repairs and financing also arise during this stage. Once the transaction has closed, the third stage involves the registration and completion of any documents that have been prepared relating to the transfer of ownership and recording these documents with the appropriate state or county office.

While these basic stages describe the process of the transfer of land ownership, there are a number of important points in this process during which disputes and legal questions commonly arise. The following sections will describe these issues in more detail.

Land Sale Contracts

Most transfers of land must be preceded by a contract of sale. The contract must generally be in writing, contain the signatures of the parties and set out the essential terms of the transaction including the names of the parties, an identifiable description of the property and the price of the property. In most jurisdictions, once the contract is signed, the doctrine of equitable conversion arises, which holds that purchaser of real property becomes the equitable owner of title to the property and is bound to complete the purchase of the land at the closing. The seller retains legal title of the property until the closing, but the seller's interest in the property is considered personal property. Thus, the seller is entitled only to the payment of money for the property rather than a right to possess the property.

This doctrine is important in terms of determining who bears the risk of loss of property after the contract is signed but before ownership of the property has transferred. Under the doctrine of equitable conversion, the risk of loss is transferred from the seller to the buyer when the contract is signed. This means that after the contract is signed, the buyer is locked into the agreed upon price even if the property is damaged or destroyed. Most buyers purchase insurance to protect their interest in the property and to mitigate their risk of loss. Also, buyers and sellers can determine their own terms by stipulating in the contract who will bear the risk of loss in the event the property suffers damage.

Marketable Title

Every land sale contract contains an implied warranty that the seller of the property will provide marketable title to the property at closing. Marketable title means that the buyer may take the title of the property with reasonable assurance that there are no issues or defects in the chain of title that will present an unreasonable risk of litigation after closing. The implied warranty of marketable title protects buyers from "purchasing a lawsuit."

Some of the defects that could prevent a seller from obtaining marketable title include encumbrances on the chain of title such as mortgages, liens or unpaid taxes on the property. Also, if a property has some condition that has caused an existing violation of a zoning ordinance, this would also render the title unmarketable. However, the mere presence of a zoning restriction that governs or includes the property would not make title unmarketable without an actual violation of the zoning ordinance.

Even if there is a defect in the title that renders it unmarketable at the time the contract is signed, the buyer and seller may still move forward with their agreement to complete their transaction on the specified closing date. This is because sellers typically have until the date of closing to cure any title defects. Thus, if two weeks before the scheduled closing, a buyer discovers a zoning violation on the property or learns that the seller has obtained a second mortgage on the property, the buyer may not rescind the contract at that time. The seller has until the day of closing to resolve any issues that may cloud the marketability of the title. In addition, the seller may use the proceeds of the sale of the property to clear any mortgages that remain on the property. However, if the seller does not provide marketable title at closing or the seller knows the title is not marketable, the remedies to the buyer at that time include recission of the contract, monetary damages or the right to bring a lawsuit to quiet title or resolve any questions of ownership in the property. If, prior to closing, the seller is unaware that the title is unmarketable but the buyer learns of a defect in the title, the buyer must notify the seller that the title is unmarketable and give the seller a reasonable amount of time to cure the defect.

Deeds

Once the closing occurs, the land sale contract merges with the deed, which essentially extinguishes the contract along with its implied warranty of marketability. Thus, after the closing, the buyer must look to the deed for any covenants that expressly warrant defects in the title. The deed is the document that actually transfers title to an interest in real property. To be effective, a deed must comply with certain formalities. For instance, it must be in writing, signed by the seller or grantor of the property and should identify the property and the parties to the transaction. The description of the property does not have to be as precise as the property description in a land sale contract, but it should not leave any doubt as to the property to be conveyed. A deed that is forged or obtained by deceit will be considered void and the deed will be set aside by the court, even if a buyer has already purchased the property. However, if a deed was executed by a minor or obtained by certain types of fraud, the deed will be considered voidable and a court will set it aside only if the property has not been purchased by a party who was unaware of the defects in the deed.

Today, there are three basic types of deeds that are used to convey most property interests-general warranty, special warranty and quitclaim deeds. These types of deeds differ in the extent to which they protect buyers by charging the seller of the property with certain responsibilities regarding the condition and habitability of the property. The general warranty deed generally contains a series of covenants that provide the buyer with certain assurances regarding the property. These covenants include the covenant of seisin, which ensures that the property is the grantor's to convey; the covenant of right to convey, stating that the grantor has the authority to transfer the property; and the covenant against encumbrances, which provides that there is no encumbrance or defect in the title. These three covenants can only be breached at the time of the closing. In addition, general warranty deeds also commonly include a covenant for quiet enjoyment, which provides that no third party has a lawful claim to the title, and a covenant of warranty, wherein the seller agrees to defend the buyer against a third party's claim to any interest in the property. If included in the general warranty deed, the covenant for further assurances provides that the grantor will take the steps necessary to perfect title to the property. The covenants of quiet enjoyment, warranty and further assurances can only be breached if the grantor's possession of the property is violated.

The special warranty deed is a special type of deed in which the grantor or guarantees the title against defects only arising during the period of his or her ownership of the property and not against defects that existed before that time. A quitclaim deed releases the grantor from any interest that he or she held in the property and provides the grantee no warranties or protections regarding the title or condition of the property. The parties to a contract may decide what type of deed they will use to transfer ownership in the property. However, buyers in particular must pay close attention to the type of deed that will be used and any protections it may or may not offer. Any covenants, or lack thereof, that are included in a deed are typically reflected in the price of the property in that the more assurances a grantor makes, the higher the sales price.

Recording Acts

After the closing and the actual transfer of property occurs, every state has enacted legislation that requires the purchaser to file a record of the transaction, generally with the County Recorder or Recorder of Deeds, to provide constructive notice of the change in ownership or interest of a particular property. These statutes are known as recording acts. Recording acts generally require that all deeds, mortgages and certain types of leases be recorded. Recording acts help maintain an official record of the chain of title of ownership so that any person may research the chain of title to any piece of property to determine the extent of the interests and ownership in that property. This protects a subsequent bone fide purchaser, or a person who pays value for property and who has no notice of any prior ownership interests in it, from purchasing land only to learn later that a third party still maintains an ownership interest in the property.

There are three common types of recording acts that provide different types of protections for bona fide subsequent purchasers of property. However, the burden is on the party filing under the recording act to ensure that the transaction is covered by the statute and that the proper documents are timely filed. The recording acts are typically known as race, race-notice, and notice statutes. Under a pure race statute, the person who records first wins, even if the recorder had notice of a prior unrecorded conveyance. This means that if Landowner A conveys land to Individual B, and two weeks later conveys the same property to Individual C, Individual C will take title to the property if she records before Individual B, even if she knew that Landowner A had previously conveyed the property to Individual B. A race-notice type of act operates in the same way as the race statute, but only if the first recorder had no notice of any prior unrecorded conveyance.

Under a notice type of recording act, a subsequent bona fide purchaser would win over a prior purchaser who failed to record so long as the second purchaser had no knowledge of the prior conveyance at the time the purchase was made. For instance, if the first purchaser failed to record his or her deed at the time the second purchase is made and the second purchaser files her deed after the conveyance, she would win in a dispute over the ownership of the property.

Security Interests in Real Estate

There are several different types of security interests in real estate. A security interest gives a creditor the right to take all or part of a property that has been offered as security if the purchaser defaults on a loan. Thus, when a customer seeks to borrow funds from a bank or credit union to purchase a home, the customer agrees to make regular payments of principal and interest and gives the bank or credit union a mortgage until the loan is paid in full. Thus, if the purchaser defaults on the loan, the creditor has the right to initiate foreclosure proceedings in an attempt to recoup the balance of the outstanding debt. The mortgage lien is the bank's or credit union's security interest and it is recorded in the title documents in public land records according to the state's recording act. Once the mortgage is paid in full, the lien is removed and title remains in the homeowner. The most common types of security interests in real estate are mortgages, deeds of trust, installment land contracts and sale-leasebacks. These security interests will be explained in more detail below.

Mortgages

A mortgage is a legal document that a purchaser gives to a lender that provides the lender with an interest in the property to secure the repayment of the debt and the mortgage is evidenced by a mortgage note. Once the debt has been repaid, a satisfaction of mortgage is recorded with the recorder of deeds in the county where the mortgage is located. Each state has enacted laws and statutes that govern property rights to land located within its borders. Mortgages must be executed according to the laws of the state in which the property is located and must fulfill certain formalities, such as describing the real estate, including the signatures of all owners of the property and containing an official seal of a notary public if necessary. The mortgage note establishes the borrower's promise to repay the debt. In addition, it describes the terms of the transaction such as the amount of the debt, the interest rate, the amount of monthly payments, the due date and any other terms, such as any prepayment penalties.

The law has developed over time in relation to the legal effect of mortgages. Years ago, under the prevailing common law, if a borrower failed to pay a mortgage debt in full or make timely monthly payments, the lender could foreclose on the property, leaving the borrower with a complete loss of title regardless of how long payments had been made up to that point. However, courts eventually began to seek a more equitable remedy for debtors who have made payments on a property but run into financial hardship. One such equitable remedy allows such debtors to regain title under certain circumstances after a default by paying the remainder of the debt in full plus interest and other costs. Today, almost all states have enacted statutes that regulate the mortgage lending industry and many of these statutes allow debtors to redeem the property within a specified period of time after they have fallen behind on payments.

However, if the borrower defaults on the mortgage note and is unable to meet any redemption options, lenders have the right to foreclose on the property. Because foreclosure can result in financial losses for both the lender and the borrower, lenders are often willing to work with debtors to help create payment options during periods of financial hardship. In spite of this, if a lender does move forward with foreclosure proceedings, the real estate is generally sold, often by a county official, at a public foreclosure sale. When the real estate is sold at a foreclosure sale, the lender is most commonly the purchaser of the property. If the bid at the foreclosure sale is less than the debtor still owes on the property, the lender may be granted a deficiency judgment for the balance of the debt, even if the bid represents the property's fair market value. Thus, a deficiency judgment permits a lender with the right to seize any other assets or income a debtor may own to collect the balance of the outstanding debt. This process has often been criticized by consumer rights organizations.

Another option, which arose as an alternative to foreclosure during the real estate downturn of the early twentieth-first century, is the short sale. As real estate values declined sharply, many homeowners found their mortgages "upside down," that is, they owed more than the home was worth. Mortgage defaults became so common that banks began offering alternatives to foreclosure, including allowing the property to be sold "short," or below the amount owed. This solution circumvented the lengthy foreclosure process while preventing the property from falling into an abandoned condition (Sheridan, 2011).

Deeds of Trust

A deed of trust is another type of security interest in real estate that involves three parties—the debtor, the lender and the trustee. The way a deed of trust operates is that the debtor gives a deed of trust to a trustee; a third party who holds the title in trust until the lien is paid in full. If the debtor defaults, the lender instructs the trustee to foreclose the deed of trust and sell the property in a foreclosure sale. The trustee may be a third party that is associated with the lender or, in some instances, a neutral third party. Depending upon the state, either attorneys or insurance companies provide trustee service. The deed of trust is recorded in public records and is cancelled when the debt is paid.

The country is equally divided into states that utilize mortgages and those that utilize deeds of trust as security instruments. Mortgages and deeds of trust are similar and essentially serve the same purpose. However, there are a few important differences between these two forms of security interests, primarily relating to the foreclosure process in the event of a default. With a mortgage, if a borrower fails to make monthly payments or meet other conditions of the loan, “the lender must typically bring a court action in order to foreclose on the property. With a deed of trust, if the homeowner does not pay the loan, the foreclosure process is usually much faster and less complicated than the formal court foreclosure process” because the trustee has the power to sell the house if the borrower defaults on the loan (“Deeds of trust?,” 2007). The lender simply gives the trustee proof of the delinquency and asks the trustee to initiate foreclosure proceedings. The trustee must proceed with the foreclosure according to the state’s laws, but the process bypasses the court system, which makes the foreclosure process considerably faster and less expensive for lenders.

Installment Land Contracts

“An installment land contract is an agreement between a buyer and seller whereby the seller finances the sale price of the property on an installment method and retains legal title until the obligation is paid in full” (“Installment land contracts,” 2007). Thus, the installment purchaser obtains legal title only after the entire contract price has been fully paid. Installment land contracts are less common than mortgages or deeds of trust, but are sometimes used in place of those other security interests.

When an installment land contract is used, the parties agree to the terms of the contract but do not actually transfer a deed or title to the property as in a closing. Instead, the installment land contract enables the buyer to use, possess and enjoy the property so long as he or she makes timely payments. The installment land contract is recorded according to the state's recording act immediately after execution of the agreement, but the deed is not recorded and title does not pass until the balance is fully or substantially paid.

Installment land contracts are most often used in slow markets, during periods of higher interest rates or when a borrower is unable to qualify for more conventional forms of financing. The installment loan contract is attractive for buyers in that they are able to obtain property without having to qualify for a loan or pay closing costs and these contracts often require a lower down payment than a typical mortgage requirement. Sellers, too, often find installment loan contracts a solid option because sellers are permitted to hold legal title and the deed to the property while the buyer is making payments. However, sellers must continue to use caution because even though they hold legal title and have the ability to foreclose on a property if the buyer defaults, the process of foreclosure and the legal fees that may be involved could be expensive and time consuming. Thus, installment land contracts are still used with caution.

Sale-Leasebacks

In a sale-leaseback transaction, a property owner sells its property to a buyer for cash and then leases the property back from the buyer over an extended period of time. Businesses have increasingly begun to use sale-leaseback financing options for their commercial property because the sale of the property allows the company to gain a significant influx of equity, which the company can use for other purposes or invest back into the business while taking advantage of the tax write offs that are permissible with leased property. The tax consequences of a sale-leaseback differ from conventional loans in that businesses may generally write off the full payment of a lease obligation but only the interest payment on a conventional loan. Because real estate sale leaseback transactions have become an increasingly popular form of financing, some companies have begun to offer sale and leaseback transactions for equipment as well (Sabatini, 2013).

Community Land Trusts

Community land trusts (CLTs) are nonprofit landowners who lease properties for use as farms or homes. Lessees may build (and own) the structures on the land, but the landowner is responsible for paying taxes on the land. The concept was developed in the 1970's as a way of assisting young farmers who could not otherwise afford the necessary land. It was later used in urban settings to make housing more affordable and protect tenants from rising real estate values. The unintended consequences of underfunded public services in areas with many CLTs results where nonprofits enjoy tax exempt status (Bagdol, 2013).

Factors Affecting the Use of Land

Even though a property owner may have paid for her land in full and own title to the property outright, she does not necessarily have unmitigated rights to use and enjoy the land however she sees fit. As our society becomes more populous and the sprawl of urban areas begins to extend into once rural regions, land use is increasingly being regulated by multiple layers of governance. The federal government has certain powers pertaining to regulating land use. In addition, state, county and even local agencies and governing bodies may enact regulations that restrict how landowners may use their property. The following sections will explain some of the significant factors that affect the use of land.

Nuisance Regulations

A nuisance is an unreasonable interference with another person's use and enjoyment of his or her property. There are two types of nuisance: private or public. A private nuisance occurs when there is an interference with another's private property rights. A public nuisance is an interference with the general public's rights. For instance, if odors from a manufacturing plant are offensive to a nearby neighbor, the nuisance is considered private because only the individual property owner is harmed. However, if the odors affected schoolchildren, neighborhoods and business in the vicinity, the nuisance is public because it interferes with health, safety or comfort of the general public.

Because the activities that may or may not constitute a nuisance are relative or impossible to define in advance, courts must weigh each instance in which nuisance is alleged on a case-by-case basis to determine whether a nuisance has actually occurred. In reaching a decision, courts use a balancing test to weigh various competing factors that affect both parties such as the extent of the harm, the nature of the harm, the social utility of the activity, the suitability of the activity relative to the character of the locale and the burden of halting the activity.

When property owners allege nuisance in a lawsuit, they almost always seek injunctive relief, which is a request that the nuisance activity be stopped or mitigated. Further, property owners may seek monetary damages to compensate for any bodily harm or loss of property value as a result of the nuisance activity. In order for the courts to award complaining property owners with injunctive relief, the interference with their property must be substantial and ongoing. This is because if the alleged nuisance stems from a business operation, injunctive relief may require that the company halt its entire business operations. Thus, in constructing a suitable form relief, courts will attempt to balance the relative hardships to both of the parties involved in the action and craft a decision that attempts to minimize the economic impact on parties on both sides of the dispute.

Zoning Regulations

Under a state's police power, each state is permitted to enact statutes to reasonably control the use of land in ways that are designed to protect the health, safety, morals and welfare of its citizens. However, the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the U.S. Constitution provide individuals with federal rights and protections that limit the actions that states can take. Cities and counties can exercise zoning power only if a state enabling act authorizes such actions.

Zoning provides state and local government bodies with the ability to control the physical development of land and to limit the uses of land within their jurisdiction. Zoning laws typically classify areas according to their predominate use, such as residential, industrial, recreational or commercial areas. Once an area has been zoned for a particular use, activities that do not conform to the prescribed use of the area may be restricted or highly limited. Besides restricting the uses that can be made of land and buildings, zoning laws may also limit the dimensional requirements for lots and for buildings on property located within specified areas and regulate the extraction of natural resources from land within the zoned areas.

While zoning ordinances may be enacted to regulate certain land uses and business activities, zoning boards may permit certain exceptions to the zoning regulations. For instance, a nonconforming use is a use of land that violates the current zoning ordinances, but that existed at the time the zoning act was passed. A nonconforming use may be grandfathered into the zoning requirements so that it becomes a legal violation of the current zoning ordinances or a certain amount of time may be allotted for the nonconforming use to be corrected. Another exception to zoning ordinances is a variance, which is a departure from zoning requirements that is permitted by the zoning board for a particular purpose. For instance, a homeowner who wants to make a change to his home that is not permitted under current zoning requirements may request that the zoning board grant him a variance so that he may lawfully make the desired changes to his home.

Eminent Domain & Regulatory Takings

Eminent domain refers to the power of a state to appropriate property for a public use. While a state may exercise its eminent domain power for the benefit of the public, the Fifth Amendment to the U.S. Constitution requires that private property may not be taken for public use without just compensation being paid to the property owner. Just compensation has generally been defined to mean the fair market value of the property at the time that the property was appropriated. Although only the state has eminent domain powers, it may occasionally delegate these powers to certain public and private companies, such as utilities providers, so that these companies can use eminent domain powers to run telephone, electric, water or gas lines over private property. The process of taking land under eminent domain powers is known as a condemnation proceeding.

Another way that the government can affect the use of land is when it passes regulations that limit or erode the value of private property. When the government so regulates property that it no longer has any economic value, such regulatory actions constitute a regulatory taking and the owner is entitled to just compensation. If a regulation leaves property with only limited economic value, a court uses a balancing test to determine whether a taking has occurred by weighing such factors as the social objectives of the regulation, the diminution in value of the property and the property owner's reasonable expectations for use of the property.

Applications

Law of Property in Common Real Estate Transactions

Most people have exposure to the law of property at several points in their lives. Many people rent apartments and forge a landlord-tenant relationship. Others buy homes or purchase land to develop for a range of purposes. When a person buys land, he or she has the responsibility to stay abreast of the condition of their property and to take action to correct any improper uses of their property. If a property owner fails to do so over an extended period of time, he or she may lose rights to complete use and possession of the property as third parties may develop rights to the land. The following sections will explain these common real estate transactions in more detail.

Landlord-Tenant Relationships

Landlord-tenant law governs the rental of commercial and residential property. Landlord-tenant law is regulated by state statutes, common law and the terms of an individual lease. Landlord-tenant relationships are created when a person leases property from the property owner. The leasehold is actually an estate in land that gives the lessee, known as the tenant, a present possessory interest in the premises with the property owner, known as the landlord, retaining a future interest in the property at the end of the lease. The tenancy may be for a set period of time such as for one year, for an indefinite period of time as in a month-to-month lease, for a terminable period that ends at any time by either party, or until a landlord takes steps to evict a tenant who has remained in possession of the premises after the expiration of the lease.

The landlord-tenant agreement, which is embodied in a lease, may eliminate or limit these rights. However, a fundamental component of any lease is the implied covenant of quiet enjoyment. This covenant ensures the tenant that her possession of the property will not be disturbed by someone with a superior legal title to the premises, including the landlord. This means that the tenant may use and enjoy the property according to the terms of the lease with no expectation that a third person may enter or use the property without her permission. The covenant of quiet enjoyment may be breached by an actual eviction or a constructive eviction, as when the landlord causes the premises to become so uninhabitable that the tenant is force to leave the property.

A constructive eviction can occur when governing housing codes are violated by another tenant or by the condition of the property. Housing codes were established to ensure that residential rental units are habitable when they are rented and remain habitable during the tenancy. Depending on the state, housing code violations may lead to administrative action by a state agency against the landlord or to the tenant being allowed to withhold rent until the violation is cured. If a tenant breaches the terms of a lease, summary eviction statutes commonly allow a landlord to quickly evict the tenant. However, federal law prohibits discrimination in housing and the rental units.

Use & Exploitation of Natural Resources

Although natural resources are a part of the landscape, their use and value is not necessarily assumed when a buyer purchases land that contains or is adjacent to these resources. In general, an owner of real property has the exclusive right to use and possess the surface and soil of his property and the airspace above it up to a certain extent. A property owner's ability to use the water that exists on or runs through his property depends on whether it is ground water, surface water or a watercourse such as a stream, river or lake. For ground or percolated water in wells, about a dozen eastern states hold that the owner of the overlying land can take any amount of the water and use it for any purpose. About half of the remaining states follow a similar doctrine, but allow a property owner to export the water only if it does not harm the interests of other landowners with rights in the water. Most western states follow doctrines that determine ownership of the water either by ownership of overlying land or by being the first to make beneficial use of the water.

For surface waters such as rainfall and seepage, half of the states follow the theory that owners may not alter the natural flow of the water's drainage patterns while the other states hold that an owner may erect structures to channel the water away from her property. Similarly, two major doctrines divide watercourse rights. Under one doctrine, the owners of the property that border the watercourse own the water. The other doctrine holds that the order in priority of beneficial use determines rights to the water and a right can be lost if the use of the water is abandoned.

Property owners have a right to the airspace above their property, but the airspace is finite. Airplanes are able to fly in airspace regulated by the federal government, although property owners may have the right to be free of excessive noise. Also, property owners have rights to the lateral support of their property in its natural state and to the subjacent, or underground, support of their property.

Rights in the Land of Another

A property owner has the responsibility to know the extent of his property and to take steps to eliminate any threat to his possession and enjoyment of her land. Thus, if a person trespasses, a property owner may take the necessary actions to evict the trespasser. However, if the trespasser continues to cross and use the property of another beyond the time established for the statute of limitations for trespass without the property owner taking steps to evict him, the trespasser may acquire title to the property by adverse possession.

In order to satisfy all of the elements of adverse possession, the use and possession of the land must be sufficiently open and notorious so that the owner has notice of the trespass and the land use must be without the owner's permission. In addition, the trespasser must actually occupy the land for a continuous period of time throughout the statutory period. If these elements exist until the statute of limitations for trespass expires, title to the property will vest in the trespasser.

While adverse possession occurs when a trespasser acquires title to land through continuous occupation of it, there are several non-possessory interests in land that create a right for one person to use the land of another without gaining title to the property. For instance, an easement provides its holder with the right to use a tract of land belonging to someone else for a specified purpose, such as to cross land to gain access to a road or to lay utility wires. A license permits a person to enter another person's property for a specific purpose, such as when a repairman is hired to fix a broken dishwasher. Profits are written documents that grant one person the right to take certain natural resources from another person's land. Finally, real covenants are promises concerning the use of land and are either affirmative, where a person promises to do something such as pave the driveway or negative, in which a person promises to not take a certain action, as in promising not to develop land for industrial use. Real covenants run with the land at law, which means that subsequent owners may be able to enforce them or be obligated to honor them.

Conclusion

Property law is the area of law that governs the various forms of ownership and interests in real property. The law of property has been developed through the common law legal system, and the roots of its concepts date back hundreds and thousands of years. Some of the most familiar aspects of the law of real property include issues involving landlord and tenant relationships, possessing ownership of an estate in land and granting a security interest in real property through a mortgage or deed of trust. However, the law of real property also covers many other areas such as rights to natural resources, obtaining rights in the land of another or zoning and nuisance regulations. While there are some federal laws and regulations that govern the law of property, the legal and regulatory framework of the law of property is primarily composed of state laws, regulations and statutes. The law of property essentially reflects the predominant views that a culture and community have toward land, land ownership and the exploitation of natural resources. Thus, property laws continue to develop according to the needs of individuals and communities, particularly in urban environments where property ownership and use is at a premium.

Terms & Concepts

Assignment: The distribution of legal rights (such as lease time) from an individual to another individual.

Bailment: Legal situation in which property is given by someone who harbors exclusive control of it to someone else in order to ensure that the property is reasonably cared for and protected.

Binder: Serves as a summary of the contractual agreement between a buyer and a seller.

Closing: Pertaining to real estate, is the time at which the deed is given to the buyer, the title is handed over, and the costs are paid - the final interaction between a buyer and seller.

Contract: Legal agreement detailing the offer and acceptance consented to by two or more parties; often required to be in writing.

Damages: Upon determination of a wrongful act, is the monetary compensation given to the harmed.

Deed: Legal description of a property and its boundaries; final step in a sale involves the deed being exchanged for the agreed upon price.

Easement: Allows individuals access to another individual’s property; in order to run pipes or phone lines, utility companies often hold easements.

Encumbrance: Any claim or restriction on a property's title.

Estate: All the property a person owns.

Fixture: Most frequently those items which are attached to a property and are included in a sale; includes ceiling lights, awnings, window shades and doorknobs.

Foreclosure: When a borrower cannot repay a loan and the lender seeks to sell the property.

Grantor: Individual that creates a trust.

Implied Warrant of Habitability: In most states, is the law which requires landlords to ensure safe and habitable premises for tenants; essential services and cleanliness can be included.

Joint Tenancy: “When two or more people own property as joint tenants and one owner dies, the other owners automatically gain ownership of the deceased owner’s share. For example, if a brother and sister own a house as joint tenants and the brother dies, the sister automatically becomes full owner” (“Joint tenancy,” 2007).

Lien: A claim against someone’s property which ensures receipt of payment; a mortgage is an example of a lien.

Partition: Court ordered division of property; occurs in situations of joint tenancy which have been disrupted by a dispute.

Quitclaim Deed: Deed which transfers an owner’s rights to a buyer without guaranteeing that there aren’t other outside claims on the property.

Real Property: Term which refers to a piece of land and all of those things which are a part of it; houses are real property while couches and other similar furnishings are not.

Title: Ownership of property.

Bibliography

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Deed of trust? (2007). What are these other terms I keep hearing? Retrieved May 15, 2007, from http://www.napahomebuyer.com/terms.html

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Reid, K. (2003). Vassals no more: Feudalism and post-feudalism in Scotland. European Review of Private Law,11, 282-300. Retrieved May 15, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=11585817&site=ehost-live

Robertson, D. (2006). Cultural expectations of homeownership. Explaining changing legal definitions of flat 'ownership' within Britain. Housing Studies,21, 35-52. Retrieved May 15, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=19437390&site=ehost-live

Sabatini, G. (2013). Sale-leaseback — Corporate real estate as a long-term source of financing. Site Selection, 58, 190-196. Retrieved October 31, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=87813826&site=ehost-live

Sheridan, T. (2011). Short on results. Mortgage Banking, 71, 42-47. Retrieved October 31, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=61347347&site=ehost-live

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Suggested Reading

Combs, M. (2006). Cui bono? The 1870 British Married Women's Property Act, bargaining power, and the distribution of resources within marriage. Feminist Economics, 12(1/2), 51-83. Retrieved May 15, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=20338592&site=ehost-live

De la Cruz Skerrett, J. (2006). Condominiums and home owners associations. Caribbean Business, 34, 10-11. Retrieved May 15, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=23335933&site=ehost-live

Forbes, S. (1991). A note on teaching the time value of money. Financial Practice & Education, 1, 91. Retrieved April 5, 2007, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=9607240016&site=ehost-live