As is the case with many real estate terms, “real property” isn’t as simple as it sounds. Real property is legalese to classify land and any fixtures integrated with it, such as the house, other buildings, crops, ponds and more. Knowing which elements of your home are legally recognized as real property will help you understand what rights you have to the natural and man-made resources around you.
Real Property, Defined
Let’s break down the phrase “real property.” Property signifies a legal possession, right and use of an object, whether it be tangible or intangible. The Cornell Legal Information Institute defines real property as “not only the face of the earth, but everything of a permanent nature over or under it.” Conceptually, it’s easy to think of it as everything you would inherit rights to at the transfer of ownership of a property. For example, house hunters ought to know that the playground set, if freestanding, likely isn’t explicitly bundled with the real property you’re seeking to purchase.
Every property deed, lease, or other transfer of ownership document will include a property description that explicitly identifies the perimeter of ownership, whether it be marked by a glimmering lakeshore or a fence.
Types Of Real Property
Once you understand what encompasses your real property, it’s important to understand how that property is owned. There are three major different classifications of estates, separated by duration of ownership: freehold, nonfreehold and concurrent ownership.
Freehold estates allow ownership for an indefinite period of time and include, but are not limited to, the following:
- Fee simple: Simply put, a fee simple ownership is indefinite. Fee simple estates, often confused with fee absolute estates, are the most common and most valuable property type. Owners of fee absolute properties have the right to make any legal changes to the property, to sell the property or transfer ownership to beneficiaries.
- Life estate: Life estate is a special ownership type that’s tied to the life expectancy of the grantee, called a “life tenant.” When the life tenant passes away, the ownership will be transferred to the person of their choosing. During the lifetime of the life tenant, the designated heir is enjoying a future interest ownership.
Nonfreehold estates, on the other hand, are property types limited by duration. The most common type is the leasehold. If you’ve ever rented an apartment or a house, you’ve entered into a leasehold agreement, which grants lessees the right to occupy land owned by the lessor.
Concurrent estates are owned by two or more individuals at the same time. If two or more people own equal rights to a property, they have entered into a tenancy in common (TIC) estate, not to be confused with joint tenancy estates. TIC owners may own varying percentages of the property, but will each have total access to the property and can sell their share of the property without approval by the other owners.
What Are Examples Of Real Property?
Real property is anything affixed to the land in question. Examples of real property include, but are not limited to, the following:
- Accessory dwelling unit
- Basketball court
- Mineral rights
- Private road
- Sewage system
Real property laws vary from state to state. Some states may designate trees as personal property if their removal does not damage the land. State law also varies when it comes to defining ownership rights to the land under the property. If you plan to make significant changes to the land on a prospective home, it’s wise to consult with a local contractor who is familiar with local laws.
What’s The Difference Between Real Property And Personal Property?
If you’re not sure if something is real or personal property, ask yourself this: Is it moveable? If not, it’s likely real property. Let’s say you purchased a lakefront property and decided to build a dock. You bought power tools, some nails, the wood to construct the dock and anything else you might need. As individual pieces, these supplies are your personal property. Once you’ve built the dock and affixed it to the land, it’s no longer moveable and has become real property.
What’s The Difference Between Real Estate And Real Property?
You may be more familiar with the concept of real estate than the concept of real property and for good reason. Real estate describes the plot of land and the man-made and natural resources attached to it, whereas real property describes an individual’s legal limits and liberties on how to use said real estate. Think of it this way: real estate is tangible land, buildings and garden beds.
Bundle Of Rights
Real property is a concept, most often used by lawyers, that attaches what’s known as the bundle of rights to a real estate property. The bundle of rights is nearly universally recognized as:
- The right of possession: The title holder owns dominion over the property.
- The right of control: The title holder can make any legal changes to the property, provided they don’t break any covenant rules with a homeowner’s association.
- The right of exclusion: The title holder holds sole permission of entry to the property, excepting warrants to search the property.
- The right of enjoyment: The title holder is allowed to enjoy their property in any (legal) manner they desire.
- The right of disposition: Once the title holder maintains full equity in the property (no longer mortgaged), they may transfer ownership however they legally choose.
After all, what’s the point of investing in real estate without the above legal rights?
Managing Real Property
No matter what side of the table you’re on – buyer or seller of real property – developing real property can increase the value and, eventually, return on investment if properly maintained. Don’t get too attached to your self-made shed or garden. You can’t take the real property with you, but you can enjoy your well-earned sweat equity when you sell.
Buyers, find out the maximum home price you can afford with our Home Affordability Calculator.