Real Property Guide: 3 Characteristics of Real Property

Real property refers to a piece of land, any improvements on the land, and the legal rights to use and operate the land granted to the property owner. Real property ownership rights include the ability to sell, lease, or enjoy the property as one sees fit. The main difference between real estate and real property is that real property is inherently accompanied by ownership rights.

Real property encompasses anything on a property that can’t be moved, unlike personal property. This includes most types of fixtures—but not trade fixtures like dental chairs, or display cases—that are attached to the property, including man-made improvements made on the property.

Real estate, real property, and personal property are closely related to one another. Any of these entities can be subject to property taxes, though personal property is the only one of the three that can be physically moved. Here is an overview of how real estate, real property, and personal property are related.

• Real estate: The definition of real estate is the transactional sale or acquisition of real property, which not only includes the land itself but everything permanently attached to the land. This includes natural resources and improvements on the land like houses. Real estate is different from real property because it refers only to the physical property and the structures on it rather than the rights afforded to the owner. Real estate differs from personal property because it is a type of immovable property that is tied to physical land.
• Real property: Real property is different from real estate because real property includes the intangible rights and limitations—like any easements on the property—that come with private ownership. Real property is different from personal property because it is immobile and refers only to things that are physically attached to the estate.
• Personal property: Personal property refers to a person’s moveable possessions that are not attached to a property. This includes clothes, appliances, and other items that may reside in a house but they can be moved. Personal property can become real property if it becomes inseparable from the home. (For example, if a homeowner purchases a chandelier, it is their personal property. If they install the chandelier in their dining room, it becomes a fixture and therefore immovable.) Personal property is different from both real estate and real property because it only includes movable objects that are not tied to a piece of land or its structures.

There are a few characteristics that help distinguish real property from other types of property.

1. 1. It cannot be moved. Real property refers to the raw land of a property—including surface land, mineral rights, and airspace above the property—and the improvements made on that land. This means that real property must remain fixed in a specific place and cannot be moved.
2. 2. Location influences its value. The market value of any piece of real property may fluctuate due to external factors in the area. These can include proximity to resources or commercial centers, air traffic, nearby property values, or even noisy neighbors. Changes in the environment like development, construction, or pollution can also influence the value of real property, depending on whether they are desirable or undesirable changes.
3. 3. It has property rights attached to it. The ‘Bundle of Rights’ is a shorthand term for the legal privileges afforded to an owner of a piece of real property. This includes the rights of possession, control, exclusion, enjoyment, and disposition of the property.

Real property ownership can take a number of forms. Here are some of the most common forms of real property ownership.

1. 1. Joint tenancy: In a joint tenancy agreement, two or more tenants share the ownership and title of a piece of property. Each party is responsible for an equal share of property. If one owner dies in a joint tenancy, ownership transfers to the surviving tenant.
2. 2. Sole ownership: Sole ownership is when one person holds the title to a piece of real property. Properties that are owned by one individual may avoid the payment and legal issues inherent in a property owned by two or more people, but transferring ownership when/ if the owner dies becomes difficult if the owner has not declared an heir.
3. 3. Tenancy in common: Tenancy in common allows two people to share ownership of a property separately, with each owner holding a separate title to the property. Each owner owns a different percentage of the property, though both are entitled to use it equally. Unlike in joint tenancy, however, tenancy in common does not allow a surviving owner to take full ownership of a property if one tenant dies.
4. 4. Tenants by entirety: Tenant by ownership agreements involve two people who operate as a joint entity owning a property together. This is a common type of property ownership held by married couples. The property title is held by both tenants equally. If one tenant dies, the title transfers to the surviving tenant.
5. 5. Community property: Community property is also a common form of ownership used by married couples, but they enter into the ownership as separate individuals rather than a unit. Rights and resources of the property are to be divided equally between the parties in the event that the couple gets divorced.

An estate is the degree of ownership interest that a person holds in a piece of real property. The amount and type of this ownership is broken into two categories: freehold (which involves indefinite ownership) and nonfreehold (which involves renting or leasing). Here are four types of estates in real property.

1. 1. Fee simple: Fee simple estate is a type of freehold estate that affords the owner the most rights out of any real property estate. The owner of a fee simple state controls the property for an indefinite period of time and may transfer the estate to their family heirs when they pass away.
2. 2. Life estate: Life estate is a type of freehold estate that involves ownership of a property for the duration of the owner’s life. When the possessor of a life estate passes away, the property is transferred to the person of their choosing.
3. 3. Tenancy for years: Tenancy for years is a form of non-freehold estate (or leasehold estate) that gives a beginning and end date to the amount of time that the tenant holds rights to the property.
4. 4. Tenancy at will: This type of non-freehold estate gives a tenant rights to the property that may be terminated at any time by the owner or tenant.

All you need is a MasterClass Annual Membership and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market.