Real Estate, Real Property, and Land — Basic Definitions and Concepts
Though often used as synonyms, there are subtle distinctions among the terms. Land primarily refers to the surface of the ground and all natural objects within it or on top of it. Theoretically, land is the section of the earth's sphere, and includes all earth down to the center, and upward into space. Yes, it's nice to know that as a real estate owner, you own a significant part of the universe. As a practical matter, land is the surface and anything underneath within reach of technology, and no, the sky isn't the limit, but a land owner does enjoy some air rights, although with the advent of modern air travel and neighbors these rights have been limited by necessity. After all, Joe, your neighbor, isn't going to get a tan basking in the shadow of your skyscraper.
Real estate is land and any additions and improvements, such as buildings, sewers, sidewalks, and anything else considered permanently attached to the land. This is yet another reason why real estate doesn't extend into space, as some textbooks on the subject claim, because space isn't attached to it. As the earth rotates, and revolves about the sun, which in turn is revolving around the center of the galaxy, and so on, the space over real estate is always changing. The citizens of Alpha Centauri can breathe easier, knowing that you will never press any of your claims against them because they happened to be in â€œyourâ€ particular sector of space that happens to be over your land at that moment.
And there are problems with claiming ownership beneath the surface of your land. Do you own the oil down below, for instance? Technically you do, but oil has 2 characteristics that might make it difficult for you to retain ownership. It is liquid, and usually extends over a large area, crossing many real estate boundaries. If your neighbor, who might be miles away and where the oil might be closer to the surface, drills a well and starts pumping it out, the oil will flow from under your land to under his.
Thus, there are practical, technical, and legal limitations to real estate ownership. The reality is real estate is basically the surface, anything permanently attached to it, anything that can be extracted from the surface, and certain air rights.
Fixtures are artificial improvements to the land or any of its buildings. A fixture is considered real property if that is how it is treated by the owners, if the attachment is considered permanent, and if the parties to any sale treat it as such. If there is any doubt as to what is a fixture and what is personal property, then any sales agreement should remove that doubt. Examples of ambiguous items are satellite dishes, carpeting, bookcases, and appliances.
Trade fixtures are fixtures used in the conduct of a business, and thus, are considered the personal property of the business owner, even when the fixture is physically attached to the real estate. A vacating business tenant has the duty to remove all fixtures to his business, to restore the real estate to its original condition. Otherwise, the fixtures become part of the real estate by accession — they become a part of something that is already owned, the real estate.
Personal property, also known as chattels, includes anything that is movable, and thus, not real estate. This includes not only personal belongings, but also annual crops (emblements) that were planted. The planter is entitled to the fruits of his labor even if the land is owned by someone else. Perennial plants are considered part of the land, however. Mobile homes are also generally considered personal property because they are movable, and registered as motor vehicles, but they can be considered real property if, for instance, the mobile home is attached to a permanent foundation. Personal property can also be converted from real property by severance, where the property is severed from the land, such as cutting a tree down, or picking fruit.
Real Estate Ownership Rights, Benefits, and Limitations
Real property, or realty, is the real estate and the legal consequences of owning the real estate, called a bundle of legal rights or appurtenances, that the owner has with respect to the real estate, that transfers to any subsequent owner.
A real estate owner has the same rights as an owner of personal property: the right to possess it, to control it, to enjoy it, and to exclude it from others, as well as the right to dispose of it by selling it, gifting it, abandoning it, or bequeathing it. This is the classic idea of ownership.
However, real estate ownership is restricted in many ways by the law. Zoning laws, for instance, restrict what the land can be used for, environmental laws restrict what can be done to the land, easements restrict exclusions, and fair housing laws govern the sale of real estate. Real estate rights can also be restricted to certain aspects of the real estate, such as mineral rights.
It's obvious why real estate benefits the owner, but real estate ownership also benefits society by avoiding the tragedy of the commons — exploiting the land for one's benefit, but not contributing to the renewal of the exploited resources. So, for instance, if a parcel of land is not owned, then people could come to cut down the trees to make firewood or furniture, but they would have no incentive to plant new trees, because they do not own the property, and thus, would not benefit by renewing the resources for others. Thus, real estate ownership promotes conservation and renewal of resources, and it also allows improvements. No one would spend money, for instance, to construct a building on land that they did not own.