REAL VS PERSONAL PROPERTY AND BASIC PROPERTY RIGHTS
Property essentials 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
Tangible Intangible
| Real Property | all types | |
| Personal Property | boat, car, jewelry | stock certificate, contract, patent |
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.
Fixtures
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.
Differentiation criteria
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
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.
Emblements
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
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 housing that conforms 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.
Conversion
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 |
Bundle of rights
Real property rights consist of the bundle of rights associated with owning a parcel of real estate. Foremost of these rights is the right of possession.
The right to use a property refers to the right to use it in certain ways, such as mining, cultivating, landscaping, razing, and building on the property. The right is subject to the limitations of local zoning and the legality of the use. One’s right to use may not infringe on the rights of others to use and enjoy their property. For example, an owner may be restricted from constructing a large pond on her property if in fact the pond would pose flooding and drainage hazards to the next door neighbor.
The right to transfer interests in the property includes the right to sell, bequeath, lease, donate, or assign ownership interests. An owner may transfer certain individual rights to the property without transferring total ownership. Also, one may transfer ownership while retaining individual interests. For example, a person may sell mineral rights without selling the right of possession. On the other hand, the owner may convey all rights to the property except the mineral rights.
While all rights are transferrable, the owner can only transfer what the owner in fact possesses. A property seller, for example, cannot sell water rights if there are no water rights attached to the property.
The right to encumber the property essentially means the right to mortgage the property as collateral for debt. There may be restrictions to this right, such as a spouse’s right to limit the degree to which a homestead may be mortgaged.
The right to exclude gives the property owner the legal right to keep others off the property and to prosecute trespassers.
The Bundle of Rights
Separable rights
The bundle of real property rights also applies separately to the individual components of real estate: the air, the surface, and the subsurface. An owner can, for example, transfer subsurface rights without transferring air rights. Similarly, an owner can rent air space without encumbering surface or subsurface rights. This might occur in a city where adjoining building owners want to construct a walkway over a third owner’s lot. Such owners would have to acquire the air rights for the walkway. If the city wants to construct a subway through the owner’s subsurface, the city has to obtain the subsurface rights to do so.
An ordinary lease is a common example of the transfer of a portion of one’s bundle of rights. The owner relinquishes the right to possess portions of the surface, perhaps a building, in return for rent. The tenant enjoys the rights to possess and use the building over the term of the lease, after which these rights revert to the landlord. During the lease term, the tenant has no rights to the property’s subsurface or airspace other than what the building occupies. Further, the tenant does not enjoy any of the other rights in the bundle of rights: he cannot encumber the property or transfer it. To a limited degree, the tenant may exclude persons from the property, but he may not exclude the legal owner.
Surface rights. Surface rights apply to the real estate contained within the surface boundaries of the parcel. This includes the ground, all natural things affixed to the ground, and all improvements. Surface rights also include water rights.
Air rights. Air rights apply to the space above the surface boundaries of the parcel, as delineated by imaginary vertical lines extended to infinity. Since the advent of aviation, air rights have been curtailed to allow aircraft to fly over one’s property, provided the overflights do not interfere with the owner’s use and enjoyment of the property. The issue of violation of air rights for the benefit of air transportation is an ongoing battle between airlines, airports, and nearby property owners.
Subsurface rights. Subsurface rights apply to land beneath the surface of the real estate parcel extending from its surface boundaries downward to the center of the earth. Notable subsurface rights are the rights to extract mineral and gas deposits and subsurface water from the water table.
Water rights
Water rights basically concern the rights to own and use water found in lakes, streams, rivers, and the ocean. In addition, they determine where parcel boundaries can be fixed with respect to adjoining bodies of water. What water rights does an owner of a property that contains or adjoins a body of water enjoy? The answer depends on three variables:
- whether the state controls the water
- whether the water is moving
- whether the water is navigable
Doctrine of Prior Appropriation. Since water is a resource necessary for survival, some states — particularly those where water is scarce — have taken the legal position that the state owns and controls all bodies of water. Called the Doctrine of Prior Appropriation, this position requires that property owners obtain permits for use of water. Florida does not operate under this doctrine per se, but under the common law doctrines of littoral rights and riparian rights, as modified by the Prior Appropriation concept of “first in time, first in right” and codified in the Florida Water Resource Act.
Littoral rights. Littoral rights concern properties abutting bodies of water that are not moving, such as lakes and seas. Owners of properties abutting a navigable, non-moving body of water enjoy the littoral right of use, but do not own the water nor the land beneath the water. Ownership extends to the high-water mark of the body of water.
The legal premise underlying the definition of littoral rights is that a lake or sea is a navigable body of water, therefore, public property owned by the state. By contrast, a body of water entirely contained within the boundaries of an owner’s property is not navigable. In such a case, the owner would own the water as well as unrestricted rights of usage.
Littoral rights attach to the property. When the property is sold, the littoral rights transfer with the property to the new owner.
Riparian rights. Riparian rights concern properties abutting moving water such as streams and rivers. If a property abuts a stream or river, the owner’s riparian rights are determined by whether the water is navigable or not navigable. If the property abuts a non-navigable stream, the owner enjoys unrestricted use of the water and owns the land beneath the stream to the stream’s midpoint. If the waterway in question is navigable, the waterway is considered to be a public easement. In such a case, the owner’s property extends to the water’s edge as opposed to the midpoint of the waterway. The state owns the land beneath the water.
One’s riparian rights to use flowing water are subject to the conditions that:
- the usage is reasonable and does not infringe on the riparian rights of other owners downstream
- the usage does not pollute the water
- the usage does not impede or alter the course of the water flow.
Like littoral rights, riparian rights attach to the property.
Processes that affect water rights and ownership. Through natural processes, water moves and land grows and shrinks, possibly changing ownership rights. Noteworthy among these processes are
- accretion – the process whereby land increases due to the accumulation of rock, soil, and sand carried by water
- alluvion – land that results from accretion, such as at the mouth of a river; the landowner owns the deposited material
- erosion – loss of land through the action of wind and water; the landowner may lose land
- reliction – the uncovering of underwater land by the receding of water; new land usually belongs to the owner of the previously covered area
