Chapter 1

Real Property Introduction

Overview

  • This chapter covers the basics of property ownership, including:

    • Real property

    • Personal property

    • Fixtures and trade fixtures

    • Land rights

    • Water rights

    • Land characteristics

Classifications of Property

  • The American legal system recognizes two major classifications of property:

    • Real Property: Property that cannot be physically moved, including land, improvements, and a bundle of legal rights.

    • Personal Property: Property that is movable and not permanently fixed to one location.

  • Differences between real property and personal property are essential for students to understand.

Real Property

Definition

  • Real Property: Defined as property that cannot be physically moved. It includes:

    • Land: The Earth’s surface extending downward to the center of the Earth and upward to infinity.

    • Improvements: All man-made structures permanently attached to the land.

    • Bundle of Legal Rights: The interests, benefits, and rights automatically included in ownership of real property.

Components of Real Property

  1. Land:

    • Defined as the Earth's surface with boundaries, often referred to in real estate as a parcel, tract, or lot.

    • Often interchangeably used but refer to the same concept.

  2. Improvements:

    • Man-made structures attached to land: houses, buildings, driveways, sewers, landscaping, etc.

    • Improvements are considered real property because they are immobile.

      • Raw Land: Unimproved land, generally just dirt, grass, shrubs, and trees.

      • Improved Land: Land that has undergone development with man-made structures.

  3. Fructus Naturales:

    • Naturally growing or planted trees, shrubs, and grasses considered real property because they remain with the property when sold.

Title and Transfer of Real Property

  • Title: Ownership of real property.

    • Owning real property is referred to as "holding title".

    • Title can be transferred through:

    • Deed: A legal document used to convey title between living parties.

    • Will: A legal document that states how an individual’s assets are distributed upon death.

  • Convey: Means to transfer title via sale, gift, or inheritance either through a deed or a will.

  • Conveyance: The act of transferring title.

Bundle of Legal Rights

  • Holding title involves a bundle of legal rights which include:

    1. Right of Possession: Owner holds title and thus owns the property.

    2. Right to Control: Owner can determine use of the property, within legal constraints.

    3. Right of Enjoyment: Owner can lawfully enjoy the property.

    4. Right of Exclusion: Owner can prevent others from entering or using the property, except under law (e.g., a search warrant).

    5. Right of Disposition: Owner can transfer title of the property.

Personal Property

Definition

  • Personal Property: Any property not classified as real property.

    • Movable and not fixed permanently to one location.

    • Can be tangible (physical) or intangible (non-physical, such as stocks).

    • Change of ownership typically occurs via a bill of sale, not a deed or will.

Types of Personal Property

  1. Chattels: Tangible personal property like furniture and clothing.

  2. Chattels Agreement: An agreement outlining the transfer of personal property in a sales contract.

  3. Emblements (Fructus Industriales): Anually cultivated crops removable at harvest.

    • Distinguish from fructus naturales which are not movable.

Changing Property Status

  • Severance: Changing real property to personal property.

    • Example: Cutting down a tree for firewood.

  • Annexation/Attachment: Changing personal property to real property.

    • Example: Installing a driveway using cement, gravel, and sand.

Fixtures

Definition

  • Fixture: An item initially considered personal property but becomes real property once installed attached to a property.

    • Installation should create the appearance of permanence and remain with the property upon sale.

Examples of Fixtures

  • Initially considered personal property until attached:

    • Sink faucets, heating systems, water heaters, light fixtures, kitchen cabinets, toilets.

  • Rule of Thumb: A fixture is something that is "nailed, glued, or screwed" to the property, and if removed, makes the item inoperable.

    • Items easily moved without tools (like microwaves) remain personal property.

Comparison of Fixtures and Personal Property

  • **Fixture Examples:

    • Sink & Faucet:** Fixture

    • Toilet:** Fixture

    • Dryer: Personal Property (not a fixture)

Trade Fixtures

  • Trade Fixtures: Items used for business installations in a commercial property that can be removed by the business owner.

    • Examples include hydraulic barber chairs, beauty parlor sinks, and store shelves.

Land Rights

Types of Land Rights

  • When buying residential properties, the land and its rights are typically sold together.

  • In commercial real estate, land rights can be distinct:

    1. Air Rights: Ownership rights extending from land surface to air space above.

    2. Surface Rights: Limited to the ownership of land on the surface.

    3. Mineral Rights (Subsurface Rights): Rights to natural resources beneath the surface.

Water Rights

  • Water Rights: Rights associated with land abutting bodies of water.

  • Different doctrines govern water rights:

    1. Prior Appropriation: States control water bodies, requiring permits for use.

    2. Common Law Doctrines: Include Littoral Rights (for non-flowing water like lakes) and Riparian Rights (for flowing water like rivers).

Littoral Rights

  • Apply to properties bordering non-flowing bodies of water (lakes).

    • Ownership extends to the high-water mark, but not beneath the water.

Riparian Rights

  • Apply to properties bordering flowing bodies of water:

    • Navigable Waterways: Ownership extends to the water's edge; the state owns the land underneath.

    • Non-Navigable Waterways: Ownership extends to the midpoint of the waterway, with rights to use water and land underneath.

Land Terms to Know

  • Alluvion: Silt moved by flowing water resulting in accretion.

  • Accretion: Increase in land area due to deposited alluvion.

  • Erosion: Gradual land loss from natural forces.

  • Avulsion: Sudden land loss due to nature (e.g., earthquakes) with no change in property lines.

  • Reliction: Increase in land due to water retreating.

Appurtenances

  • Appurtenances: Rights, benefits, and improvements that transfer with real property.

    • Common examples include:

    • Buildings, easement rights, water rights, fences, in-ground pools.

  • An appurtenance is something intended to remain permanently with the property upon sale.

Land Characteristics

  • The value of real property is determined by economic and physical characteristics.

Economic Characteristics

  1. Scarcity: The supply of land relative to its demand in a location.

  2. Modifications/Improvements: The effect of property improvements on value can be positive or negative.

  3. Permanence of Investment/Fixity: Long-term impacts of infrastructure investments on property value.

  4. Area Preference/Situs: The desirability of a location which significantly affects property value. Particularly significant in real estate.

Physical Characteristics

  1. Immobility: Land cannot be moved.

  2. Indestructibility: Land cannot be destroyed.

  3. Non-homogeneity/Uniqueness: No two parcels of land are the same; differences in size, shape, location, and appearance.