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Real Property

The study of real property concerns a discussion of the ownership rights and duties that are inherent in all of the various forms of property ownership. It also discusses the relationship between people who have different interests in the same property, such as people who jointly own property and landlord-tenant relationships. In addition, an important component of the study of property is a discussion of how property is transferred, including a study of real property contracts, deeds and closings. 

Property Ownership – The Estate System

Unlike Contracts and Criminal law, the law of Real Property has, to a large extent, remained constant over a very long period of time. In no area is this more evident than in the area of the Estate System. The Estate System deals with the levels and types of ownership that are possible with regard to real property. It is based on the real property ownership system that existed during feudal times, and it has not developed much, in spite of the obsolescence of some of its aspects.

The highest level of ownership a person can have in any real property is the fee simple. Ownership of a fee simple in a parcel of property means the right to own and possess that property in perpetuity (forever). However, the fee simple itself can be subjected to various conditions and/or contingencies. Therefore, a fee simple that is completely unconditional and that bestows upon its owner absolute unconditional ownership of property forever is known as a “fee simple absolute”. There are also lesser types of fee simples, which are conditional upon the occurrence or non-occurrence of an event or condition. 

A life estate is an interest in land whose duration is measured by a human life. The holder has the right to possess the property as long as he or she lives. At the death of the holder, the property reverts back to the owner.

The lesser estates are known as “leasehold” estates. The holder of a leasehold estate is known as a tenant and the holder of the remainder interest (the person who will have the right to the property when the leasehold is up) is the landlord. There are various types of leasehold estates, such as the term of years (a leasehold that has a fixed duration), a periodic tenancy (a leasehold whose duration is not set, but that is renewed periodically) and a tenancy-at-will, which can be terminated by either party at his or her will.

Landlord-Tenant Law

Landlords and tenants owe a host of duties to each other.

Some examples of duties that a landlord owes to the tenant are:

Delivery of Possession
The landlord’s duty to deliver possession of the property to the tenant is, of course, the essence of any leasehold, because the leasehold itself is nothing more than possession of the property for a certain period of time. Therefore it is clear that, as a fundamental duty inherent in the leasehold, the landlord must give the tenant the legal right to possess the property.

The Duty to Allow the Tenant Quiet Enjoyment of the Property
A tenant has the right to quiet enjoyment of the property without interference by the landlord. This is called the “covenant of quiet enjoyment.” It exists in every lease. Even if the parties did not expressly agree to this term, it is an implied term inherent in any leasehold. This means that the landlord may not evict a tenant without good cause and may not make it so uncomfortable for a tenant that the tenant has no choice but to move out.

Landlord’s Duty to Provide Habitable Premises
Today, many jurisdictions infer an “implied warranty of habitability” automatically in any lease, although most jurisdictions that do infer such a covenant would limit this rule to dwellings. Thus, if in such a jurisdiction, a landlord fails to provide heating for a residential apartment in the winter, he or she will have breached this implied warranty even though the tenant could go out and buy a heater.

Duty to Repair
Many modern jurisdictions require that a landlord keep the premises in reasonable repair throughout the duration of the lease. 
Some examples of duties that a tenant owes to the landlord are:

Rent
The first and foremost duty that a tenant has is to pay rent. Traditionally, the duty to pay rent was an independent duty, meaning that the tenant was obligated to pay rent regardless of whether or not the landlord was in breach of certain covenants. Today, the duty to pay rent is dependent upon the landlord’s performing certain duties. The amount of the rent is obviously almost always set forth in the terms of the lease. If, for some reason, it is absent from the terms of the lease, a court will infer a reasonable rent under the circumstances, as determined by the fair market rental value of the property at the time.

Repair
The tenant has a duty to avoid waste to the same extent that any holder of a present interest has a duty to the holder of a future interest to avoid waste. This means that a tenant may not destroy the property, may not consciously allow the property to disintegrate into a state of complete disrepair and may not make any significant changes in the property without the landlord’s permission.

Refrain From Using the Property for Illegal Purposes
The tenant has a duty to the landlord to avoid using the property for illegal purposes. 

Honesty as to Intended Purpose
If the landlord asks, the tenant must be honest about his or her intentions for using the premises. If the tenant uses the property in a manner inconsistent with his or her original representations, then the landlord may terminate the lease.

Duty to Leave Fixtures Behind
When a tenant vacates leased premises, he or she obviously may take any personal property that the tenant brought into the premises during the lease. However, the tenant must leave behind anything that is attached to the land itself. Materials that are attached to the land itself are known as “fixtures”. There is no clear cut definition for what constitutes a fixture. Generally, something that is attached to the premises in a manner that cannot easily be removed is considered a fixture.

How Real Property is Acquired

Although real property can sometimes be acquired by simply moving on to property and staying there for a certain period of time (a doctrine known as “adverse possession”), usually, real property is acquired through a purchase and sale transaction between the buyer and seller.

A buy-sell transaction of property has two basic elements: The sales contract and the closing.

The Contract
A contract for the transfer of an interest in real estate must be in writing and must be signed by the party against whom the contract is being enforced. Otherwise, the contract is unenforceable. 

Very often, real property is sold through a broker. The general procedure runs something like this. The seller will sign a contract with a broker, giving the broker the right to list and show the property to possible buyers. If the property is sold, then the broker will collect a commission, which is usually a percentage of the purchase price, from the seller. Typically, the brokers’ commission is approximately 6% of the purchase price, although the recent trend is to lower the commission because computer technology and the internet have made it significantly easier to market homes to a large number of potential buyers.

Unless specifically agreed to otherwise, every contract for the sale of land contains an implied promise that the seller will convey “marketable” title to the buyer. Marketable title is title that is free from contention and/or doubt to the extent that a reasonable buyer would accept it. A seller who fails to convey marketable title under a contract has breached the contract. In such a case, the buyer can refuse to pay the purchase price for that land and sue the seller for whatever other damages the buyer suffered as a result of the breach.

Today, a seller generally has a duty to disclose defects in the property that are known to the seller. Many states have consumer protection laws that require sellers of real property to fill out disclosure forms. These forms often ask very specific questions about the condition of the house. If, in the form, the seller lies, there will almost certainly be adequate grounds for the buyer to avoid the contract.

Contracts for the sale of land generally may be specifically enforced. This means that a court can force the seller to actually hand over the property to the buyer if the seller later refuses to go through with the deal after the contract has been signed.

The Closing
The transfer of real property, whether it is in the form of a gift or a sale, must be accomplished by the transfer of a written instrument that represents ownership of the property. This instrument is known as a “deed”. The transfer of the deed in a buy-sell transaction is known as the “closing”. A deed must contain at least two elements:

  1. Granting Clause: The “granting clause” lists the transferor (the seller in a buy-sell transaction) and the transferee (the buyer in a buy-sell transaction) and a statement to the effect that the transferor is transferring the land to the transferee. 
  2. Description of the Property: For a deed to be effective, it must describe the property that it purports to convey. 

A deed is not effective in transferring land from the buyer to the seller until it has been delivered from the grantor (seller) to the grantee (buyer). The deed must be delivered to the grantee with the specific intent to give title over to the grantee. 

After the buyer gets the real property deed, he or she should record the deed in the property records office in the county as quickly as possible. All jurisdictions in the United States maintain a system that allows all real property transfers to be recorded in a land records office. This is done at the county level. Each county has its own land records office. In this office, all deeds or records that transfer title to any parcel of land in the county are recorded and noted in the land records section.

The main purpose of this is to allow potential buyers of real property to make sure that the purported seller really owns the property that is the subject of the potential transaction. In order to protect themselves, buyers are well advised to do a “title search” on any property before they buy that property. Today, buyers generally do not do this title search themselves. Rather, they hire legal professionals or title search companies to perform the title searches for them. In addition, most buyers purchase title insurance on property before they buy it. The way title insurance works is that, for a fee, the title insurance company will guarantee that the title obtained by the buyer is a legitimate title.

Mortgages

Many people cannot afford to pay the entire purchase price for real property at the time that they purchase it. Therefore, lenders agree to lay out the money for the purchaser to use to pay the purchase price. In exchange, the buyer agrees to pay back the loan and agrees that the purchased property itself will be collateral for the loan. If the loan is not paid back, the lender will have the right to repossess the purchased property. This is called a mortgage. The lender (almost always a bank) is called the “mortgagee.” The borrower (the buyer of the property) is called the “mortgagor.” If a mortgagee actually does repossess the mortgaged property, that is called a “foreclosure.”