Real Property Characteristics
This chapter explains what land and real property are, how the law distinguishes real property from personal property, and the physical and economic characteristics that shape value. Understanding these fundamentals is the foundation for every other topic on the exam.
Land, Real Estate, and Real Property
Land includes the surface of the earth, the airspace above it, and the ground beneath it to the center of the earth. Real estate adds all permanent human-made improvements attached to the land, such as buildings and fences. Real property is the broadest term, encompassing the real estate plus the bundle of legal rights of ownership, including the rights to possess, use, enjoy, exclude, and dispose. Anything not classified as real property is personal property, also called chattel.
Fixtures and Trade Fixtures
A fixture is personal property that has become part of the real estate by being permanently attached, and it transfers with the property unless excluded. Courts weigh the method of attachment, adaptability to the property, and the intent of the party who installed the item. Trade fixtures are an important exception: items a commercial tenant attaches to conduct business remain the tenant's personal property and may be removed before the lease ends, provided any damage is repaired. Growing crops planted by a tenant, called emblements, are likewise treated as the tenant's personal property.
Physical and Economic Characteristics
Land has three physical characteristics: immobility (it cannot be moved), indestructibility (it is durable and permanent), and non-homogeneity (each parcel is unique). It also has four economic characteristics: scarcity, improvements, permanence of investment, and situs, or area preference. Situs is often the single most important influence on value because buyers place a premium on location. Together these traits explain why real estate markets behave differently from markets for movable goods.