In common understanding, property is something that is owned by someone. A car is the property of Bill Brown if Bill Brown owns the car. If the item is not owned, it is not property. For example, if a car is abandoned and left to rust in the desert, the car is no longer property, since no one claims ownership. Similarly, the planet Jupiter is not property, since no one owns it.
From a more technical standpoint, property is not only the item that is owned but also a set of rights to the item enjoyed by the owner. These rights are commonly known as the “bundle of rights,” explained further below.
In owning property, one has the right to possess and use it as the law allows. The owner has the right to transfer ownership of the item (sell, rent, donate, assign, or bequeath). The owner may also encumber the item by mortgaging it as collateral for debt. Finally, the owner has the right to exclude others from use of the item. In the example of the car, when Bill Brown bought the car, the car became his property: he owned the car itself. At the same time, he also acquired the legal rights to transfer, use, encumber, exclude, and possess the car.
Classifications of property. Our legal system recognizes two classifications of property: real property and personal property. Real property is ownership of real estate and the bundle of rights associated with owning the real estate. Personal property is ownership of anything which is not real estate, and the rights associated with owning the personal property item. Items of personal property are also called chattels or personalty.
Note: since all real estate in the United States is owned by some person, private organization, or government entity, all real estate in the country is real property. Given that fact, this text will follow the customary practice of using the two terms interchangeably and synonymously.
Tangible versus intangible property. Real and personal property may be further categorized as tangible or intangible property. Tangible property is physical, visible, and material. Intangible property is abstract, having no physical existence in itself, other than as evidence of one’s ownership interest.
Tangible vs. Intangible Property
|Real Property||all types|
|Personal Property||boat, car, jewelry||stock certificate,|
All real estate, by its physical nature, is tangible property. Personal property may be tangible or intangible. Boats, jewelry, coins, appliances, computers, and art work are examples of tangible personal property. Stocks, copyrights, bonds, trademarks, patents, franchises, and listing agreements are examples of intangible personal property.
In conveying real property, it is vitally important to recognize the distinctions between personal property and the real property that is to be conveyed. Confusion can arise because items of property may be either personal property or real property, depending on circumstances.
The primary criterion for distinguishing real from personal property is whether the item is permanently attached to the land or to structures attached to the land. For example, a tree growing in one’s yard is an item of real property. However, when the owner cuts the tree down, it becomes personal property. Similarly, a swimming pool pump on a shelf in the owner’s garage is personal property. When it is installed with the rest of the pool, it becomes real property.
While the “attachment” criterion is pivotal in distinguishing between real and personal property, there are other tests to be applied. In addition, the attachment rule is subject to exceptions.
A personal property item that has been converted to real property by attachment to real estate is called a fixture. Typical examples are chandeliers, toilets, water pumps, septic tanks, and window shutters.
The owner of real property inherently owns all fixtures belonging to the real property. When the owner sells the real property, the buyer acquires rights to all fixtures. Fixtures not included in the sale must be itemized and excluded in the sale contract.
In the event that the attachment criterion is insufficient to determine whether an article of property is real or personal, a court may apply one or more of the following additional criteria.
Intention. One’s original intention can override the test of movability in determining whether an item is a fixture or not. If someone attached an item to real property, yet intended to remove it after a period of time, the article may be deemed personal property. If a person intended an article to be a fixture, even though the item is easily removable, the article may be deemed a fixture.
For example, an apartment renter installs an alarm system, fully intending to remove the system upon lease expiration. Here, the alarm system would be considered personal property.
Adaptation. If an item is uniquely adapted to the property, or the property is custom-designed to accommodate the item, it may be deemed real property whether the item is easily removable or not. House keys, a garbage compactor, and a removable door screen are examples.
Functionality. If an item is vital to the operation of the building, it may be deemed a fixture, even though perhaps easily removable. Window-unit air conditioners and detachable solar panels are possible examples.
Relationship of parties. If a tenant installs a fixture in order to conduct business, the fixture may be considered a trade fixture, which is the tenant’s personal property.
Sale or lease contract provisions. In a sale or lease transaction, the listing of an item in the contract as a personal property item or a fixture overrides all other considerations. Unless otherwise stated as exceptions, all fixtures are included in the sale. For example, if a sale contract stipulates that the carpeting is not included in the sale, it becomes a personal property item. If the carpeting is not mentioned, it goes with the property, since it is attached to the floor of the building.
Trade fixtures, or chattel fixtures, are items of a tenant’s personal property that the tenant has temporarily affixed to a landlord’s real property in order to conduct business. Trade fixtures may be detached and removed before or upon surrender of the leased premises. Should the tenant fail to remove a trade fixture, it may become the property of the landlord through accession. Thereafter, the fixture is considered real property.
Examples of trade fixtures include a grocer’s food freezers, a merchant’s clothes racks, a tavern owner’s bar, a dairy’s milking machines, and a printer’s printing press.
Growing plants, including agricultural crops, may be either real property or personal property. Plants and crops that grow naturally without requiring anyone’s labor or machinery are considered real property.
Plants and crops requiring human intervention and labor are called emblements. Emblements, despite their attachment to land, are considered personal property. If an emblement is owned by a tenant farmer, the tenant has the right to the harvested crop whether the tenant’s lease is active or expired. If the tenant grew the crop, it is his or her personal property, and the landlord cannot take it.
Factory-built housing consists of dwelling units constructed off-site and transported to and assembled on a building site. The category also includes readily moveable housing of the type that can be relocated from place to place, once known by the term mobile home. The National Manufactured Housing Construction and Safety Standards Act of 1976 defined the types of factory-built housing and retired the mobile home designation. Manufactured housing is factory-built housingthatconforms to HUD standards. Factory-built housing may be considered real property or personal property, depending on whether it is permanently affixed to ground that is owned or leased long-term by the housing owner, according to Florida law. Real estate practitioners should understand the local laws before selling any kind of factory-built housing.
The classification of an item of property as real or personal is not necessarily fixed. The classification may be changed by the process of conversion. Severance is the conversion of real property to personal property by detaching it from the real estate, such as by cutting down a tree, detaching a door from a shed, or removing an antenna from a roof. Affixing, or attachment, is the act of converting personal property to real property by attaching it to the real estate, such as by assembling a pile of bricks into a barbecue pit, or constructing a boat dock from wood planks.
Real Property vs. Personal Property
|Real Property||Personal Property|
|land, fixtures, attachments, conversions by affixing||trade fixtures, emblements, conversions by severance|