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Real Property and the Law. LEARNING OBJECTIVES:. Define and describe land , real estate and real property . Define and describe surface rights , subsurface rights and air rights . Describe the differences between real property and personal property .

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Real Property and the Law


  • Define and describe land, real estate and real property.
  • Define and describe surface rights, subsurface rights and air rights.
  • Describe the differences between real property and personal property.
  • Define and describe the differences between a fixture and a trade fixture.
  • Identify and apply the legal tests of a fixture.
  • List and explain the economic and physical characteristics of real property.
  • Identify and explain the concept of the bundle of legal rights in the ownership
  • of real property.
Real Property and the Law


Definitions (See Figure 2.1)

A. Land—the earth's surface extending downward to the center of the earth and

upward to infinity, including things permanently attached by nature, such as trees and water

B. Real estate—the land and all things permanently attached to it by either nature or by man (improvements)

C. Real property—real estate plus the interests, benefits and rights inherent in the ownership of real estate In Practice: "real estate" and "realty" are casual uses of the term accurately described as "real property“

D. Surface rights - may be sold or leased to others

E. Subsurface rights—includes rights to minerals and other substances in the

ground. Such rights may be sold or leased to others in the same manner as

surface rights and independent of surface ownership.

Real Property and the Law


Definitions (See Figure 2.1)

F.Air rights may also be sold or leased independent of surface ownership

Solar or sun rights have become an ownership issue in recent years

primarily because of solar energy applications that require direct access to


G. Personal property—all property that does not fit the definition of real property

1. Movable Characteristic; chattel (See Figure 2.2)

2. An item of real property may be changed to personal property

through severance.

a. Trees, perennial shrubbery and grasses not requiring annual

cultivation are real property (Fructus naturales)

b. Crops with a growing season of less than a year (annuals),

known as emblements, are personal property (Fructus


Real Property and the Law


Definitions (See Figure 2.1)

3. An item of personal property may become real estate by


a. Construction materials routinely become real estate.

b. Mobile homes, manufactured housing, and modular housing laws vary regarding whether such housing becomes real estate when and how it is permanently attached to the ground.

H. Classification of Fixtures

1. Fixture—an article that was once personal property but has

been so affixed to land or a building that the law now recognizes it as part of the real estate

Real Property and the Law


Definitions (See Figure 2.1)

2. Legal tests of a fixture

a.The intention of the annexer

b.The method of annexation

c.The adaptation to real estate

d.The existence of an agreement

3. Trade fixture—an article owned by a tenant and attached to rented space or a building for use in operating a business

a. Tenant’s personal property

b. Must remove on or before last day of lease.

c. Not removed - becomes landlord’s real property.

4. Importance in a real estate transaction—to avoid confusion about which items are intended to be included in the sale, they should be clarified when a property is listed and the sales agreement is negotiated,

Real Property and the Law


Ownership of Real Property / Bundle of legal rights (see Figure 2.2)

A. The concept comes from old English law

B. The bundle of legal rights includes the rights of

1 .Possession—the right to occupy the premises

2. Control—the right to determine certain interests for others

3. Enjoyment—possession without harassment or interference

4. Exclusion—legally refusing to create interests for others

5. Disposition—determining how the property will be disposed of

6. Encumbrance —the right to use property as security for loan

Real Property and the Law

Characteristics of Real Estate that Affect its Nature and Use

A. Economic characteristics (SIPA)

1. Scarcity—although the total supply of land is not in short supply,

land of a particular quality or location may be limited.

2. Improvements—they can affect both the improved parcel and

surrounding parcels, either favorably or unfavorably.

3. Permanence of investment—improvements are considered to

create fixed investments.

4. Area preference—peoples' choices of one area or site over another

(situs); the most important economic characteristic

B. Physical characteristics (IIU)

1. Immobile—the geographic location of any given parcel of land can

never be changed.

2. Indestructible—land is durable and indestructible, even though

erosion, flood, volcanic action, and fire may change its topography

and value.

3. Unique—the law holds that no two parcels of land are exactly the same;

this uniqueness is also known as "nonhomogeneity" or “heterogeneity.“


Real Property and the Law


  • Laws Affecting Real Estate
  • A. Specific areas of Law important to real estate practitioners
        • 1. Law of Contracts 2. General Property Law 3. Law of Agency
        • 4. State Real Estate License Law 5. Federal Regulations
        • 6. Zoning and Land Use laws 7. Environmental regulations
        • 8. Federal, state & local tax laws
  • B. Real Estate Practitioners may not act as an attorneys
  • C. Real Estate license laws
  • 1. Purpose is to protect the public interests by promoting confidence in
  • brokerage ndustry
  • 2. All 50 states, District of Columbia and Canadian provinces require licensing
  • 3. State laws similar, but differ in detail
  • 4. Specific education and personal requirements for licensure
  • 5. Exam required
  • 6. Certain standards of ethical and personal conduct required
  • 7. Some states require continuing education courses for license renewal

Real Property and the Law



1. How does distinguishing between real estate and personal property affect local

real estate transactions? What common problems arise between buyers and


2. Both a house and a car are useful investments. What makes the difference