Chapter 4: Unit 1 - National Ownership: Real Property Characteristics & Rights (Notes)

Possess (The Bundle of Rights in Real Property)

As mentioned earlier, the concept of property includes the concept of rights. In the bundle of rights associated with owning a parcel of real estate, foremost is the right of possession.

Reliction

Increase in land due to the receding of water from the shore.

Water Rights

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.

Allodial system

Under the allodial system, individuals are entitled to own property without proprietary control by the king/government. The allodial system and the right of individuals to own property is one of the foundations upon which our country was built. All property in the United States is under the allodial system Government entities regulate the following aspects of real property interests: - the bundle of rights: possession, usage, transfer, encumbering and exclusion - legal descriptions - financing - insurance - inheritance - taxation

Alluvion

the actual soil, rock and other matter moved by flowing water which results in accretion

The legal concept of real estate encompasses

- land - All man-made structures that are "permanently" attached to the land

Types and Uses of Real Property

1. Residential Property - is defined as land or improved property with buildings designed for humans to live in (single-family homes, multi-family homes, apartments, vacation homes or condominiums) 2. Industrial property - is land used for industrial purposes (warehouses, factories, distribution centers and power plants) 3. Commercial property - income-producing property, such as office buildings, restaurants, shopping centers, hotels and motels, parking lots and stores. Some industrial properties may also fall into this category. 4. Agricultural property - land used primarily for growing crops or raising livestock (farms, pastureland, orchards and timberland. Zoning ordinances are usually favorable for agriculture use) 5. Special purpose real estate - has a unique use to the persons who own and use it, (churches, hospitals, schools and government buildings) 5.1 - Public open space - usually owned by private persons or the government and includes undeveloped shorelines, public parks and lakes. 5.2 - Recreational areas, such as parks, water access areas, trails and shorelines. These are usually preserved for ecological or educational reasons.

Severable Rights

1. 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 surface water rights. 2. 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. 3. 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.

Fixtures

A personal property item that has been converted to real property by attachment to real estate is called a fixture. (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.

Accretion

An increase of land created by deposits of soil by the natural flow of water.

Littoral rights

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 or 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, and, 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.

Five economic characteristics of land (D.U.S.T.S)

D: DEMAND - The more demand there is for a particular property, the more valuable it is to consumers looking for real estate. U: UTILITY OR USEFULNESS - A three bedroom house is more useful to more consumers than a one or two bedroom house. S: SCARCITY - A property will sell quickly if only a few properties in a particular area are on the market. T: TRANSFERABILITY - When loans are available, and rates are low, real estate is readily transferable from seller to buyer. S: SITUS - (meaning Site) - The unique attractiveness of a property's location is a major determinant of the other economic characteristics. Lack of any of these items diminishes the market value (the price a buyer will be willing to pay) of the property.

Federal regulation

Federal agencies, such as the Federal Housing Administration, promote and regulate home ownership. The Environmental Protection Agency establishes protective usage restrictions and guidelines for dealing with hazardous materials and other environmental concerns. Federal flood insurance legislation requires certain homeowners to obtain flood insurance policies. Federal laws, such as the Federal Fair Housing Act of 1968, prohibit discrimination in housing based on race, religion, color, or national origin. Such laws as the Americans with Disabilities Act prescribe design and accessibility standards.

Local regulation

Focuses on land use control, control of improvements, and taxation. Local controls how all property within the jurisdiction may be developed, improved, demolished, and managed. They have the power to zone land, take over land for the public good, issue building permits, and establish the rules for all development projects. Along with school districts and other local jurisdictions, have the power to levy real estate taxes. Zoning laws regulate the following: - The use of the land - Lot sizes - Types of structures permitted - Building heights - Setbacks (how far back from the street an improvement can be built) - Density (the ratio of land area to improved area) - Types of animals that can or cannot be kept on a property (no pet cougars, etc...) Violation of zoning regulations renders a title unmarketable.

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.

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)

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)

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. (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

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. (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)

Immobility

Land is immobile, since a parcel of land cannot be moved from one site to another. One can transport portions of the land such as mined coal, dirt, or cut plants. However, as soon as such elements are detached from the land they are no longer considered land.

Indestructibility

Land is indestructible in the sense that one would have to remove a segment of the planet all the way to the core in order to destroy it. Even then, the portion extending upward to infinity would remain. For the same reason, land is considered to be permanent.

Heterogeneity

Land is non-homogeneous, since no two parcels of land are exactly the same. Admittedly, two adjacent parcels may be very similar and have the same economic value. However, they are inherently different because each parcel has a unique location.

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. (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)

Personal property

Ownership of anything that is not real estate, and the rights associated with owning the personal property item. Items of personal property are also called chattels or personalty. Chattels are transferred by means of a bill of sale. The Uniform Commercial Code regulates the transfer of chattels and the use of chattels as security for debts. (Everything that sits on the real property)

Real property

Ownership of real estate and the bundle of rights associated with owning the real estate. (When your buying a houses you're actually buying the property that house sits on) (The land and everything that's premeditatedly attached

Emblements

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 and are consider personal property.

The Bundle of Rights in Real Property

Property is not only the item that is owned but also a set of rights to the item enjoyed by the owner. They include the rights to: 1. Possess 2. Use 3. Transfer 4. Encumber 5. Exclude

Improvements

Real estate therefore includes, in addition to land, such things as fences, streets, buildings, wells, sewers, sidewalks and piers. Such man-made structures attached to the land are called improvements. The phrase "permanently attached" refers primarily to one's intention in attaching the item. Obviously, very few, if any, man-made structures can be permanently attached to the land in the literal sense. But if a person constructs a house with the intention of creating a permanent dwelling, the house is considered real estate. By contrast, if a camper affixes a tent to the land with the intention of moving it to another camp in a week, the tent would not be considered real estate.

Riparian rights

Riparian rights concern properties abutting flowing 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. Navigable - if the waterway in question is navigable, it 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. However, the landowner has right to all accretions, which is the land resulting from the soil build-up caused by the natural action of the river or stream. Non-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.

State regulation

State governments are the primary regulatory entities of the real estate business. State governments establish real estate license laws and qualifications. In addition, state governments have established real estate commissions to administer license laws and oversee activities of licensees. State governments also exert regional influence in the usage and environmental control of real estate within the state. Relevant state laws might include laws relating to flood zones, waste disposal, drainage control, shore preservation, and pollution standards. States also play a role in defining how real property may be owned, transferred, encumbered, and inherited (in some states a mortgaged property becomes the legal property of the lender until the mortgage loan is paid) States have the power to levy real estate taxes, but generally pass this power to local government.

What water rights does an owner of a property that contains, or adjoins, a body of water enjoy?

The answer depends on three variables: 1. whether the state controls the water 2. whether the water is moving 3. whether the water is navigable 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. If a proposed usage is reasonable and beneficial, the state will grant a permit, which over time, can attach to the property of the permit holder. If a state does not operate under prior appropriation, it operates under the common law doctrines of littoral rights and riparian rights.

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.

Judicial regulation

The judicial system exerts an influence on real estate ownership and use through decisions based on case law and common law, as distinguished from statutory law. Case law consists of decisions based on judicial precedent. Common law is the collective body of law deriving from custom and generally accepted practice in society.

Encumber (The Bundle of Rights in Real Property)

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.

Transfer (The Bundle of Rights in Real Property)

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 in the property without transferring total ownership. Also, one may transfer ownership while retaining individual interests. 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 transferable, 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.

Use (The Bundle of Rights in Real Property)

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. 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.

Groundwater rights

Water located below the earth's surface, below the saturation point, in underground geological formations called aquifers. Some states employ a rule of capture regarding groundwater use rights. The rule of capture allows a property owner to pump a regulated amount of water. Landowners who negligently remove excessive water may be liable for sinkage in neighboring properties.

Erosion

a gradual loss of land caused by flowing water or wind. The opposite of accretion.

Avulsion

a loss of land by a sudden and large-scale change in water flow (e.g. the ocean washes away the water front during a typhoon, or heavy rains change the flow of a stream). In either event the owner still owns the land underlying the water's previous location.

Intangible property

abstract, having no physical existence in itself, other than as evidence of one's ownership interest. (stock certificates, contracts, patents, copyrights, bonds, trademarks, franchises, listing agreements)

Tangible Property

physical, visible, and material (boats, cars, jewelry, appliances, computers, art work)