RH

Chapter 1-6 Real Estate Law Key Terms

Who can prepare legal documents?

  • Only attorneys can prepare and draft legal documents.
  • Real estate brokers and salespeople cannot draft legal documents; they may only fill in blank spaces on attorney-approved forms.
  • Real estate licensees cannot charge extra for this work (e.g., filling out a contract form for someone).
  • Real estate licensees cannot give legal advice; any legal advice must come from an attorney.
  • State law governs the accounting of real estate transactions and documents (e.g., recording, etc.).

Types of property descriptions

  • Note: An address is not a legal description; it’s what the property is commonly called.

Meets and bounds descriptions

  • A meets and bounds description provides a physical description of the property.
  • Example (paraphrased from transcript):
    • “Beginning at the old tree by Johnson’s Lake, going 25 rods and 8 feet northeasterly to an iron stake, then 90 degrees southeasterly about 400 feet to the well by the stream. Follow the stream southwest about 36 rods to the corner of the fence post from Johnson’s property, then 85 degrees northwesterly about 300 feet to the point of beginning.”
  • Key rule: the description must totally enclose a parcel of land; the last sentence must say “and go back to the point of beginning.” Otherwise, it’s not a valid description.
  • Terminology:
    • Meats (length measurements) vs bounds (markers).
    • Must begin and end at the point of beginning.
  • Usefulness: good for defining irregular-shaped lots.
  • Important principle: survey measurements prevail over deed measurements. If a current survey differs from an old deed, use the newer survey measurements as accurate.

Geodetic survey system

  • Uses a network of benchmarks across the country to identify land location, height, elevation, etc.
  • Benchmark: a concrete item in the ground that identifies land location and elevation; benchmarks are widespread across the country.

Rectangular (government) survey system

  • Describes land using meridians (north–south lines) and baselines (east–west lines).
  • Range lines run parallel to the meridian; tier lines run parallel to the baseline.
  • Every six miles, the intersection of range and tier lines forms a square piece of ground six miles on each side.
  • Township: a six-by-six mile square; contains 36 square miles.
    • In the example: a township defined by range 2 west and tier 2 south.
  • Section system:
    • A township contains 36 sections.
    • Each section is one mile by one mile, i.e., a square mile.
    • Each section contains 640 acres.
    • Each acre contains 43,560 square feet.
    • Formulas:
    • 36 ext{ square miles} = 6 ext{ miles} imes 6 ext{ miles}
    • 1 ext{ square mile} = 640 ext{ acres}
    • 1 ext{ acre} = 43{,}560 ext{ ft}^2

Lot and block system

  • Recorded on a plat map; used for subdivisions.
  • Describes subdivision details: Lot number, Block number, subdivision name, county, and state.
  • Example: “Lot 2, Block 4, Oak Estates, Johnson County, Kansas.”

Setback lines and front footage

  • Setback lines: the required space between the lot line and the building line (e.g., front setback 40 ft, side setback 20 ft).
  • Front footage: the width of the lot along the street line.
  • Square footage is calculated as:
    • ext{Square Footage} = ext{Length} imes ext{Width}

Ownership of real estate by organizations

  • Sole proprietorship: one person runs the business; unlimited liability.
  • Syndication: two or more people pool money to invest and spread risk.
  • Corporation taking title in severalty (severalty = one entity):
    • A corporation buys property as a single entity regardless of number of stockholders.
    • Debt: often incurred; stockholders are not personally liable.
    • Nonrecourse loan: debt applies to the corporation’s assets, not to stockholders.
  • Joint ownership when a corporation and an individual buy together: tenants in common (TC).
  • Corporations cannot be joint tenants because joint tenancy carries a right of survivorship, and corporations never die in the same sense as individuals.
  • General partnership: unlimited liability for all partners; profits, losses, and taxes shared.
  • Limited partnership: general partners run the business; limited partners contribute capital and have limited liability (up to their actual investment).
  • Real Estate Investment Trust (REIT): a large, real-estate-focused investment fund.
  • Securities license requirement:
    • Required when one receives money and invests for others (e.g., stock brokers, mutual funds).
    • Federal oversight by the SEC; conducting sales of real estate securities requires compliance with federal disclosure and anti-fraud provisions.
  • LLC (Limited Liability Company): combines features of corporations and partnerships; provides limited liability and pass-through taxation (profits/losses flow to owners).

Fair housing laws and enforcement

  • Three major statutes:
    • Civil Rights Act of 1866: prohibits racial discrimination; all citizens have the same rights to inherit, purchase, lease, sell, hold, and convey real and personal property.
    • Civil Rights Act of 1968 (Title VIII): residential housing only; seven protected classes; prohibits discrimination in sale or rental, including terms, conditions, or advertising.
    • Fair Housing Amendments Act of 1988: added handicapped and familial status protections; expanded enforcement and accessibility requirements.

Civil Rights Act of 1866 (race-based prohibition)

  • Prohibits discrimination based on race; no exemptions based on race; establishes universal racial equality in property rights.

Civil Rights Act of 1968 / Title VIII (residential focus)

  • Protected classes (as of 1968 and expanded in 1988):
    • Race, color, religion, national origin, sex
    • Handicapped (1988)
    • Familial status (1988)
  • Illegal acts under Title VIII include:
    • Refusing to sell or rent or negotiate based on a protected class
    • Changing terms, conditions, or services for the protected class
    • Advertising that excludes protected classes or implies discriminatory preferences
    • Inducing owners to sell by implying protected-class movement into the neighborhood (blockbusting)
    • Steering: directing buyers toward or away from certain areas based on protected class
    • Redlining: lender or insurer refusing to provide services in a given area due to the protected class makeup
    • Denying MLS membership or other similar discriminatory practices

Exemptions to the Fair Housing Act of 1968

  • Four exemptions commonly discussed: 1) For sale by owner (FSBO) of up to three homes at a time, no broker, no discriminatory advertising
    • Example tongue-in-cheek note: FSBO owner could, in theory, restrict buyers in non-discriminatory ways as long as not advertising discrimination.
      2) Owner-occupied 1–4 unit dwelling when the owner lives in one unit and rents the others
      3) Not-for-profit religious organizations discriminating based on religion and not operated commercially
      4) Not-for-profit private clubs that are not operated commercially
  • Supreme Court case: Jones v. Mayer (1968) held that race-based discrimination is never allowed, regardless of exemptions tied to the 1968 Act.

Fair Housing Amendments Act of 1988 (handicap and familial status)

  • Handicapped: defined as a mental or physical disability; illegal to discriminate on the basis of handicap.
    • Not a handicap: addiction to illegal drugs is excluded from the definition of handicap.
    • Rules for landlords:
    • Cannot change terms for a tenant based on handicap.
    • Tenants can make reasonable modifications at their own expense.
    • Landlords must modify rules to allow equal use of facilities and housing.
    • Multifamily buildings with 4 or more completed after 03/13/1991 must be accessible to the handicapped; if there’s an elevator, all units must be accessible; if no elevator, ground-floor units must be accessible.
  • Familial status: protects families with children under 18.
    • Retirement communities may exclude children if advertising is targeted to older persons and certain occupancy conditions apply (e.g., 62+ or 55+ with at least 80% of units occupied by older persons).

HUD enforcement and advertising guidelines

  • HUD (Housing and Urban Development) enforces fair housing laws; offices must display a fair housing poster showing compliance with fair housing laws.

  • The fair housing logo (a frame of a house with an equal sign) is recommended for advertising but not required by law.

  • Who may file a complaint with HUD:

    • A person who believes they were discriminated against; complaint must be filed within one year of the act.
    • State laws apply if they are substantially equivalent to Title VIII.

  • Advertising rules:

    • Inclusionary advertising (e.g., “wheelchair accessible”) is acceptable; it describes accessibility and is open to all.
    • Exclusionary advertising (e.g., discriminating phrases) is not allowed.
    • Advertisements in newspapers should be in newspapers of general circulation.

  • ADA (Americans with Disabilities Act): a federal law ensuring accessibility to places of public accommodation (e.g., shopping centers, grocery stores, brokerage real estate offices).

  • Penalties: fines for violating federal fair housing laws can reach up to 75{,}000 for a first offense.

  • Connections to real-world practice and principles:

    • Ensure compliance in advertising and client interactions to avoid unlawful discrimination.
    • In property descriptions, rely on legally valid description forms rather than informal identifiers like an address.
    • When structuring investments or ownership, choose organizational forms (sole proprietorship, partnership, corporation, LLC, REIT) with attention to liability, taxes, and financing implications.
    • Maintain awareness of both federal and state equivalents and ensure postings, advertising, and complaint processes adhere to applicable rules.

  • Note on practical context:

    • The accounting and recording requirements for real estate transactions are governed by state law; practices must align with state-specific recording and filing rules.
    • While shortcuts or exemptions may exist under federal law for certain small-scale activities (e.g., FSBO), they do not override the core protections against racial discrimination and other protected classes.