The Legal and Regulatory Environment of Business PDF

Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  The Legal & Regulatory Environment of Business 19e...

Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  The Legal & Regulatory Environment of Business 19e Chapter 7 The Property System Pagnattaro Cahoy Magid Reed Shedd Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-2  Learning Objectives To distinguish property from other legal rights. To understand the legal scope of property. To categorize different types of ownership interests To understand how property is legally acquired Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-3  Learning Objectives, II To organize and apply the rules of security interests To appreciate the limits on property rights that serve broader societal interests Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-4  Property Legal right to exclude others from resources that are originally possessed or are acquired without force, theft, or fraud Absolute (Legal enforcement) but not infinite Boundaries can be ambiguous Foundation of the free market Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-5  Problem of Limited Resources Frameworks to handle limited resources – State makes major decisions about the production and distribution of resources – Private property - State recognizes and enforces an individual’s rights to acquire, possess, use, and transfer scarce resources Societies have mixed frameworks for dealing with the reality of limited resources Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-6  Property, II Property is central to society’s achievement of prosperity Promotes Makes resources incentives easily divisible Establishes conditions for capital formation Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-7  Pop Quiz pop pop pop QUIZQUIZQUIZ Property influences the marketplace in what ways? a. Promoting incentives b. Recognizing divisibility of resources. b. Creating conditions for capital formation d.All of the above Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-8  Divisions of Property Personal Real property property Land and All movable interests in land resources Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-9 Property Boundaries in the Physical World Defining land – Land ownership consists of more than surface of the property Air rights – Owner of real property possesses the air above the land to a certain extent – Can be sold to another for development Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-10  Air Rights Examples Skyscrapers and Air Space Transactions – In densely populated cities like NYC, developers often purchase the air rights from neighboring properties to build taller buildings. Bridges and Tunnels Easements – Pass over or under private property Solar Panels – Property owners who installed solar panels on their roof may negotiate with neighboring property owners to prevent the construction of anything that would block sunlight 11 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Property Boundaries in the Physical World, II Subsurface rights – Landowner owns the rocks and minerals beneath the land – Can be separately sold to another Fixtures on land – Object of personal property that becomes an object of real property- – Manufacturing equipment in a plant Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-11  Examples of fixtures Built-in Appliances – Dishwashers, ovens, or cabinets that are permanently attached to the home. Chandeliers Heating and cooling systems Fences 13 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  14 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Types of Ownership Fee simple: Represents the maximum estate allowed under law (own it completely) – Estate: Bundle of rights and powers of land ownership-e.g., including the right to use, sell, or build on the land. – Absolute estate involves no limitations or conditions attached – Defeasible can have a condition attached to its conveyance "you can only keep the land if you use it as a school." If you break the condition, you could lose ownership. Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-13  Types of Ownership, II Life estate: Grants an ownership in land for the lifetime of a specified person – Land reverts to the original grantor upon death of the person Leasehold estate: Property right granted to tenants by a landlord – Land can be leased for a definite duration or an indefinite duration Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-14  Types of Ownership, III Concurrent ownership - More than one person can own the same property – Ownership is undivided – Applies to personal and real property – Tenancy in common: Tenants own different shares of the resource – Joint tenancy: Tenants have equal ownership shares Right of survivorship: if one of the joint tenants dies, the remaining tenant becomes the sole owner of the entire resource Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-15  Easements Right to cross over land Use of land behind the exclusive legal fence Ways of acquiring – Buying directly from a titleholder or reserved in a deed – Natural easement: allows owner to get from their land to the nearest public road – Negative easement: prevent adjoining landowner from doing things that harm the owner’s land – Easement by prescription: hostile crossing another’s land openly Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-16  The Backyard Fence Problem Samantha and Jordan are neighbors. Samantha decides to build a tall fence on her property for privacy, but the fence blocks Jordan’s view of the beautiful park next door. Jordan is upset and wants the fence taken down. – Can Samantha build the fence? What questions would you ask? 19 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Bailments Goods placed into another’s possession to be returned in future (without transfer ownership) – store something in a warehouse, rent furniture from the rental store, lease a piece of equipment, loan your lawnmower to a neighbor, or store your car in a friend’s garage while you are on vacation. Bailor: Owner Bailee: Possessor of the object Categories – For the sole benefit of the bailor – For the sole benefit of the bailee – For the mutual benefit of both parties Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-17  Bailments, II Legal duty of the bailee determines the potential liability of the bailee Duties of care are vital when the parties are negotiating a settlement Bailor has duties to the bailee in a mutual benefit bailment Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-18  Class Discussion The Friends and the House Alex, Jamie, and Taylor buy a house together as joint tenants, each owning 1/3. A few years later, Alex unexpectedly passes away. Jamie thinks they should keep the house and split ownership 50/50. Taylor thinks they should sell the house and split the money. Alex’s family also wants part of the house. Q1: Who gets Alex’s share? Q2: If James wants to keep the house but Taylor wants to sell, what can they do? Q3: How would things be different if they were tenant in common? 22 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Q1 Who gets Alex’s share of the house? Since Alex, Jamie, and Taylor are joint tenants, Alex’s share automatically passes to Jamie and Taylor due to the right of survivorship. Alex’s family does not inherit any part of the house. 23 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Q2 If Jamie wants to keep the house but Taylor wants to sell, what can they do? If they can’t agree, Taylor can file a partition action in court, asking the court to either divide the property or order a sale. If the house can’t be divided, the court may order the sale, and Jamie and Taylor would split the proceeds. 24 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Q3 How would things be different if they were tenants in common instead of joint tenants? If they were tenants in common, Alex’s share would go to Alex’s heirs (likely their family) instead of automatically going to Jamie and Taylor. 25 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Acquiring Resources Through Possession Rule of first possession: First person to reduce previously unowned things to possession becomes their owner First person to reduce abandoned thing to possession owns it Lost items – Finder becomes owner by reducing the item to possession and following a statutory procedure – Mislaid things must be given to the owner of the premises where the item was mislaid Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-21  Adverse Possession Provides ownership of land under state statute when the possession is: – Open and notorious – Actual and exclusive – Continuous – Wrongful – For a prescribed period of time Encourages land use Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-22  GA State law example An individual who takes possession of an otherwise neglected piece of real estate owned by someone else, and improves it, may acquire title to the property under adverse possession laws. To be eligible, the person acquiring the property must do so publicly and pay property taxes or otherwise act as though he or she already has the right to possess it. Georgia adverse possession laws require 20 years of occupation in order to claim title. 28 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.  Acquiring Resources Through Accession Accession: Something that is added Law of accession – When people apply efforts to any raw materials and change its nature into finished products, they own the finished products Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-24  Acquiring Resources Through Gift Donor who owns something gives it to a donee, who becomes the new owner Gift does not take place until the donor: – Intends to make the gift – Delivers the gift by physical transfer to the donee Testamentary gift - Made through a will Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-25  Title and Property Registration Title: Ownership – Represented by a physical document registered with the state for certain resources Deed: Document of title that transfers ownership of land Protection against ownership problems – Warranty deed, special warranty deed – Quitclaim deed – Buyers and lenders are protected by registration statutes Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-26  Property and Security Interests Principal types of security interests – Mortgages – Secured transactions Security interests are property applications – Explain why property is the central concept of capitalism and private markets Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-27  Security Interests in Land Mortgage on homes and land – Security interest provided by a person to a bank for borrowing money Deeds of trust: Borrower signs a note and deed of trust – Grants the lender a security interest in the building and land – Trustee - Holds full legal ownership to the land Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-28  Security Interests in Land, II Land sales contract: Owner sells the land by contract – Subject to the condition that seller retains title to the land until buyer pays the purchase price Recording statutes – Mortgages and deeds of trust must be registered in a recording office – Provide notice of the security interest to potential buyers and lenders of the land Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-29  Security Interests in Land, III Foreclosure: Creditor must go through the court system to ensure that procedures are properly followed Deficiency: Balance owed by the debtor to the creditor-mortgagee Right of redemption: Allows mortgagor to get back land upon payment of the full amount of the debt Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-30  Secured Transactions Involves a creditor who has made a loan to a debtor who agrees to give the creditor a security interest in a collateral – Collateral: Valuable object Article 9 of the Uniform Commercial Code – Set of laws that controls security interests Attachment: Occurs when: – Secured party holds given value – Debtor owns the collateral – Security agreement is provided Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-31  Secured Transactions, II Perfection: Arises when a security interest is attached and creditor has taken all proper steps required by Article 9 Financing statement: Filed to perfect a security interest under Article 9 Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-32  Pop Quiz, II pop pop pop QUIZQUIZQUIZ Do secured interests that are recorded first always take priority over competing interests recorded later? a. Yes b. No Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-38 Property, Use of Resources, and Equal Right of Others Owners can make use of their resources in several ways Property system protects the equal right of all to their resources Laws prevent owners from using their resources to injure the resources of others Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-34  Nuisance and Zoning Public nuisance: Arises from use of land that causes inconvenience or damage to the public Private nuisance: Unreasonable use of one’s property to cause substantial interference with the use of another’s land Zoning ordinances: Laws that divide counties into use districts designated residential, commercial, or industrial Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-35  Case 7.3 - Nuisance Case – Cook v. Sullivan – 829 A.2d 1059 (N.H. Sup. Ct. 2003) – Trial court Issue – Plaintiffs sued the defendants alleging they created a nuisance by filling in wetlands and constructing a home on their property Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-36  Duration Limitations on Property Patents and copyrights are granted for limited times Rule against perpetuities – Limits exercise of property over resources to a duration of lives in being plus twenty-one years – Prevents an owner from controlling resources through many future generations Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-37  Taxation Government provides numerous services for the general welfare and common defense of the nation Federal taxation is a specified power of Congress Taxation of wealth generated by incentives of property system contributes to common good Copyright ©2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 7-38