Principles of Real Estate
This chapter covers the foundational concepts every New York salesperson must understand: what real property is, the rights that come with ownership, how estates and interests are defined, how New York's distinctive co-op and condominium forms of ownership work, and the basic principles of value. Master this vocabulary first, because the license law, contracts, and finance topics all build on it. New York's real property rules come mainly from the Real Property Law (RPL) and long-standing common law, but specific figures, filing rules, and offering-plan requirements can change, so confirm current details with the New York Department of State (DOS) and the New York Attorney General's office.
Real vs. Personal Property
Real property is land and everything permanently attached to or appurtenant to it, together with the bundle of legal rights that come with ownership. It includes the surface, the subsurface (mineral and support rights), the air space above (within reason), and improvements such as buildings, fences, and built-in systems. Personal property, also called chattel or personalty, is movable and not permanently affixed; furniture, a car, and a tenant's freestanding refrigerator are personal property. The distinction matters constantly in New York practice because a sales contract conveys the real property and any fixtures, while personal property passes only if a separate bill of sale says so. Disputes over what stays and what goes (light fixtures, appliances, window treatments) are among the most common closing frictions, so a well-drafted contract lists included and excluded items explicitly. Items can change legal character. A fixture is personal property that has become real property by being permanently attached to or adapted to the land or building. Once something becomes a fixture, it ordinarily passes with the real property in a sale unless the parties agree otherwise in writing. New York courts and the exam use the MARIA test to decide whether an item is a fixture: Method of attachment (how firmly it is affixed and whether removal causes damage), Adaptation (whether the item was custom-fit to the property, like a made-to-measure bookshelf), Relationship of the parties (a tenant is more likely to be allowed to remove items than an owner), Intention of the party who installed it (often the strongest factor), and Agreement (any express contract term controls). Because intention and agreement dominate, a clear written provision almost always resolves the question. Trade fixtures are a key exception. Articles a commercial tenant installs to carry on business, such as shelving, display counters, or a restaurant's cooking line, generally remain the tenant's personal property and may be removed before the lease ends, provided the tenant repairs any damage. Anything left behind after the lease term may become the landlord's by accession. Note that emblements, or annual crops produced by a tenant farmer's labor, are treated as personal property the tenant may harvest even after the tenancy ends. Statutory details evolve, so verify current with NY DOS.
The Bundle of Rights
Ownership of real property is best understood as a bundle of rights rather than a single thing. A useful memory device is DUPE-plus-exclusion: the rights of Disposition, Use, Possession, and Enjoyment, together with the right to Exclude others. Disposition is the power to sell, gift, mortgage, lease, or will the property. Use is the freedom to build on, farm, rent, or otherwise employ the land. Possession is the right to physically occupy. Enjoyment is the right to use the property without unreasonable interference from others. Exclusion is the right to keep out trespassers. An owner may transfer some rights while keeping others, which is exactly what happens when a landlord leases (transferring possession for a term) or a homeowner grants a utility easement (transferring a limited use right). Critically, none of these rights is absolute. Every parcel in New York is subject to two broad categories of limitation: public powers and private restrictions. The public powers are captured by the acronym PETE. Police power is the government's authority to regulate for health, safety, morals, and general welfare, and it is the basis for zoning, building codes, rent regulation, and environmental rules; no compensation is owed when the police power is exercised reasonably. Eminent domain is the power to take private property for a public use, but the Fifth Amendment and the New York Constitution require just compensation, and the process is called condemnation. Taxation lets government levy real property taxes, and unpaid taxes become a superior lien that can lead to a tax sale. Escheat returns property to the State of New York when an owner dies with no heirs and no will. Private restrictions add a second layer. Deed restrictions and restrictive covenants, common in subdivisions and condominium declarations, can limit building height, use, colors, or business activity, and they bind current and future owners. Easements grant others a right to use part of the land. Liens encumber the owner's equity. The key exam point is that an owner's rights are always shaped by this web of public and private limits, and no bundle of rights ever includes the right to use property unlawfully. Regulatory details change, so verify current with NY DOS.
Estates and Forms of Ownership
An estate is the degree, quantity, nature, and extent of a person's interest in real property. Estates divide first into freehold estates, which involve ownership of indefinite duration, and leasehold estates, which grant possession for a fixed or renewable term (covered in the practice chapter). The greatest freehold estate is fee simple absolute: ownership of unlimited duration that is freely transferable during life and inheritable at death, subject only to the public and private limits already discussed. A defeasible fee is ownership that can be lost if a stated condition occurs, such as a deed granting land 'so long as it is used as a park.' A life estate lasts only for the duration of a named measuring life; when that life ends, title passes to a remainderman named in the grant or reverts to the grantor as a reversion. A life tenant may use and profit from the property but may not commit waste that harms the future interest. Concurrent ownership describes how two or more persons hold title at the same time. Tenancy in common is the default in New York when a deed to multiple grantees does not specify otherwise. Each tenant in common holds an undivided fractional interest that can be unequal, may be sold or mortgaged separately, and passes by will or intestacy at death, with no right of survivorship. Joint tenancy carries the right of survivorship, so a deceased joint tenant's share passes automatically to the surviving joint tenants outside probate; New York requires the four unities of time, title, interest, and possession, and a joint tenancy must be clearly expressed. Tenancy by the entirety is a special form available only to married couples in New York and is presumed when spouses take title to a home; it adds survivorship plus protection against a creditor of only one spouse and cannot be severed unilaterally. Ownership in severalty means one individual or legal entity holds the entire title alone. New York also recognizes community property only for out-of-state or foreign transactions, since New York is not a community-property state. Because survivorship and creditor rules carry major financial and estate consequences, licensees should never advise clients on which form to choose; refer them to an attorney and verify current with NY DOS.
New York Co-ops, Condominiums, and Common-Interest Ownership
New York, and New York City in particular, relies heavily on two common-interest ownership forms that the exam tests closely because they behave very differently from a house. A condominium owner holds fee simple title to an individual unit, typically defined as the airspace between the walls, plus an undivided percentage interest in the common elements such as the lobby, elevators, roof, hallways, and land. Because the unit is real property, the owner receives a deed, records it, pays real property taxes directly on the unit, and can obtain an individual mortgage on the unit alone. The condominium is created by recording a declaration and filing an offering plan; common elements are managed by a board of managers funded through common charges. A cooperative is fundamentally different: it is personal property, not real property. The building is owned by a single cooperative corporation, and a purchaser buys shares of stock in that corporation and receives a proprietary lease giving the right to occupy a specific apartment. Because the buyer owns stock rather than a deed, financing is a share loan secured by the shares and the lease, not a traditional mortgage, and the corporation itself may carry an underlying blanket mortgage on the whole building. Co-op maintenance charges bundle the shareholder's proportionate share of that blanket mortgage, real property taxes on the building, and operating costs. A hallmark of co-op life is the board of directors' power to interview and approve or reject prospective purchasers and to restrict subletting, so long as it does not violate fair housing law; condominiums usually cannot reject buyers but may hold a right of first refusal. Both condos and co-ops in New York can only be sold to the public after the sponsor files an offering plan (a 'black book') accepted by the New York State Attorney General's office, and both are subject to the fair housing laws covered in Chapter 2. Other common-interest arrangements include planned communities with homeowners associations and timeshares. Because tax treatment, financing, transfer, and board approval differ sharply between these forms, licensees must describe them accurately and refer legal and tax questions to professionals. Filing thresholds and rules evolve, so verify current with NY DOS and the Attorney General.
Encumbrances, Legal Descriptions, and Principles of Value
An encumbrance is any claim, lien, charge, or limitation that affects title or use without necessarily preventing transfer. Encumbrances divide into money encumbrances (liens) and non-money encumbrances (restrictions on use). Liens are financial claims that secure a debt: a mortgage lien, a real property tax lien (which in New York is superior to other liens), a mechanic's lien filed by an unpaid contractor, a judgment lien from a court award, and special assessments for local improvements. Non-money encumbrances include easements (a right to use another's land, either appurtenant and running with the land, or in gross benefiting a person or utility), encroachments (an improvement extending onto a neighbor's parcel), licenses (revocable permission), and restrictive covenants that limit use but cannot enforce illegal terms. A buyer's title report lists these, and the goal at closing is marketable title free of undisclosed encumbrances. Real property must be identified precisely, and a street address alone is legally insufficient. New York uses three recognized legal description systems. Metes and bounds traces the boundary by measured courses (distances) and directions (bearings), moving from a defined point of beginning around the parcel and back to that same point; monuments, both natural and artificial, mark corners. Lot and block (the recorded plat or subdivision map) identifies a parcel by lot, block, and map reference filed in the county, and it is the most common method in developed New York areas. The rectangular (government) survey system of ranges and townships is used in much of the country but not in New York, though the exam may still test it. Accurate descriptions prevent boundary disputes and are essential to a valid deed. Value behaves according to economic principles appraisers and agents use to explain price. The four elements of value are Demand, Utility, Scarcity, and Transferability (DUST). Highest and best use is the legally permissible, physically possible, financially feasible, and maximally productive use of a site. Substitution caps value at the cost of an equally desirable alternative. Conformity holds that reasonably similar properties support stable value, while progression raises a lesser home's value among better homes and regression lowers a superior home's value among lesser ones. Supply and demand, anticipation, and change all move prices over time. Tax rates and assessment rules change, so verify current with NY DOS and local assessors.
Last updated: September 2026
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