22.3: Real Property

Real property is land, and certain things that are attached to or associated with it. Real property includes undeveloped land, like a field, and it includes buildings, such as houses, and office buildings. Real property also includes things associated with the land, like subsurface rights (rights to minerals and things found beneath the surface).

Methods of Acquisition

Real property may be acquired by purchase, inheritance, gift, or through adverse possession. Ownership rights are transferred by title. Ownership of real property means that the owner has the right to possess the property, as well as the right to exclude others, within the boundaries of the law. If someone substantially interferes with the use and enjoyment of real property, the owner may bring a nuisance claim. Similarly, the owner may bring a trespass claim against those who enter the land without consent or permission.

Purchase

Land owners may convey or sell part or all of their land interests. Different types of deeds convey different types of interests. A quitclaim deed, for instance, conveys whatever interests in title that the grantor has in the property to the party to whom the quitclaim is given. That means if the grantor has no interests in the real property, a conveyance by quitclaim will not grant any interests in the property. By comparison, a warranty deed conveys title and the seller gives a warranty against defects in title as well as encumbrances. Buyers typically demand a warranty deed when they purchase property because the seller assumes the risk of the title not being clear.

After title is transferred by the deed, the deed is recorded in the county where the property is located. Recording a deed is important because it places others on notice about who owns the property. States have different rules about who is considered the legitimate owner when a conflict in ownership claim exists. A bona fide purchaser is a purchaser who takes title in good faith, with no knowledge of competing claims to title. Many states recognize a bona fide purchaser’s rights to ownership over those who did not properly record a deed.

Inheritance

Another common way in which real property may be obtained is through inheritance. Real property may be bequeathed through a will or may be transferred by state law when someone dies without a will. Generally speaking, people have the right to dispose of their property as they wish when they die, providing that their will or other transfer instrument meets their state’s requirements for validity. If someone dies without living relatives, the government becomes the owner of the property.

Gift

Real property may also be acquired through a gift. A gift is valid when:

1. The person giving property intends to make the gift;
2. The person delivers the deed to the recipient; and
3. The recipient accepts the gift.

If one of these elements is not met, then title will not be conveyed.

Figure 22.2 Comparison of Contract and Gift

Adverse Possession

A less common way to acquire real property is through the doctrine of adverse possession. Adverse possession is when someone who is not the owner of real property has claimed the real property for his own. This is referred to as “squatter’s rights.” If land sits idle at the owner’s hands but someone else puts it to use, then the law may favor the user’s claim to the land over that of the actual owner. Adverse possession claims often occur around property lines, where one party has routinely used another’s property because a fence has been misplaced.

Figure 22.3 Adverse Possession Cartoon

Interests and Scope

Owning real property carries many responsibilities, as well as the potential for great profit and great liability. It is important to learn how to protect against potential liability of property ownership. For instance, if a toxic waste site is discovered on real property, the owner may be liable for its cleanup, even if he or she did not realize that such a site was there when purchasing the land. Each buyer of real property has a duty to exercise due diligence when purchasing land. A purchaser should never agree to buy land “sight unseen” or without a professional inspector.

It is important to know the duties of landowners, how to limit liability associated with the ownership of land, and when severance of liability occurs.

Duties of Landowners

Landowners owe different duties to different types of people who enter their land. These responsibilities vary, depending on whether the person is a trespasser, a licensee, or an invitee.

A trespasser is a person who intentionally enters the land of another without permission. A landowner has a duty to not intentionally injure a trespasser. For instance, booby traps and pitfalls are illegal. Trespassers injured from such traps have valid claims against the landowner. However, if trespassers are injured from unknown or unforeseeable dangers, the owner is not usually liable.

A licensee is someone who has permission to be on the land. Landowners have a higher duty of care to such a person. Licensees include delivery people, meter readers, and utility workers. A landowner must not intentionally injure a licensee and must warn the licensee of known defects. For example, if a landowner knows that the steps to his or her porch are icy, he or she has a duty to warn a licensee that those steps are icy. Failure to do so may result in liability for the landowner.

An invitee is someone who has entered real property by invitation. Businesses and public places that want members of the community to visit have issued invitations to the public. Landowners must inspect their property for defects, correct those defects when found, and warn invitees about such defects. For example, a grocery store must clean up spills as quickly as possible and put up a “caution” sign in that area.

Ownership Interests in Real Property

Different types of interests may be owned in real property. For example, real property may be owned without restriction, subject only to local, state, and federal laws. Sometimes ownership interests may be narrower, subject to conditions, the violation of which can lead to loss of those ownership interests.

The most complete ownership interest recognized by law is called fee simple absolute. This ownership allows the owner complete control over the land and lasts until the owner dies or conveys the property to someone else. Generally, if someone wants to buy real property, he or she is looking to buy property in fee simple absolute.

Compare that with a defeasible fee. A fee simple defeasible is subject to a condition of ownership or to some future event. For instance, if an owner donates land to a city “so long as it is used as a public greenway,” then the land would be owned in defeasible fee by the city as long as it maintains it as a public greenway. Once the condition is violated, the land would revert back to either the original owner or whoever owned the reversion interest, which is a future interest in real property.

Another ownership interest is a life estate. This interest is measured by the life of the owner. For example, a person could grant ownership rights in real property to a parent for the length of his or her life, but then the property would be returned upon the parent’s death. A common investment, known as a reverse mortgage, employs the concept of life estate. A reverse mortgage is an arrangement where the purchaser of real property agrees to allow the seller of the property to retain possession of the property for a specified period of time (such as the remainder of his or her life) in exchange for the ability to purchase the property at today’s price. These arrangements essentially gamble on life expectancies of the sellers of real property by granting life estates to them in the property.

Property can be owned by more than one owner. Several types of co-ownership interests are recognized in law. These ownership interests are important for matters of possession, right to transfer, right to profits from the land, and liability. For example, tenancy in common describes an ownership interest in which all owners have an equal right to possess the whole property. Compare this to joint tenancy, in which the surviving owner has the right of survivorship. If one of the owners dies, his or her property interests automatically transfers to the remaining owner(s).

These different interests are created by specific wording in the instrument of conveyance. An owner in tenancy in common may sell or transfer his or her rights without seeking permission from the other owners. This is because owners in a tenancy in common have the unilateral right to transfer their interests in property. Conversely, to transfer one’s interests in a joint tenancy, the consent and approval of the other owners is required.

Scope of Interests in Real Property

Scope of ownership determines what can (or cannot) be done with the land. The surface of the land and the buildings that are attached to the land are what most people think of about ownership of real property. However, land interests also include subsurface or mineral rights, and right to light or to a view. Moreover, water rights are granted differently, depending on whether the property is in the western or the eastern United States. Additionally, easements (the right to cross or otherwise use someone’s land for a specified purpose) and covenants (guides or restraints on how one may build on their land) grant certain rights to non-possessors of land.

Subsurface Rights

Subsurface or mineral rights are rights to the substances beneath the actual surface of the land. Purchasing mineral rights allows the owner to extract and sell whatever exists under the surface of the land, such as oil, natural gas, and gold.

Water Rights

Water rights are determined in two different ways in the United States. Generally speaking, states east of the Mississippi River follow a riparian water rights doctrine, which means that those who live next to the water have a right to use the water. The water is shared among the riparian owners. However, most western states use the prior appropriation doctrine, which grants rights to those who used those rights “first in time.” Under this concept, the use must be beneficial, but the owner of the right need not be an adjacent landowner. This policy has resulted in claims by “downstream” users having priority over landowners where water runs through the land. For example, casinos in Las Vegas, Nevada may have priority of water rights over ranchers in Colorado where a tributary runs through the ranch. Prior appropriation is a “use it or lose it” doctrine.

Easements and Covenants

Easements and covenants are nonpossessory interests in real property. An easement can be express or implied and it gives people the right to use another’s land for a particular purpose. For example, a common easement is for utility companies to enter private property to maintain poles and power lines. Other examples include sidewalks and a landlocked property having an easement across another piece of property for the purpose of a driveway or walkway.

A covenant is a voluntary restriction on the use of land. Common covenants are homeowners associations’ rules, which restrict the rights of the owners to use their land in certain ways, often for aesthetic purposes. For instance, such covenants might require houses subject to the covenant to be painted only in certain approved colors, or they might contain prohibitions against building swimming pools.

Some covenants and easements “run with the land,” which means that the restrictions will apply to subsequent owners of the property. Whether a covenant or easement runs with the land depends on the type of interest granted.

Landlord-Tenant Relationships

A leasehold interest also may be created in real property. A tenant has the right to exclusive possession of the real property and the duty to follow the rules of occupancy set out by the landlord. The landlord has the right to be paid rent and the duty to ensure that the premises are habitable. If one party does not perform under the lease as required, the other party may seek a legal remedy for breach of contract. Most state laws also impose duties on landlords to maintain safe and habitable conditions on the property. Tenants also have a duty to use the premises properly and not to damage the property beyond normal wear and tear.

Different types of tenancies may be created:

Type of Tenancy	Description
Tenancy for years	Lease lasts for a specified period of time; Called tenancy for years regardless of how long the tenancy is for; Once the time expires, so does the tenancy
Periodic tenancy	Lease states when rent is due but does not have a set duration; E.g. a month-to-month lease
Tenancy at will	Lease may be terminated at any time by landlord or tenant; Tenancy often created through actions of parties rather than written lease
Tenancy at Sufferance	Tenant remains on the property after the right of possession has ended and without the landlord’s consent; Law views tenant as trespasser who is responsible for paying rent during holdover period; Most states require landlord to evict tenant through formal eviction or unlawful detainer proceedings

Tenancies may be created for residential or commercial purposes. Commercial leases typically last for longer periods of time than residential leases. Many of the same responsibilities and duties exist with commercial leases, but there are some important differences. For example, a commercial tenant may demand that the landlord refuse to rent to a competitor of the tenant within the same building.

Lease interests are assignable unless those rights are expressly restricted by agreement. This means that the rights conveyed by the lease may be transferred to another party by assignment, unless expressly prohibited by the lease. Common restrictions on assignment in residential leases is a no-subletting clause. Just as the owner of real property may sell any or all of his or her interests, any ownership interest in real property may also be leased. For example, someone who owns the subsurface rights of land may lease the right to drill for oil or gas to another.