Real Estate Law - Chapter 2

property

describes the relationship between people and things = right to possess, own, and use things

private property

belongs to an individual who has the exclusive right of disposition

public property

things owned by the public through a federal, state, or local government body - hold in a trust

real property

land and anything permanently attached to it

• immovable

personal property

all property, except real property, that can be owned

• moveable

Uniform Commercial Code (UCC)

code of law that governs commercial transactions (not Louisiana)

Statute of Frauds

common law, a law the disallows any suit or action involving certain classes of contract unless the agreement is evidenced by a note or memorandum in writing signed by the party to be charged or his authorized agent

interests - what is it

anything relating to

• land - loan, lease, collateral, anything tied to the land

bill of sale

a written agreement in which one person transfers his interest in personal property to another

• not a title

• you keep

deed

transfers real property ownership

• goes to Register of Deeds

taxation

personally property is generally not taxed

• can be taxed is business property, vehicles

differences of real vs personal

real property

• common law (source)

• deed (transfer)

• property tax

personal property

• UCC Article 2 (source)

• bill of sale (transfer)

• no tax or different rate

fixture

legal hybrid; a piece of personal property that has become affixed to real property in such a way that it becomes part of the real property

severance

the legal principle that defines the mechanical processes required to convert an item of real property into personal property

fixture tests

• annexation

• adaption

• intention

annexation

key fixture test that is met when personal property is in fact annexed, fixed, or fastened onto the real property

• appears easy, but courts do not agree

• does it have equal value if not attached

• unattached machinery is essential to plant operation

• does removal damage the real estate

constructive annexation

just due to relationship between real and personal, even if not attached

• garage door openers, antennae dials

adaption

test for determining whether personal property has become united with real property by its adaption to the use and purpose of the real property

• property is functionally tied to property and necessary for use

  • computer system in bank

intention

the controlling test

test for determining whether personal property has become united with real property by examining the intent of the annexor

• intent of parties is gathered from nature of article, relations, situation of parties making annex and structure, use, mode of annexation. NOT owner’s testimony

special tests

developed to determine the two types of property vital to agriculture

1. things growing on land

2. manure

fructus naturales

vegetations that grows naturally on property and not my the efforts of humans

• real property

fructus industriales

vegetation, such as crops, the grow on property by the efforts of humans

• personal property

• manure is a fixture

enablements

crops produced by a tenant’s labor to which the tenant is entitled; grown annually, not spontaneously, by labor and industry

• synonym for fructus industriales

fixture disputes

1. whether certain pieces of properties are fixtures

2. whether property that may be a fixture is sold separately

3. whether a fixture serves as collateral to secure a loan

4. whether a fixture is wrongfully or mistakenly affixed to another’s real estate

trade fixtures

articles placed in or attached to rented building by tenants to carry on the trade or business for which the tenants occupy the premises

• pizza oven in pizza restaurant

agricultural fixtures

articles placed in or attached to farm buildings and land for the purpose of farming

domestic fixtures

articles that tenants attach to a dwelling to render their occupation of the premises more comfortable or convenient

• public policy allows tenants to remove what they installed, but judges still may look to fixture tests

fixture restrictions on removal

• article annexed must fall within one of the tenant’s fixture categories

• tenant must be able to remove the fixture without causing substantial injury to the premises

• tenant must remove the articles before turning over possession of the premises to the landlord

collateral

property that is pledged as security for the satisfaction of a debt

• special problems may arise when fixtures are used

default and repossess

don’t pay, (dealer) takes ownership/possession of car

• can then sell (commercially responsible way) and apply to debt

mortgagor (owner) v mortgagee (bank)

mortgagor gives right to repossess, mortgagee has security interest in real estate

• bob buys house, gives bank a mortgage (SI in house), he adds fixtures to house, failed to make payments in note (promise to pay), defaulted

• after acquired title clause covers later additions in mortgage

owner v secured party

secured party has security interest in property

• sally owns home, no mortgage, borrowed money and installed new cabinets as fixtures

• gave SI in cabinets and signed financing statement, lender had SI in cabinets

• lender can take cabinets

attachment (creation) - how lender gets collateral in personal property or fixtures over buy

signing financing statement (security agreement) giving security interest/collateral description

financing statement

a document filed in the public record to give notice to third parties of the secured party’s security interest

security agreement

an agreement that creates a security interest

• filed with secretary of state

purchase money security interest (PMSI)

a security interest taken by a lender or retained by a seller to secure all of part of the price of goods purchased by the borrower

• best buy

lay away

seller keeps until paid off

security interest creation - attachment

debtor (borrower) signs SI (agreement)

creditor gives value

creditor has rights to collateral

creditor has protection against borrower only

• can’t take something if you don’t know about a security interest

perfection

of Security Interest, against competing claims to the collateral, which usually requires the secured party to give public notice of the interest as by filing in a government office

• when filed in Secretary of State

• filed first has priority

fixture filing

the filing of a financing statement also in the real estate public record to perfect the security interest in a fixture

• filed in Register of Deeds and SOS for perfection

security interest - know!

creation (attatchment)

• debtor signs security agreement or creditor takes possession

• creditor gives value ($)

• and debtor has rights in collateral

perfection

• creditor files financing statement

• or creditor takes possession

unsecured creditor

lender lends with no security

• no contract

• no security to secure loan

• must sue to get judgement

  • credit cards

secured creditor

get collateral, if not repaid you get the collateral

• contract

  • car

security for real estate

secured creditor

grant a security interest to bank (mortgage)

bank filed mortgage with ROD

can foreclose and repossess house

security for fixtures

attachment - signing financing statement gives security interest in product to lender

• lender can take fixtures if you default

**perfection - files with Secretary of State and Register of Deeds for priority

secured party v other creditos

jim buys HVAC on installment basis from sam and takes SI

jim has mortgaged house

mortgage company has after acquired title clause

Sam has SI in property

• has PMSI on specific good and perfects by fixture filing before good a fixture or within 20 days of becoming a fixture prevails over existing mortgages

• SI before fixture filing has priority over interests recorded later

• readily removable, SI before goods became fixtures prevail

• secured party prevails if consents in writing

subordination

the process by which one creditor gives up rights to another creditor

wrongful annexation

the illegal attaching or merging of one thing or another. can’t benefit from illegal conduct

mistaken annexation

the mistaken attachment of personal property to real property owned by someone else. equity

In re Marriage of Graham (1978) - concept of property

no martial assets, wife supported husband during MBA, wife filed for divorce and did not seek alimony

issue: is MBA marital property which can be divided in divorce?

holding: degree in or of itself is not property

analysis: no exchange or transferable value (but factor in support). can’t be sold or transferred. personal to holder

Ex Parte Brown - misclassification of fixtures as personal property

husband awarded house with fixtures and realty appurtenant (attached) in divorce, wife took microwave, refrigerator, attached bookcase, and china cabinet

issue: were the bookcase and china cabinets that the wife removed from the marital home were fixtures (part of the real property) or personal property that she was entitled to remove

holding: wife was in contempt of court

analysis: fixture is chattel (personal prop) attached to realty, so they were fixtures. did the tests, showed all fixtures were made for use and anchored

adamson v sims (2004) - fixture tests: intention of parties

adamson held liable for conversion, sims claimed to own hanger, adamson said he bought it with the plantation

issue: is hanger a fixture? if fixture is it owned by Sims as attached to real property. if not a fixture, then Don owns it

holding: the airplane hanger was classified as personal property, not a fixture

analysis: had nothing to do with the plantation, intended to be separate from the land built for one person’s hobby. intent was for it to be treated as personal property

yeadon fabric domes v maine sports complex - fixture financing

setting order among MSC creditors

issue: did court err determining order of priority?

holding: no, SI had to be perfected by fixture filing before dome became fixture or within 20 days of fixture which wasn’t done. SI had to be perfected before mechanic’s liens interest became of record, but fixture filing wasn’t done until 2004. work began in 2001