1.1 Real Property vs. Personal Property

Real Property vs. Personal Property

The exam opens here because almost every later concept depends on knowing what is being conveyed. Land is the surface of the earth plus everything beneath it to the center and the airspace above it. Real estate adds anything permanently attached by nature or by people. Real property is real estate plus the bundle of legal rights that comes with ownership. Personal property (also called chattel or personalty) is everything that is movable and not permanently attached.

The bundle of rights is a frequently tested mnemonic. Remember DEEPC: Disposition (sell, will, transfer), Exclusion (keep others out), Enjoyment (use without interference), Possession (occupy and hold), Control (use within the law).

When does personal property become real? Annexation

Attaching personalty to land turns it into a fixture (real property) through annexation. Detaching a fixture turns it back into personalty through severance. A standing tree is real property; cut into firewood it becomes personalty. Conversely, lumber (personalty) nailed into a deck becomes a fixture.

When a buyer and seller disagree over whether an item stays with the house, courts apply the MARIA total-circumstances test:

Intention is the single most weighted factor on most exams, and a written agreement controls over all the others. The safe practice tip: list questionable items (chandeliers, mounted TVs, drapes) in the purchase contract to avoid litigation.

Trade fixtures and emblements

Two special carve-outs reverse the normal fixture rule:

• Trade fixtures are items a commercial tenant installs to conduct business (display shelving, a restaurant pizza oven, a barber chair). They remain the tenant's personal property and may be removed before the lease ends; if left behind, they become the landlord's by accession. The tenant must repair any damage from removal.
• Emblements (fructus industriales) are annually cultivated crops. A farm tenant retains the right to re-enter and harvest the crop he planted even after the lease expires. Crops are personalty; naturally growing perennials (fructus naturales) like trees and wild grasses are real property.

Worked example: A seller's washer and dryer sit in the laundry room connected only by a standard plug and a screw-on water hose. Are they fixtures? Method of attachment is minimal and removal causes no damage, so absent a contract clause they remain personal property and the seller may take them.

Why the distinction drives the whole transaction

The classification matters far beyond "who keeps the fridge." It determines the form of transfer, the document used, and even the financing.

• Real property transfers by a deed and is recorded in the county land records. Personal property transfers by a bill of sale and is generally not recorded against the land.
• A mortgage or deed of trust pledges real property; a security agreement under the UCC pledges personal property.
• Real estate is taxed by the county as ad valorem property; most personalty is not subject to real-property tax.

When a sale includes both (a furnished condo, a turnkey restaurant), draft a separate bill of sale for the personalty so the deed conveys only the real property. Mixing them clouds title and can trigger transfer-tax errors.

Plants, water, and the things that travel with land

Land carries more than dirt. Ownership generally includes subsurface (mineral) rights, air rights up to a reasonable height, and water rights.

• Riparian rights attach to land adjoining a moving waterway (river or stream); the owner may make reasonable use of the water.
• Littoral rights attach to land bordering a stationary body (lake, sea, ocean); ownership typically runs to the average high-water mark.
• The doctrine of prior appropriation, used in many western states, grants water use by permit based on beneficial use rather than land location ("first in time, first in right").

Severance again controls timing: severed minerals (extracted ore, pumped oil) become personal property, while in-place deposits are part of the real estate. Knowing what automatically travels with a deed prevents over- or under-conveying an interest.

Common exam traps on this topic

Watch for these recurring distractors:

• "Growing crops" vs. "trees": annually planted crops (emblements) are personalty; naturally growing trees and perennial shrubs are real property until severed.
• Tenant vs. seller installs the same item: identical shelving is a removable trade fixture for a commercial tenant but typically a fixture (stays) when a seller installs it in a home.
• "Permanently attached" wording: an item can be heavy or plugged in and still be personalty; analyze the full MARIA test, not weight alone.
• License vs. easement: a neighbor's revocable permission to cross is a license, not a property interest.

Finally, remember the conversion vocabulary in both directions: annexation (personalty becomes a fixture) and severance (a fixture or part of the land becomes personalty). The exam often asks which term applies to a given fact pattern, and a written agreement in the purchase contract always overrides the default classification, so disclose and itemize any borderline item before closing to protect both parties.