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Property and Tenancy

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					Property and
  Tenancy
       Overview of Property Law
   While Property law is a separate branch of the
    law, it overlaps with contract law.
     Any agreement to sell or lease involves a contract.
     Yet, there are a lot of legal principles that are unique
      to property ownership.
   Property is classified as either Real Property or
    Personal Property
     Real Property—land and anything affixed to it, such
      as a house or a tree
     Personal Property—Everything else, including
      money and intangible property rights, such as a
      copyright or patent.
                    Hypothetical
   Owen Owns Blackacre. In his will he
    leaves Blackacre “to my wife Lee for her
    life and then to my son, Findley.”
     Can  he do this?
     After Owen dies, Lee sells the land to Simon.
          Can he? what will Simon get?
     AfterOwen dies, but while Lee is alive,
      Findley sells.
          Can he? What will Simon get.
   During her
    life, Lee
    decides to
    knock down
    the family
    mansion and
    erect this
    monstrosity.
    Types of Ownership Interests
   Types of Ownership Interests
     Fee simple—an      outright ownership in land. It means
      nobody else has a claim to ownership now or in the
      future.
     Life Estate— The right to occupy and use the land for
      one’s lifetime. Owner might leave Blackacre to wife
      for her life and then to oldest son. Wife had a life
      estate. She couldn’t be ejected during her life, but
      could not sell anything more than the right to occupy
      during her life.
     Future Interest—The right to possession of the
      property in the future. Someone who takes after a
      Life Estate would have a “future interest”
                   Joint Ownership
   Joint Tenancy
       Ownership by two or more people with the right of survivorship.
        Both own and have a right to use and sell the entire property
        during lifetime.
       When one dies, the other automatically owns the whole. The
        interest isn’t divisible. Each is an owner of the entire estate.
       One owner can’t sell their half without the consent of the other,
        which severs the joint tenancy.
       While one joint tenant has the right to sell on their own and
        purchaser gets clear title, they would have an obligation to
        account to their co-owner for the proceeds.
       Most joint bank accounts are set up this way automatically. Most
        joint owners of real property have deeds set up this way.
       Typically, this is how married couples own property.
              Joint Ownership
   Tenancy in Common
     Ownership    by two or more persons without a
      right to survivorship.
     Each owns a proportional share of the whole
      and has a right to use the whole,
     Can sell their share and leave their share to
      their heirs.
                  Hypotheticals
   Owen leaves Blackacre (an 80-acre farm) to his
    two sons Cain and Able as joint tenants.
     How  many Acres does each son get?
     Cain dies, who gets his share?
     Cain sells Blackacre to David without telling Able. Is
      the sale valid? What does David get?
   Same as above, but Owen leaves it to them as
    tenants in common.
 Owen leaves Blackacre “to my sons Cain
  and Able.” Does this create a joint
  tenancy or tenancy in common?
 Modern Rule: The law presumes a
  tenancy in common unless a joint tenancy
  is clearly intended by the words of the
  devise or deed.
               Fractional Rights
   A fee simple owner owns the land from the
    center of the earth to a reasonable space above
    the land. Also has the right to exploit all parts of
    the land.
   Can sell or lease a part of those rights.
   Common in Kansas to sell or lease the mineral
    rights. Owner has right to use and exploit the
    surface, but someone else has the right to
    exploit subsurface oil, gas or minerals.
     If alease, owner usually gets share of what comes
      out.
          Equitable Interests
            Hypothetical
 Owen wants to leave Blackacre to his
  daughter Eve, but he doesn’t think she has
  the experience or skill to manage the
  property. So, he creates trust that allows
  Eve and her heirs to use the property and
  to keep all proceeds and other income
  from the property. Adam will be the
  trustee and manage the property.
 Who owns the property?
    Equitable Ownership Interests
 In a number of different situations it is
  possible to have an interest in property
  that gives you legal rights that are not an
  “ownership” interest.
 Equitable rights of a beneficiary in a trust.
  Beneficiary is entitled to the use of the
  property with conditions and restrictions,
  but ownership is in trustee
                  Hypothetical
   A and B have adjoining property. A wants to
    build a driveway to his house, but the most
    convenient and inexpensive route requires that
    the driveway go 4 feet onto B’s property. B says
    that A can build the driveway, but refuses to sell
    the land on which the drive will go. A is afraid
    that B will sell his house and a new owner will
    rescind permission to cross the land.
   What to do?
                 Hypothetical
   A and B have adjoining property. 15 years ago A
    built a driveway to his property which
    inadvertently was 4 feet onto B’s property. B
    discovers that the drive is on his property and
    demands that it be moved. It can’t be moved
    except at great cost.
   Does A have to move the driveway?
   Does A have to pay B any money?
   What if the mistake was only 2 years ago?
 The government wants to build sidewalks.
  They tell homeowners that they are going
  to build across the front of their properties.
 Can it?
 Do they have to pay anything?
                     Easements
   An easement is the right to use (usually to cross)
    another’s land.
   Many easements are created by deed or
    contract.
   Some easements are created by law out of
    fairness. Proscriptive Easement. An
    easement created by long use without objection
    by the owner
   Some easements are created by eminent
    domain by government or by government as a
    condition of allowing property to be developed.
     Thus,  the city has an easement on the first three feet
      of property in most cities for sidewalks
     Often has an easement to run water and sewer lines.
 Paul borrows 100K from the First Bank of
  Bling. The Bank takes a mortgage on the
  house and files the mortgage with the
  registrar of Deeds.
 A year later Paul still owes 98K. He sells
  to Brenda. Brenda writes him a check for
  98K. Paul runs off to Rio with the money
  and doesn’t pay back the bank.
 What can the bank due?
             Lien or Mortgage
   A lien or mortgage secures a debt owned
    to a person by a landowner.
     Mortgage   occurs when loan was to buy the
      land;
     lien occurs where the borrower offers existing
      property as security to purchase something
      else; also a mortgage on personal property,
      such as a car, is called a lien.
   As long as the owner pays the debt, the creditor
    has no claim to the property. However, if the
    landowner defaults, the creditor can eventually
    have the property sold to satisfy the debt.
     In most    states a lien must be filed with the deed so
      that someone purchasing later will be aware of the
      lien.
     If lien is filed, purchaser must pay the lien amount to
      lien-holder and the balance to owner.
     Car titles also list lien-holders.
   Transfer of Ownership
     Deeds.   Regardless of how title is held to real
      property, title is usually manifested by a deed, which
      is a document that describes the property and lists
      the owners.
     The deed is recorded. When the deed is recorded it
      puts everyone on notice regarding ownership of the
      property, gives protection to the listed owners, and
      prevents an original owner from conveying property
      more than once.
     Deeds are the document that accomplishes a legal
      transfer of property. All states require that any land
      sale be in writing.
                                  Deeds
   Different types of deeds transfer different warranties
    about what is owned.
       The most common type of deed is a warranty deed. Such a
        deed guarantees clear title to the property. If later it is
        discovered that owner did not have clear title, purchaser can
        recover from seller.
            But, seller may not have money, hence title insurance.
       Grant Deed—Represents that the seller has not sold to anyone
        else, but does not make any promises about claims against the
        property that predate the seller.
       Quitclaim deed—Transfers whatever the seller owns. It makes
        no representations about the existence of claims against the
        property.
                 Title Companies
   While a deed does transfer owners, it should be
    recorded to put others on notice of your assertion of
    ownership interest
   When buy and sell real property, it is common to have a
    title company do a title search to ensure that there isn’t
    anyone who has a claim, whether whole or partial to the
    land.
   Typically, the seller is required to buy title insurance,
    insuring the buyer against any claim to the property.
   Title Companies
   Title Insurance
                 Mechanics of buying and selling a house

                               Step 1
   Listing the home for sale. Most people who sell their
    home list their home with a Real Estate Agent.
       In all states, real estate agents have to be licensed and take an
        exam
       Real Estate Agents work on a commission and are hired by the
        Seller. Thus, even if they are showing you the home, their duty
        is to the seller.
       Sometimes a house is listed with Agency “A” and the buyer
        contacts Agency “B” to show them homes. If the buyer buys the
        house, the two Agencies will split the commission. This is called
        an open listing, meaning that any agency can show the house.
       If you are a buyer using an agent that isn’t the listing agent, that
        agent may owe duties to both you and the buyer.
                       Hypo
   Sam has listed his house with R.E. Andrews, a
    real estate agent. Sam runs into his friend Brian
    at the store and tells him that his house is for
    sale. Brian is very interested and decides he
    wants to buy it. Before they leave the store, they
    have reached a binding contract to sell without
    any help from R.E. Andrews. Is the agent
    entitled to a commission.?
   What if Sam and Brian keep their contract secret
    and wait until the agency agreement expires to
    execute the sale?
              Mechanics of buying and selling a house

                           Step 1
   Typical commission is 5%. Sellers have to take
    that out of what they get for the house.
     Sometimes     B and S will negotiate for the B to pay the
      fee, but is really just an increase in the sell price.
     Sometimes, but not often, a RE agent will agree to
      reduce their commission to help get a house to sell.
   Agent is entitled to commission regardless of
    whether the agent played a role in the sale. If
    Buyer found Seller or Seller contacted buyer
    during the listing period, agent gets a cut.
                      Step 1
   Advantage of using a RE agent.
     They    will market the house
     It will be listed with all other agents, so any
      agent helping a buyer will know about it
     They have expertise in the law of Real Estate
      and RE valuation and will help the Seller
      through the process to avoid legal problems.
    Mechanical and Structural Defects
   Most states require a seller to disclose any known
    defects in the home that are not reasonably apparent
    from an inspection of the home.
   Some states require buyers to disclose the age of roof
    and other major structural or mechanical problems of
    which they are aware
   Thus, if the basement leaks when it rains heavily and
    you are selling in dry season, S must disclose.
   Buyers are strongly encouraged to hire a professional
    home inspector and to have a home inspected for
    termites, radon and have roof inspected.
   Often the contract will be conditioned on the home
    passing all these inspections, although typical the
    contract will give the seller the right to repair and keep
    the contract in place.
    Step 2—The Real Estate Contract
   If the B agrees to buy the house and Seller
    accepts the purchase price, they will negotiate a
    contract for sale. (Probably don’t have a
    “contract” if simply agree to price)
   Contract will list the earnest money (down
    payment that is forfeited if B reneges), purchase
    price, closing date and any contingencies that
    will allow one side or another to get out of the
    contract.
                             Step 2
                          Contingencies
   Common contingencies
       House passing all necessary inspections
       S agreeing to repair something
       B selling their existing home within X date.
            This contingency will be in place when the B hasn’t yet sold their
             own home, but doesn’t want to buy until they know they will so they
             aren’t making double payments. If the S thinks there is a strong
             market for his own home, may not agree to this one. If the S is
             having a hard time finding a B, they will be more likely to take this
             one.
       B getting approved for a mortgage. This is standard. Often B
        has been pre-approved for a mortgage, which makes them a
        better prospect for an S. But, even so, the actual loan ON THAT
        HOUSE must be approved by the mortgage co.
       House passing a title inspection
                        Step 2
   Other things in the contract besides the obvious
     Whether any   furnishings or other moveable objects
      stay with the house. (who gets the swing set?)
     That buyer paying for title insurance
     What happens to yearly expenses, such as property
      taxes, already paid
     Who pays for inspections.
   Buyers should always have a lawyer read the
    contract. The agent is working for the seller.
        Step 3—Getting a Mortgage
   Whether or not you can get a mortgage depends on
       Credit rating
       Income
       Price of the home related to income
       How much you are willing to put down. You are less likely to
        default if you have more of your own money in the home.
   The usual reason can’t get a mortgage is bad credit or
    trying to buy too much house for your income.
   Note that when a bank forecloses, they have no
    obligation to protect your equity. They simply want to
    sell for enough to get THEIR money back. Thus, often
    lose down payment and any accumulated equity.
     Step 3—Getting a Mortgage
   Types of Mortgages
     Fixed Rate    —The interest rate stays the same for the
      entire length of the load.
     Variable Rate —Interest rate starts lower than a fixed
      rate, but it can go up if interest rates set by the Fed go
      up. Riskier for buyers, but can be attractive to reduce
      price of payments initially. Often people take these
      loans out with the idea that they will re-finance to a
      fixed rate later.
     Graduated Payment —Fixed rate, but have lower
      payments initially, which then go up after a few years
      and then stay flat.
        Step 3—Getting a Mortgage
   Mortgage length
       Most mortgages are for 30 years. Other standard term is 15
        years.
       Length of Mortgage effects monthly payments and the amount
        paid over the life of a loan.
       15 year mortgage is much more expensive per month, but it
        allows you to pay much less over the life of the loan.
       Most mortgages front-load the interest. Thus, over the first 5
        years you build very little equity in a home (the amount of the
        home you actually have paid for). Last 5 years almost all is
        equity.
       Mortgage payment calculator
       http://www.mortgage-calc.com/mortgage/simple.php
               Eminent Domain
   Eminent Domain—The power of the
    government to take property of citizens for
    public use without their permission.
     Under the Constitution (5th and 14th
      Amendment) Government must pay just
      compensation
     Can only be done for a public purpose
        Build or widen road
        Build a school
        Build a park
                   Hypotheticals
   Which of the following will be a valid grounds for
    challenging eminent domain
     The  property it taken for a park. The city already has
      a lot of parks.
     The property has been in the family for 200 years and
      has great sentimental value, but the city only offers
      compensation for the value of the land.
     The city is building a road, but it could easily be built
      elsewhere through an area where the land would be
      less expensive.
     The highway being built goes through sacred Indian
      burial grounds.
                   Eminent Domain
   Court won’t second-guess the wisdom of the public
    project. Can’t challenge eminent domain to build a park
    by arguing that already enough parks. So long as the
    purpose is public, courts won’t interfere.
   Only requires compensation for a Taking
       Taking ordinarily must be direct and deprive person to title and
        use.
       can be only part of a parcel of property.
       Taking is not simply regulating through zoning
   Compensation—fair market value prior to the taking.
    What the property would have sold for on the open
    market.
       No additional compensation because of subjective value to
        owner. Ultimately is determined by the courts.
                              Zoning
   Land use and zoning involves the regulation of the use
    and development of real estate. The most common form
    of land-use regulation is zoning
   What are Zoning Regulations?
       The basic purpose and function of zoning is to divide a
        municipality into residential, commercial, and industrial districts
        (or zones), that are for the most part separate from one another,
        with the use of property within each district being reasonably
        uniform.
       Within these three main types of districts there generally will be
        additional restrictions that can be quite detailed.
       Regulations may restrict areas to single-family homes or to multi-
        family dwellings or townhouses. In areas of historic or cultural
        significance, zoning regulations may require that those features
        be preserved.
         Regulation of Development
   Land-use regulation is not restricted to controlling
    existing buildings and uses; in large part, it is designed
    to guide future development.
   Municipalities commonly follow a planning process that
    ultimately results in a comprehensive or master plan,
    and in some states the creation of an official map for a
    municipality.
   The master plan is then put into effect by ordinances
    controlling zoning, regulation of subdivision
    developments, street plans, plans for public facilities,
    and building regulations.
   Future developers must plan their subdivisions in
    accordance with the official map or plan.
   Wichita Zoning
               Limits on Zoning

   Courts have held that a zoning regulation is
    permissible if it is reasonable and not arbitrary; if
    it bears a reasonable and substantial relation to
    the public health, safety, comfort, morals, and
    general welfare; and if the means employed are
    reasonably necessary for the accomplishment of
    its purpose.
   Given the subjective nature of these factors,
    there is obviously a lot of room for disagreement,
    and on occasion litigation.
Applying for a Change of Zoning
 If the zoning on a parcel of land is
  inconsistent with the use the land owner
  desires, the owner may apply to the local
  jurisdiction for a change of zoning.
 If the owner is unsuccessful in obtaining
  the change, there may be a possibility to
  appeal the action, either within the
  administrative structure of the
  governmental body or in a court of law.
                     Variances
   A variance is a request to deviate from current
    zoning requirements. If granted, it permits the
    owner to use the land in a manner not otherwise
    permitted by the zoning ordinance. It is not a
    change in the zoning law. Instead, it is a specific
    waiver of requirements of the zoning ordinance.
   Typically, variances are granted when the
    property owner can demonstrate that existing
    zoning regulations present a practical difficulty in
    making reasonable use of the property.
Non-Conforming, Pre-existing Uses
   A nonconforming use is a permitted use of property
    which would otherwise be in violation of the current
    zoning ordinance.
   The use is permitted because the land owner was using
    the land or building for that use before the zoning
    ordinance became effective.
   Nonconforming uses are often referred to as being
    "grandfathered in" to a zoning code.
   In order to qualify for nonconforming use, the property
    almost always needs to have been continuously put to
    the non-conforming use.
   Thus, if the businesses closes and the use lapses for
    any time, the permission for the nonconforming use
    could vanish.
           Landlord-Tenant
 Usually based on a Lease—a contract
  between the landlord and the tenant.
 Relationship also governed by state law
  which imposes obligations on the landlord
  and limits what landlord can require of
  tenant.
     Standard Lease Provisions
   The names of the parties
   A description of the rental property
   The term, or length, of the lease
   The amount of rent
   The due date of the rent
   The amount of the security deposit
   Whether the tenant is subject to late fees
   Maintenance responsibilities
   Options to renew
   Termination notice requirements
   When the landlord may enter the rental property
   Rules concerning pets
             Hypothetical
 Bert and Ernie are roommates and enter
  into a lease with Oscar to rent an
  apartment for $500 per month. Ernie
  drops out of school and leaves town. How
  much rent does Bert owe?
 Same, but Ernie throws a fit, breaks a
  window and trashes the carpet in his
  room. Does Bert own anything if Ernie
  doesn’t pay for the damage?
              Roommates
 Unless the lease specifically states
  otherwise, the tenants are jointly and
  severally for the rent.
 Unless the lease specifically states
  otherwise, the tenants are jointly and
  severally liable for any damages.
     Term and Length of Lease
 A lease over a year must be in writing.
 Oral leases are month to month
 Typically lease will provide for notice of
  termination.
 After the expiration of a lease, lease will
  convert to month-to-month unless the
  lease calls for an automatic renewal.
           Security Deposit
 By law, security deposit is limited to 1-
  month rent for unfurnished dwelling, 1.5
  for furnished dwellings and 2-months rent
  if there is a pet.
 Purpose is to provide fund to pay for
  damages to the property.
 If a landlord wrongfully refuses to return
  the deposit, are subject to statutory
  penalties.
       Landlords' Maintenance
          Responsibilities
 Under most state and local laws, landlord
  must offer and maintain housing that
  satisfies basic habitability requirements,
  such as adequate weatherproofing,
  available heat, water and electricity, and
  clean, sanitary, and structurally safe
  premises.
 Local building or housing codes typically
  set specific standards.
       Consequences of Not Making
            Required Repairs
   When a tenant requests necessary repairs and the
    landlord or property manager doesn't meet legal
    responsibilities in providing them, a tenant usually has
    several options, depending on the state. These options
    include:
   withholding the entire rent until the problem is fixed
    (some states require the tenant to place the rent in an
    escrow account)
   hiring someone to make necessary repairs and
    deducting the cost from the next month's rent.
   paying less rent
   calling the local building inspector, who can usually order
    landlords to make repairs, or
   moving out, even in the middle of a lease.
                    Sublease
   Alex moves and won’t be able to fulfill the last 6
    months of his 1-year lease. Tim is willing to take
    over the lease as a sub-tenant.
   If the landlord doesn’t like Tim, can he prevent
    the sublease from happening?
   If the sublease happens and Tim fails to pay the
    rent or damages the apartment, does the
    landlord have a claim against Alex?
                   Subleasing
   Unless the lease gives the tenant the right to
    sublease, can only do so with permission of the
    landlord.
   If a sublease, the original tenant still owes duties
    to the landlord.
   The other option is for a third party to assume
    the lease with permission of landlord. In that
    case the third party would take over the duties of
    tenant and the original tenant would be off the
    hook.
         Entry to Rental Property
   Typically, after giving notice to tenants, LL can enter
    rented premises in order to make needed repairs (or in
    some states, just to determine whether repairs are
    necessary), or to show the property to prospective new
    tenants or purchasers.
   States typically require LL to provide 24 hours' advance
    notice before entering a rental unit.
   Without advance notice, in most states a landlord or
    manager may enter rented premises while a tenant is
    living there only in an emergency, such as a fire or
    serious water leak, or when the tenant gives permission.
   Kansas Landlord-Tenant laws