Real vs. Personal Property

  • Real Property: land and everything permanently attached to it, plus bundle of legal rights

    • Land

    • Improvements (buildings, fences, roads, driveways)

    • Fixtures (attached to land or improvements)

    • Air, surface, and subsurface (mineral) rights

    • appurtenances (easements, water rights, etc.)

    • Bundle of rights: possession, control, enjoyment, exclusion, and disposition

  • Personal property: everything else

    • Furniture, clothing, tools, trade fixtures, crops (in some cases), appliances not attached (e.g., freestanding fridges)

    • Trade fixtures (special case)

      • Items installed by tenants for business use

      • Personal property even though attached

      • Must be removed before lease ends or they become landlord’s property (by accession)

  • Conversion between real and personal property

    Term

    Definition

    Annexation

    Turning personal to real (e.g., installing a sink)

    Severance

    Turning real to personal (e.g., removing a ceiling fan)

    Affixing

    Physically attaching personal property to real property

  • Fixture test: use MARIA acronym

    Letter

    Factor

    Example

    M

    Method of attachment

    Bolted, cemented, nailed?

    A

    Adaptability

    Custom-fit blinds? Built-in fridge?

    R

    Relationship of parties

    Buyer vs. seller; tenant vs. landlord

    I

    Intention of the party

    Was it meant to stay?

    A

    Agreement

    Was it written in the contract?

  • MN specific

    • Fixtures in purchase agreements

      • Disputes often occur around:

        • Light fixtures

        • Curtains/drapes

        • Wall-mounted TVs

        • Appliances

      • MN Standard purchase agreements include a checklist for buyers and sellers to specify what stays/goes

      • UCC rules of fixtures

        • Uniform Commercial Code (UCC) applies when personal property is financed (e.g., a seller financed appliance)

        • If a financed fixture is removed, the lender may have a security interest, even after sale

    • Crops in MN

      Crop Type

      Real or Personal?

      Fructus naturales (naturally growing perennial)

      Real (e.g., frees, shrubs)

      Fructus industirales (annual crops, like wheat, corn)

      Personal (can be harvested and sold separately)

    • MN disclosure tip: best practice to use detailed disclosure and written agreements listing inclusion and exclusions