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Utilizing the concepts from the readings from this week (posted below), post a message that explains, from your perspective, how an entrepreneur who has amassed a ten million dollar estate consisting of both personal and real property should protect her property while living and yet ensure that the estate is passed on to her heirs. Include a biblical perspective on (or biblical principles regarding) asset management.Cite a minimum of two (2) scholarly peer reviewed sources (beyond your textbook or the Bible) applying APA guidelines (250-450 word count range).Liuzzo, A. L., & Hughes, R. C. (2019). Essentials of Business Law (10th ed.). New York, NY: McGraw Hill Education:Chapter 16, Transfer of Title;Chapter 24, Real and Personal Property;Chapter 25, Bailments;Chapter 26, Landlord-Tenant Relations;Chapter 27, Wills, Intestacy, and Trusts; andGen. 1:26-30; Psalm 24:1, 115:15-16 (Creation Mandate and Dominion).
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26-1
Chapter 26
Landlord-Tenant
Relations
©2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted
without the prior written consent of McGraw-Hill Education.
The Landlord-Tenant Relationship (1)
Landlord: Owner of real property who
temporarily leases his or her right of
possession.
Tenant: Person who agrees to pay for the
use of real property.
The relationship between the two involves
a tenant’s possession, use, and control of
real property in exchange for payment of
rent.
©2019 McGraw-Hill Education
26-2
The Landlord-Tenant Relationship (2)
Lease: Document in which the terms
of rental agreement are spelled out.
• Lessor: Landlord
• Lessee: Tenant
©2019 McGraw-Hill Education
26-3
Difference between a Lease
and a License
License
Lease
• License gives a person
(licensee) right to use
real property for a
specific purpose and
may be canceled at the
will of the landowner
(licensor).
• Lease transfers to a
lessee the right of
possession for a
specific period.
• Lease creates an
estate (interest) in real
property.
• Lease is a form of
contract.
©2019 McGraw-Hill Education
26-4
Essential Elements of the
Landlord-Tenant Relationship
Essentials of a landlord tenant relationship are:
• Tenant may occupy landlord’s property only
with landlord consent.
• Tenant’s rights in property are inferior to
Landlord’s.
• Property reverts (returns) to landlord at lease
termination.
• Parties must agree tenant has right of
immediate possession.
©2019 McGraw-Hill Education
26-5
Lease Is the Basis
of the Relationship
The landlord tenant relationship may be created
by an express or an implied contract.
• While oral contracts of lease are valid under
common law, most state statutes require
written leases in instances where the term of
the lease is greater than one to three years.
• Contracts that cannot be completed in less
than one year must be in writing to be
enforceable per the statute of frauds.
©2019 McGraw-Hill Education
26-6
Covenants, Conditions and the
Law Relating to Leases (1)
Covenants
• Agreement or promise in lease to do particular thing.
• Example: When tenant promises to use property for
certain purposes or landlord promises to make
certain repairs and ensuring tenant’s quiet
enjoyment.
Conditions
• Also called a restriction.
• Included in lease and limits property use.
• Example: If lease stipulates premises will be used
as retail business or entertainment business.
©2019 McGraw-Hill Education
26-7
Covenants, Conditions and the
Law Relating to Leases (2)
The Law Relating to Leases (state laws also
apply):
• Federal Fair Housing Act (as amended)
prohibits housing discrimination based on
race, color, sex, family status, national origin,
religion, and handicap.
• Illegal to refuse to rent to member of protected
class based on protected status.
• Ilegal for landlord to alter terms, privileges, or
lease conditions to make unfavorable to
protected class.
©2019 McGraw-Hill Education
26-8
Types of Tenant Interests in
Real Property (1)
The most common possession interests are:
• Periodic Tenancy
• Possession interest where lease continues for
successive periods for same time length (that is
weekly, monthly, etc.).
• Tenancy for Years
• Most common lease is for specific time—weeks,
months, years.
• Automatically terminates on stated expiration date.
• Tenancy at Will
• Possession interest with no specific duration.
• Lease continues indefinitely until one of the parties
notifies other of desire to terminate lease.
©2019 McGraw-Hill Education
26-9
Example: Tenancy at Will
26-10
Example of Tenancy at Will • Chuck transferred from Chicago to Los
Angeles.
• Chuck rented a house with understanding his
stay would be only a few weeks to a few
months.
• He paid rent weekly and could terminate his
lease at any time by giving the landlord one
week’s notice.
©2019 McGraw-Hill Education
Types of Tenant Interests
in Real Property (2)
Tenancy at Sufferance
• Tenancy at sufferance exists only in one
limited situation—when a tenant wrongfully
extends their tenancy beyond agreed term.
• Not a true tenancy at all since status of tenant
uncertain.
• Landlord may choose either to evict tenant
(unlawful detainer), treat as a trespasser, or
hold tenant to another lease term.
Note: Local and state laws vary on process.
©2019 McGraw-Hill Education
26-11
Rights and Duties
of the Parties (1)
Landlord’s Warranty of Habitability
• In landlord-tenant relationship, law
assumes an implied warranty of
habitability.
• Landlord assures tenant the premises
are reasonably fit for occupancy and
free of defects that would impair health,
safety, or well-being of the occupants.
©2019 McGraw-Hill Education
26-12
Rights and Duties
of the Parties (2)
Landlord’s Right to Rent, Regain Possession, Evict, to
Retain a Tenant’s Security Deposit
• Landlord has right to:
• Collect agreed-upon rent as provided in lease.
• Regain possession of property in good condition at
lease end.
• Evict tenant for nonpayment of rent, illegal use of
premises, or other material violations of lease terms.
• Retain tenant’s security deposit to offset losses
resulting from tenant-caused property damage or
nonpayment of rent.
• Tenant must receive written account of damages
and repair costs.
©2019 McGraw-Hill Education
26-13
Rights and Duties
of the Parties (3)
Landlord’s Right to Keep Fixtures and Permanent
Improvements
• A tenant may wish to make improvements by
attaching fixtures to land or premises.
• Two issues raised by such actions are:
• Does tenant have right to make attachments?
• Does tenant have right to remove fixtures attached
at lease?
• Generally, tenant has right to make reasonable
modifications to leased property in order to make it
suitable for use.
©2019 McGraw-Hill Education
26-14
Rights and Duties
of the Parties (4)
Landlord’s Duty to Mitigate Damages
• Landlord has duty to make reasonable efforts
to reduce, (mitigate) losses resulting from
tenant’s abandonment (voluntary surrender)
of leased premises.
• Landlord must make reasonable effort to find
new tenant to occupy abandoned premises.
• If landlord fails to make reasonable effort,
tenant relieved of obligation under lease to
pay rent for remaining lease term.
©2019 McGraw-Hill Education
26-15
Rights and Duties
of the Parties (5)
Tenant’s Right of Quiet Enjoyment
• Most written leases provide covenants (promises) of
quiet enjoyment of premises, and in many states, this
is implied right.
• Right to quiet enjoyment includes use of leased
premises without unreasonable interference from
landlord or third parties.
• While landlord not always responsible for actions
of third parties they have no control, some courts
hold landlords responsible for acts of tenant who
denied another tenant right to quiet enjoyment.
©2019 McGraw-Hill Education
26-16
Rights and Duties
of the Parties (6)
Tenant’s Right to Acquire and Retain
Possession
• When agreeing to lease property, the
landlord promises the tenant will have
possession of premises on the agreedupon date.
• If premises are occupied by the previous
tenant or under construction, landlord
must take reasonable steps to ensure
the premises are available on date
specified.
©2019 McGraw-Hill Education
26-17
Rights and Duties
of the Parties (7)
Tenant’s Right to Acquire and Retain Possession:
• If landlord interferes with tenant’s right of possession
by evicting tenant without court order of eviction,
tenant has right to terminate lease.
• Eviction: Legal action removing tenant from and
use of premises.
• Actual eviction: Tenant denied physical use of
premises, whether or not eviction court approved.
• Constructive eviction: Tenant’s enjoyment or use
of property substantially lessened as a result of
landlord or other tenant actions, conditions, or
behavior (example, excessive noise, foul odors).
©2019 McGraw-Hill Education
26-18
Rights and Duties
of the Parties (8)
Tenant’s Right to Assign or Sublease
• Assignment of lease: A transfer of tenant’s interest in
entire premises for entire lease term.
• Sublease: Transfer of tenant’s interest for part of
premises or part of lease term.
• Most leases do not allow tenant to assign or sublet
without landlord’s consent.
• Provision may be added that landlord may not
unreasonably refuse consent to assignment or
sublet.
• Landlord prohibited from refusing consent for
reasons resulting in illegal discrimination.
©2019 McGraw-Hill Education
26-19
Termination of Leases (1)
Lease Expiration
• Most common reason for termination is lease
expiration, no matter whether tenancy periodic, for
years, or at will.
• When lease expires landlord required to return any
security deposit to tenant.
Tenant’s Abandonment
• If tenant abandoned premises, not relieved of
obligation to pay rent.
• If landlord violated express or implied duty to provide
tenant quiet enjoyment, tenant may abandon
premises under doctrine of constructive eviction,
terminating lease.
©2019 McGraw-Hill Education
26-20
Termination of Leases (2)
Termination by Forfeiture (Breach)
• Most leases contain provision giving landlord
right to terminate lease if tenant fails to pay
rent or violates material lease provisions.
• BUT, tenant’s breach must be material, that
is, involve an important matter.
• Courts are unlikely to allow termination if
tenant is only a few days late with rent.
©2019 McGraw-Hill Education
26-21
Tort Liability
26-22
When a person is injured on leased
premises, the question of liability arises.
• Person in control of area in which injury
took place is held responsible.
• Landlord remains in control of common
areas, such as hallways, stairways, and
laundry rooms.
• Tenant’s insurance policy will provide
protection for tenant injuries within leased
premises; Landlord for common areas.
©2019 McGraw-Hill Education
Example: Tort Liability
26-23
Facts:
• While visiting a friend’s apartment, Mac
tripped on torn area rug, hit her head on
table, and was injured.
• Mac, reluctant to sue friend, sued
landlord, charging tort of negligence.
• Outcome: Court would hold duty to
maintain premises tenant’s, not landlord’s.
©2019 McGraw-Hill Education
Chapter 27
Wills,
Intestacy,
and Trusts
©2019 McGraw-Hill Education. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted
without the prior written consent of McGraw-Hill Education.
Will
Will: also referred to as a testament, it is a
person’s declaration of how they wish property
to be distributed upon their death.
• Primary purpose of a will is to allow an
individual to designate distribution of their
property after death.
• Intention of the decedent is known as
testamentary intent.
©2019 McGraw-Hill Education
27-2
Language of Wills (1)
27-3
Testator: Person who makes the will.
Probate court: Court responsible for accepting a
will that meets all legal requirements and for
supervising operation of a will.
Personal representative: Person responsible for
settling the affairs of the decedent.
Executor: If the personal representative has
been named in the will, he or she is known as
the executor.
©2019 McGraw-Hill Education
Language of Wills (2)
27-4
Administrator: If the executor is deceased,
declines to serve, is lacking in capacity or if the
decedent dies without making a will, the court
will appoint a personal representative.
Intestate: When a person dies without a will, he
or she is said to have died intestate.
Heir: The term heir is broadly refers to a person
who inherits property either under a will or from
someone who dies intestate.
Beneficiary: Individual who receives gifts of
personal or real property pursuant to a will.
©2019 McGraw-Hill Education
Types of Gifts under Wills (1)
Legacy: Legacy is a gift of money under a will.
Bequest: Gift of personal property.
The two terms are often used synonymously.
• A legacy or bequest is specific, identifying
personal property given, or general, when it
does not identify such property.
• A legacy or bequest may be residuary;
providing for disposition of the balance of the
estate.
©2019 McGraw-Hill Education
27-5
Types of Gifts under Wills (2)
Ademption: When a specific bequest of personal property
is made, but the personal property is disposed of before
the death of the testator.
Devise: A gift of real property.
Example –
• Pieper drafted will leaving –
• Snow blower, to brother-in-law (a specific bequest)
• $25,000 to nephew (a general legacy)
• Summer home to sister (a devise)
• Remainder of estate to life partner (a residuary
legacy).
©2019 McGraw-Hill Education
27-6
Requirement of a Valid Will
A will must comply with the following legal
requirements to ensure testator wishes met and
no obstacles to property transfer •



Requirement of writing
Requirement of witnesses
Testamentary capacity
Undue influence
©2019 McGraw-Hill Education
27-7
Requirement of Writing (1)
In most cases, a will must be in writing, dated,
and signed to be effective.
Holographic will: A will completely handwritten.
• Holographic wills have been challenged
because they included some words not
handwritten, such as stationary letterhead.
• Like other wills, a holographic will must be
signed and dated.
©2019 McGraw-Hill Education
27-8
Requirement of Writing (2)
Nuncupative will: Term used for an
oral will; might be valid in only most
unusual circumstances (for example,
where the testator was under the
imminent danger of death).
• A recording of a decedent’s voice,
offered as a nuncupative will, would
be invalid.
©2019 McGraw-Hill Education
27-9
Requirement of Witness (1)
A formal, printed will must be signed by the
testator and witnessed.
There are no age requirements for witnesses,
but they must be legally competent.
• Minors may witness a will as long as they
have an adequate understanding of what they
are signing and could testify regarding facts
related to the execution of the will.
• Heirs, beneficiaries, or individuals listed in a
will may not sign as witnesses in most states.
©2019 McGraw-Hill Education
27-10
Requirement of Witness (2)
Number of witnesses required varies by state
law.
Witnesses must see testator sign the document,
as they may be called upon later to attest they
actually saw the testator sign.
Witnesses generally must be aware the
document being signed is a will.
Witnesses are expected to be satisfied the
testator is of sound mind at the time of signing.
©2019 McGraw-Hill Education
27-11
Testamentary Capacity (1)
Testamentary Capacity: A testator must be of
sound mind and legal age.
• Some variation exists among the states as to
minimum age.
• It is essential the testator be of sound mind
when the will is made, even as often happens,
mental capacity may deteriorate with passing
years.
If it can be established the testator lacked
testamentary capacity, the will is void.
©2019 McGraw-Hill Education
27-12
Testamentary Capacity (2)
From a legal perspective, a testator is deemed
of sound mind if he or she:
• Is adequately rational to understand the act of
making a will,
• Realizes nature and disposition of his or her
property, and
• Recognizes his or her heirs.
A person who suffers from mental illness may
still be considered of testamentary capacity if he
or she makes a will during a lucid period.
©2019 McGraw-Hill Education
27-13
Undue Influence
Undue Influence: Pressure that might be applied
to a testator to change his or her true wishes for
disposition of property.
• Undue influence may take many forms, from
threats of harm to more subtle suggestions.
In many cases, it is difficult for a court to decide
whether the attention given to an elderly relative
is undue influence or simply loving concern
shown by one of the parties named in the will.
©2019 McGraw-Hill Education
27-14
Example: Undue Influence
27-15
Marley worked for Fran for 15 years.
At age 60 Fran executed will leaving entire estate to
Marley.
Two years later Fran died.
Fran’s grown children challenged will claiming Marley
exercised undue influence over their mother due to
confidential relationship they held.
Outcome: Court held confidential relationship itself could
not be deemed undue influence.
Lacking evidence of undue influence, will allowed to
stand and entire estate passed to Marley.
©2019 McGraw-Hill Education
27-16
Revising and Revoking Wills (1)
Revisions
• Revisions: Any alterations to will, such as erasures,
words crossed out, or handwritten insertions usually
invalidate will.
• To make legal changes in will, a separate document,
called a codicil is prepared to revoke, alter, or revise
will.
• Execution of codicil has formal requirements much
like a new will.
• Must be witnessed and dated.
• No limit on number of codicils that may be made.
©2019 McGraw-Hill Education
Revising and Revoking Wills (2)
Revocations
• Many wills include a statement the testator is revoking
all previous wills.
• Even without such a statement, the most recent will, if
valid, automatically revokes all prior wills made by
testator.
• Revocations by operation of law, may change the
disposition of gifts; may result from:
• Marriage or remarriage of testator.
• Divorce or annulment of a marriage.
• Birth or adoption of children after will was made.
©2019 McGraw-Hill Education
27-17
27-18
Example: Revising or Revoking Wills
Paul, a widower, executed a will leaving entire estate to
his two children, Robert and Susan, equally.
Years later Paul married, fathered three children, and
struggled to make ends meet.
Susan remained single and enjoyed great financial
success.
Paul felt Robert needed money more than Susan.
To change distribution of his estate so that a greater
portion goes to Robert, Paul executed a new will.
©2019 McGraw-Hill Education
Intestacy
Person dies intestate if they die without a will, or
had will failing to meet legal requirements.
• If die intestate, state law in which deceased
was domiciled (where lived) governs
disposition of their property, even though
death may have occurred elsewhere.
Laws vary by state.
• Generally, a surviving spouse and children
receive the entire estate.
©2019 McGraw-Hill Education
27-19
Trusts
Trust: A legal device or mechanism permitting
personal or real property to be held by one
party, trustee, for the benefit of another,
beneficiary.
• Some trusts have characteristics of a will.
One benefit of a trust is that it allows the legal
title of property to be separated from the benefits
of ownership.
• In addition, creation of a trust under these
circumstances may result in favorable tax
treatment.
©2019 McGraw-Hill Education
27-20
Types of Trusts (1)
Testamentary Trust
• Type of trust created by a will.
• It only becomes effective upon the death
of the testator.
• Names of the parties—beneficiaries and
trustee—are specified in the will.
©2019 McGraw-Hill Education
27-21
Types of Trusts (2)
Living Trust
• Trust is established while the person
(settlor) who wishes to set up the trust is
still alive (also known as an inter vivos
trust).
• Settlor transfers legal title of property to
the trust to be held for benefit of either a
beneficiary or settlor himself or herself,
possibly providing tax advantages to the
settlor.
©2019 McGraw-Hill Education
27-22
Role of Trustee (1)
Responsibility of the trustee is that of a fiduciary
and is one of great responsibility.
• Trustee must manage the property according
to wishes of the settlor, who may be
deceased.
Appointment as a trustee should not be
accepted unless one has the temperament,
knowledge, and skills n …
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