Chapter 8 Real estate
Agreement of the parties
- Agreement is the simplest and first test: If the parties have agreed that an item will stay or go, then that agreement meets the legal test. To be safe, the agreement should be in writing. - bill of sale: agreement in the purchase contract meets these requirements. Buyers sometimes believe that items such as refrigerators, washers, dryers, and other appliances are fixtures when they're actually sellers' personal property. When these items are staying with the house, they should not only be listed in the sale contract but may need to be conveyed via a bill of sale. This eliminates any confusion between the parties.
types of group boycotting?
- Boycotting a competitor -Boycotting a supplier or vendor -Discussing or agreeing to the different treatment of a competitor as a group
mobile home
- Mobile homes are those constructed without any regulation, before 1976. - That was the year that HUD began using federal construction standards for this type of home, as enacted by Congress in the Mobile Home Construction and Safety Standards Act.
adaptability of item to land's use
- The courts used to use the method of annexation as the only test of whether an item was real property or personal property. - adaption= related to how the item is situated or adapted to the real property ex. granger openers or remote controls of other built - in features that are permanently attached to the property
bill of sale
- agreement in the purchase contract meets these requirements. Buyers sometimes believe that items such as refrigerators, washers, dryers, and other appliances are fixtures when they're actually sellers' personal property. -When these items are staying with the house, they should not only be listed in the sale contract but may need to be conveyed via a bill of sale. -This eliminates any confusion between the parties. - the agreement if an item is going to stay or go
method of annexation
- also known as attachment - refers to whether the item is attached to the property and how permanent the attachment is - ask yourself weather the item can be removed without causing damage to the property to which it's attached, if it can't its real property
relationship of the parties
- dispute between the person who added the item and the person who removed it -the courts tend to favor a tenant's take on an item over the landlord's, and a buyer over a seller.
purpose of real estate license laws
- is to protect the public by requiring certain education, training and standards of licensees. - The license provides the public with assurance that you know what you're doing. - The requirements for licensing provide an important oversight component to ensure that you continue to meet the terms of your license.
intention of placing an item on land
- the intention of the party who installed the item is regarded as the most important consideration in determining whether the item should stay or go -However, a person's original intentions may change over time, or an item that was intended to be temporary may end up physically attached to the property, which can change the item from temporary to permanent.
annexation
- the opposite of severance - occurs when personal property is attached to real property, which makes it a fixture - ex: when she bought the rose bush they were personal property but when she planted them, annexed them, to the land making them fixtures they became part of the real property
types of price fixing
-Agreements to establish or adhere to uniform price discounts -Agreements to eliminate discounts to all customers or certain types of customers -Agreements to adopt a specific formula for the computation of selling prices -Agreements on terms and conditions of sale, including uniform freight charges, quantity discounts, or other differentials that affect the actual price of the product -Agreements not to advertise prices or to refuse to sell the product through any bidding process
antitrust violations
-Price fixing -Group boycotts -Market allocation agreements -Tie-in arrangements - all share: They involve an agreement between competitors to restrain trade unreasonably. The agreement may take the form of a written document, verbal exchange, or even be inferred from conduct (such as a meeting between competitors followed by joint conduct). Without an agreement, there's no violation.
affidavit of affixation
-When the real estate and the manufactured home are owned by the same owners, and the manufactured home is affixed to the real estate, the owners may record an Affidavit of Affixation. -This certifies that the manufactured home is, in fact, real property.
general property law
-covers the forms of ownership and tenancy in real property, and its distinction from personal property within the common law legal system. - It also covers the rights of ownership and tenancy and the government's rights and authority under eminent domain and various police powers.
consumer protection laws
-established to ensure that the licensed professionals in a state treat consumers (including their customers and clients) with fairness. - These laws (and their associated rules) are designed to protect consumers from unfair or unethical business practices, fraud, misrepresentation, and more
market allocation
-occurs when real estate professionals from competing firms agree to divide their market—by geography, price range, property type, etc.—and then refrain from competing for business. - these agreements between competing firms restrict trade, discourage competition, and restrict consumer choice, and they violate antitrust law.
how to determine if manufactured homes are personal or real property?
1. affidavit of affixation 2. certificate of title
2 characteristics of reap property/ real estate?
1. economic -Scarcity: It's true what they say—you can't make more land. -Improvements: A land's value can be affected, either positively or negatively, by the changes that are made to it. Improvements can have an impact on the areas and communities surrounding the land, as well. -Permanence of investment: Improvements, such as sewer, roads, and utilities, are long-term, stable investments with relatively stable returns over time. -Location or area preference: A property's value is in large part dependent on its situs (area where it is located and market desirability for the area). 2. physical -Immobility: The geographic location of a piece of land is fixed; it can never be changed. - Indestructibility: While improvements may deteriorate over time, the land itself cannot be destroyed. -Uniqueness: One parcel (piece of land) will not be exactly like another. This is the concept of nonhomogeneity.
when commercial tenants may remove their trade fixtures when their lease ends and they move out, the trade fixtures must be
1. essential for the tenant's business operations 2. detachable without damaging the property (or repairable) 3. moved out with a certain period of time or the fixture becomes the owner's property even if the tenant installed it
areas of law relating to real estate practice
1. law of contract 2. general property law 3. law agency 4. state-specified license laws 5. landlord-tenant laws 6. consumer protection laws
5 test to determine an items property type
1. method of annexation 2. adaptability of item to land's use 3. relationship of the parties 4. intention in placing item on land 5. agreement of the parties
an's husband, Neil, is a design engineer. So when she complained about the unsightly pass-through shelves in the living room, he installed sliding fabric panels on one side, and bolted a custom-made oversize bulletin board on the other. Unsightly bookshelves? Out of sight! Now that they're selling, Jan couldn't wait to take her bulletin board with her. She never intended to leave it, after all. What reason or reasons might a buyer have to argue that the bulletin board should stay right where it is? Select all that apply.
1. method of attachment 2. adaption to the land's use (A buyer could argue that the bulletin board was designed to specifically fit this particular home, and wasn't interchangeable—or removable, for that matter.)
water rights
1. percolating- the right to draw water from underground recesses (such as wells) for the landowners use 2. riparian - the right to access and use rivers, streams, and other flowing bodies of water adjacent to the property 3. littoral- the right to acmes and use ponds, lakes, oceans and other stationary bodies fo water bordering the property 4. prior appropriation- is a legal doctrine that grants water rights to the first individual or entity to take water from a source for beneficial use. Unlike littoral and riparian rights, which are based on a given property's adjacency to a body of water, prior appropriation is granted by the state based on need and use rather than adjacency.
real property includes real estate plus the interest, benefits, and rights automatically included with real estate ownership What are those interest benefits and rights?
1. possession: the right to occupy the property 2. enjoyment: the right to posses the land without harassment or interference 3. exclusion: the right to refuse other interest in your property 4. control: the right to determine interest in the property for others 5. disposition: the right to determine how, when, and if the property is to be sold/transferred
antitrust law goals
1. protect customers by promoting completion in the marketplace 2. outlaw unfair methods of competition
two classes of plants
1. severance 2. annexation
land physical component property ownerships rights
1. surface rights (include both land and water rights) 2. subsurface (pertain to the right to use underground resources such as natural gas and minerals. These are often referred to as mineral rights.) 3. air rights (involve the right to use the open space above buildings up to a height established by law) 4. Right to profit (the right to harvest timber, for instance, and sell it)
As part of its penalty for violating antitrust law, Homes4Cheap, Inc. has been ordered to undergo court-ordered supervision. How long can this supervision last?
10 years
In addition to fines, individuals who violate antitrust laws may face imprisonment for up to what length of time?
10 years
In certain cases, antitrust violators may be subject to court-ordered supervision. How long can this supervision last?
10 years
certificate of title
A manufactured home not affixed to the land or owned by someone different than the landowner will have a certificate of title. - In this case, the manufactured home is considered to be personal property and not real estate.
trade fixtures
A trade fixture is removable personal property that a tenant attaches to leased commercial premises in order to conduct business. Are they the lessee's personal property even though they're legally attached to the premises, or do they belong to the lessor because they're legally attached to the premises?
how can a manufactured home become real property?
If an owner wants to turn a manufactured home into real property, the parts that make it transportable (the tongue, the axles, and the wheels) must be removed, and it must be permanently affixed to the land
nonhomogeneity
One parcel (piece of land) will not be exactly like another
why is this a licensing violation ? sherry advises her clients to take ownership in the home they are buying as tenants in common
Sherry has cross the line into practicing law, which is a violation of real estate license law.
mortgage right
Some of these rights may be separated from the land by the owner by transferring ownership or an interest to another. For example, mineral rights can be separated from the property, or an owner can mortgage the property, thereby transferring an interest to a mortgagee for the term of the loan
an agency with the purpose of preventing unfair methods of competition in commerce.
The Federal Trade Commission Act (1914)
manufactured home
This is a home that's constructed with a permanent chassis and wheels because it's made to be transported. After it's constructed in a factory, it's towed to its destination and anchored to the ground. In theory, it can be removed and towed to a different site because the chassis, tongue, axles, and wheels are still attached.
Imagine you're the sponsoring broker for a new licensee. She's preparing for her first listing appointment and is a bit nervous. You help her prepare by pretending to be the seller as she goes through her listing presentation. She's at a point where she discusses commission. Because this often happens working with sellers, you interrupt her, and state that the commission she quoted is way too high. She replies that the rate is fairly standard in the industry. Is this a good response?
This is not a good response. Your agent's response suggests that there's a standard commission rate the industry charges, which is a violation. Now, if she had said this is the standard rate her firm charges, that's acceptable. Why? Because it doesn't suggest conspiracy or cooperation among competitors to fix prices.
The Millers loved their new gas grill, but didn't like the look of the propane tank. They preferred the look of the outdoor living spaces they saw in all the home magazines. Mr. Miller built a custom countertop around the grill, and even incorporated an electric griddle and built-in sink. With all this, they were really cooking! What test best fits the argument that the grill is a fixture?
adaption to the land's use ( The Millers' grill was adapted to fit their outdoor space when Mr. Miller built the rest of the fixtures around it.)
Affidavit of affixation or certificate of title? When the manufactured home is considered real property.
affidavit of affixation
One factor must exist for an action to become a violation. Which of the following must take place for a violation to occur?
agreement
Philomena loved her grandmother's antique chandelier, which hung gracefully in the formal dining room. It was a conversation starter for all her elegant dinner parties. Even though it was affixed, she made certain that, when it was time to sell, she excluded the chandelier from the sale by putting written notice in the listing disclosures. What is Philomena hoping to ensure?
agreement of the parties
Your neighbor bought rights that will prevent you from ever building above two stories. What type of rights are these?
air
involve the right to use the open space above buildings up to a height established by law.
air rights
occurs when personal property is attached to real property, which makes it a fixture.
annexation
severance or annexation? Jessica and Harriet, two elderly sisters, plant two small flowering shrubs in their backyard.
annexation
severance or annexation? Sam wants a walkway from the house to the detached garage, so he constructs a path from the loose stones on his property.
annexation
improvements
artificial attachments that include fencing, building, walkways
antitrust penalty fines can be
as high as $100 million for a corporation or $1 million for an individual and may include up to 10 yrs in prison
what's the best way to avoid price fixing?
brokerage firms should take care to establish their fees, commission splits, and agreement terms completely independent of any other firm's policies or practices.
Affidavit of affixation or certificate of title? When the manufactured home is considered personal property
certificate of title
personal property is also known as
chattel
Mixing of trust funds with the broker's own money or other brokerage business accounts
commingling
What's an antitrust violation's central element?
conspiracy
right to determine interest in the property for others
control
Use of client trust funds by the broker without the client's permission
conversion
emblements
cultivated crops and are considered personal property, even though they are part of the soil - crops are considered the personal property of the person who planted them
why is refusing to show a property bc the prospective buyers are minorities a violation?
discriminating based on protected class status is a violation
Right to determine how, when, and whether the property is to be sold, leased, mortgaged, or transferred
disposition
right to possess the property without harassment or interference
enjoyment
right to refuse other interests in your property
exclusion
Which agency prohibits unfair acts, practices, or methods of competition, and enforces federal antitrust and consumer protection laws nationally?
federal trade commission
Covers the government's rights and authority under eminent domain
general property law
Acme Realty offers discounted services. Berringer Realty and Hawthorne Real Estate Group decide to not show any of Acme's listings and to prohibit showings from Acme buyers to drive Acme out of business. This is an example of _______.
group boycotting
involved two or more business conspiring against another
group boycotting
often involves brokers agreeing to not show the listings of limited services firms, hoping to drive them and their competitive pricing out of the marke
group boycotting
what is this an example of? when two or more brokers or agents refuse to cooperate and split commissions with another one, or when several brokerages in a certain area agree to stop running advertisements in a local newspaper.
group boycotting
The geographic location of a piece of land is fixed; it can never be changed.
immobility
A land's value can be affected by the changes that are made to it
improvements
Which economic characteristic of land contains the concept that a land's value can be affected by the changes made to it, such as construction of a home or shopping center?
improvements
man made attachments that include things such as fencing, building, and walkways
improvements
surface rights
include both land and water rights
While improvements may deteriorate over time, the land itself can't be destroyed.
indestructibility
Luke loved his outdoor fireplace, a focal point of the courtyard in the back of his home. The fact that he and his son had assembled it together—Luke, Jr. had said it reminded him of building with Legos—made it all the more special. Even though it weighed more than 1,000 pounds, he built it with portability in mind. After all, it wasn't affixed to the concrete patio. On what grounds can Luke claim the fireplace is personal property? Select all that apply.
intentions of the annexing party (Even though the outdoor fireplace weighs half a ton, Luke built it with the intention of taking it with him when he moved and didn't permanently affix it to the concrete. Let's keep moving!)
price fixing
is a conspiracy or agreement between business competitors to set their prices to buy or sell goods or services at a certain price point, and it's a violation of federal and state antitrust laws.
law of agency
is all about your role relating to your clients. -Agency law covers how an agency relationship is created, and the duties of an agent to the principal
revocation
is an indefinite loss of license where it's stripped from the license holder to prevent that person from ever practicing real estate again.
modular home
is built in pieces off-site, then those pieces are transported to the spot where it will spend the rest of its days, and the build is completed there. -A modular home isn't built with transportation in mind, and it therefore doesn't include a chassis or wheels.
bundle of rights
is the common term to explain the complexities of property ownership rights. These include: -The right of possession (the property is owned and may be possessed by the title holder) -The right of control (the owner controls the use of the property) -The right of exclusion (the right to decide who may or may not access the property) The right of enjoyment (the ability of the owner to use the property in any legal manner) -The right of disposition (the right to sell or convey the property).
fixture
it's part of the real property being conveyed in a real estate transaction and should remain)
the earth's surface extending downward to the center of the earth and upward to infinity, including permanently attached natural objects
land
real estate
land, plus all things permanetly attached to it naturally and artificially
Covers the rights of renters and those they rent from
landlord-tenant laws
Which area of real estate law covers lease agreements?
landlord-tenant laws
address the landlord-tenant relationship. They establish everything from the duties and responsibilities of each party to the state laws for handling lease agreements to fair housing considerations for tenants and other tenants' rights issues.
landlord-tenant laws
Which area of real estate law covers how an agency relationship is created and explains the duties of an agent to the principal?
law of agency
governs the use of contracts, and the required elements to make a contract valid. It also covers what happens in the case of a breach of contract, and how contracts may be terminated.
law of contract
is a temporary loss of license where it's made inactive as a penalty of a violation.
license suspension
property owners who live on or next to water have certain rights. An example of one of these rights includes ______.
litoral
Which term would you most likely see associated with a lake?
littoral
the right to acmes and use ponds, lakes, oceans and other stationary bodies fo water bordering the property
littoral
which water rights? There's no better way to spend a morning than sitting on your dock throwing a ball into the lake for your yellow lab.
littoral
A property's value is impacted by where it's situated and how interested people are in buying or living in the area
location or area preference
This is a home that's constructed with a permanent chassis and wheels because it's made to be transported.
manufactured home
what antitrust violation is this an example of? Acme realty and Hawthorne realty group agree to divide the city in half, each workouts its own half
market allocation
what antitrust violation is this an example of? Instead of competing in each other's territories, agents in two brokerage firms agree to segment the marketplace and refer clients to one another who are outside of their assigned market area.
market allocation
what antitrust violation is this an example of? when a brokerage firm and its agent agree not to compete for business with another firm or firms and the association in specific markets and dived the markets accordingly?
market allocation
a ____________ home isn't built with transportation in mind, and it therefore doesn't include a chassis or wheels
modular
One of the things you enjoy about being a sponsoring broker is watching the licensees associated with your firm learn, grow, and become successful in the industry. After mentoring a licensee for many years, you learn he's ready to spread his wings and open his own brokerage. However, not wanting to "step on your toes," he decides to locate his brokerage in a neighboring town so he won't compete directly with you on as many properties. Is this an antitrust violation of market allocation?
no (Your former associate has decided on his own where his business will be located. There's no agreement in place between the two of you that would limit competition or choices for consumers. He also doesn't have any plans to turn away any business in your area.)
Barney is selling his home, and wants to handle all of the marketing and paperwork himself. Is he required to have a real estate license?
no bc it is his home
Four brokerage firms operate in the same small city as Jackson's firm. All the firms charge approximately the same listing commission and pay approximately the same cooperating commission to the selling broker. The commission splits within each firm are also similar. Is this an antitrust violation? Why or why not?
no. the fact that the firms' commission rates and splits are similar doesn't necessarily mean they agreed to fix those values
severance
occurs when an item that was real property becomes personal property by detaching it (severing it) from the land. - ex: taking rose bushed that were planted into the ground to pots made them go from real property to personal property
Five competing licensees in the same area agreed to cooperate in setting a standard commission rate for the area. This makes them guilty of a per se antitrust violation. What is a per se antitrust violation?
one in which no intent needs to be proven to establish a violation has occured
that guilt is established on the face of the circumstances—no need to prove intent. If you do certain things, just ... BAM! You're guilty. It means that no defense, justification, or excuse will be permitted.
per se
which water rights? Nostalgia sets in as you walk to the water pump next to the barn.
percolating
Involves improvements, such as sewer, roads, and utilities, that are long-term, stable investments with relatively stable returns over time
permanence of investment
jacob is a developer who purchased 78 acres and had it subdivided into half-acre lots. He decided to install sewer and underground electric for the entire subdivision, because he thinks that he will easily recoup his initial infrastructure investment. This is an example of which economic characteristic of real property?
permanence of investment
Because a manufactured home can be picked up and moved from the land it occupies, it's generally considered to be
personal property
Manufactured homes are generally considered _______.
personal property
everything that is not real property and it belongs to seller and can be removed
personal property
personal or real property? above-ground pool
personal property
personal or real property? curtains (not custom-made)
personal property
personal or real property? free-standing children outdoor play set
personal property
subsurface rights
pertain to the right to use underground resources such as natural gas and minerals. These are often referred to as mineral rights
Right to occupy the property
possession
what antitrust violation? Met Realty and Sox Properties agree to charge commissions of 6%.
price fixing
what antitrust violation? While networking at a real estate industry event, agents from several firms agree to start writing listing contracts for terms of three months
price fixing
what is this an example of? when two or more firms agree to offer exactly the same terms in their agency agreements.
price fixing
"the MLS requires us to have at least 90-day listing" is what type of antitrust violation and why?
price fixing and Discussing or even implying that there is a standard contract term in the industry alludes to price fixing, which is an antitrust violation.
is a legal doctrine that grants water rights to the first individual or entity to take water from a source for beneficial use
prior appropriation
is granted by the state based on need and use rather then adjacency
prior appropriation
which water rights? Back when the west was yet to be won, Sandra's family was the first to find and use a pond, and they still have primary rights to it.
prior appropriation
Hal and Sara own a 212-acre farm. Their property is landlocked, but they have permitted water rights to use the stream located six miles away for irrigation purposes. What kind of water rights do they hold?
prior appropriation (The doctrine of prior appropriation grants water rights based on need, not adjacency. Hal and Sara likely live in the western part of the U.S. where many states subscribe to this doctrine.)
Land, plus all things permanently attached to it naturally or artificially
real estate
includes everything in the definition of land, plus all things permanently attached to its naturally or artificially. Artificial attachments are called improvements and include things such as fencing, buildings, walkways
real estate
includes real estate plus the interest, benefits, and rights automatically included with real estate ownership
real property
personal or real property? bathroom towel rods
real property
personal or real property? door knocker engraved with your last name
real property
personal or real property? grange remote control
real property
adaption
related to how the item is situated or adapted to the real property
Sven installed an electronic moving rack at the Rent-a-Tux shop he ran for 18 years. He's had enough of dealing with the ungrateful landlord, so he's moving to the suburbs to open another store, Rent-a-Better-Tux. Affixed or not, he plans to take his tux conveyor with him. Which one of the tests supports his argument?
relationship of the parties (Sven rented the same location for 18 years, he's allowed to remove the tux conveyor. Because Sven's tux conveyor was a trade fixture, a judge would most likely side with Sven if the landlord fussed about it.)
the right to harvest timber. for instance and sell it
right to profit
the right to access and use rivers, streams, and other flowing bodies of water adjacent to the property
riparian
which water rights? Who knew the small creek flowing along the edge of your backyard would be the prime setting for many hours of father/son bonding?
riparian
the concept that there's a finite amount of land
scarcity
Ted's seller client is adamant that she'll be uprooting and taking most of the fruit trees in the backyard when she sells her home. Ted makes a note to himself that he'll need to include the ______ of the trees in the comments for his listing.
service
severance or annexation? Ann is going to sell her house, but first she digs up several of her irises and bags the rhizomes to take when she moves.
severance
severance or annexation? Jack decides to cut down a few trees on his property and use them for firewood
severance
severance or annexation? Tim is thinking about selling his house, so he cuts down a dying pine tree in the back yard.
severance
_____________________relate to the requirements of a licensee when performing real estate activities within the state. License law, continuing education requirements, supervisory requirements, and prohibited conduct are all covered by license law.
state-specific license laws
per se
that guilt is established on the face of the circumstances, no need to prove intent. If you do certain things, just ... BAM! You're guilty. It means that no defense, justification, or excuse will be permitted.
______________________ supports the Sherman antitrust act's purpose of prohibiting monopolies by prohibiting mergers or acquisitions that would create a monopoly?
the Clayton act
Supports the Sherman Act by prohibiting mergers or acquisitions that would unreasonably reduce competition or create monopolies.
the Clayton act (1914)
Prohibits monopolies and collusive actions that result in unreasonable restraint of trade, such as price fixing.
the Sherman act (1890)
permits (in certain cases) the maximum fine to be increased to twice the gain or loss involved in antitrust penalties?
the Sherman act (1890)
The two real estate firms in one small town, Vineyard Realty and Homestead Homes, agree to charge the same commission rate to avoid the possibility of clients selecting a firm based simply on price. What specific federal legislation prohibits this?
the Sherman antitrust act of 1890 (The Sherman Antitrust Act of 1890 expressly prohibits collusive acts that result in an unreasonable restraint of trade or reduced competition.)
Two large local brokerage firms agreed to lower their commission rates to the same amount, approximately 1% lower than any other firm in town. After extensive marketing of their new lower rate, these two firms began to see a big increase in the number of listings they received, costing their competitors substantial amounts of money. What about this situation makes it a per se antitrust violation?
the agreement between the two terms
why do landowners like to retain as many rights as possible?
the more rights that can be conveyed, the greater the property's value)
percolating-
the right to draw water from underground recesses (such as wells) for the landowners use
What antitrust law violation is this? providing service only if the client agrees to use a service offered by another company?
tie-in arrangements
XYZ Realty requires all buyers who work with their company to obtain financing through XYZ Mortgage company is an example of what type of antitrust violation?
tie-in arrangements
what antitrust law violation is this an example of? An agent agrees to work with a client, but only if the client agrees to not do business with Peak Mortgage.
tie-in arrangements
what antitrust law violation is this? An agent tells a client that if the client chooses to finance his mortgage through Alamo Bank & Trust, she will take 1% off of her commission rate.
tie-in arrangements
what antitrust law violation is this? I can only offer this commission rate if you use the title company/inspector/mortgage broker I recommend
tie-in arrangements
What is a good example method of relationship of the parties?
trade fixtures
t/f crops are considered the personal property of the person who panted them
true
t/f it is allowed to refusing to buy services from a vendor because of shoddy business practices or pricing?
true
Land isn't interchangeable. One piece of land isn't exactly like another.
uniqueness
tie-in arrangements
which the providing of one service is made dependent on the customer or client obtaining another. - For instance, an agent cannot tell a seller, "I can only offer this commission rate if you use the title company/inspector/mortgage broker I recommend." A tie-in arrangement may also be negative: "I can only work with you if you agree not to use XYZ Title Company." Both types of tie-in arrangements are violations of antitrust law.
