1.1 Real Property vs. Personal Property

Real Property vs. Personal Property

The single most heavily tested distinction in the national portion is real property versus personal property. Real property (realty) is the land itself, everything permanently attached to it (improvements such as buildings and fences), and 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

Real property ownership is best understood as a bundle of separable rights. A useful memory device is D.E.E.P.C.:

Any single stick can be sold or leased separately. Leasing transfers possession; a mortgage pledges the encumber right; an easement carves out a slice of control. The land also includes surface, subsurface (mineral), and air rights, each transferable on its own.

Land, real estate, and real property

These three terms form a widening series. Land is the surface, the ground beneath to the center of the earth, and the air above. Real estate is land plus permanent man-made improvements. Real property is real estate plus the bundle of legal rights. Watch for exam questions that quietly substitute one term for another.

Fixtures and the M.A.R.I.A. test

A fixture is an item that was once personal property but has become real property by being permanently attached (annexation). When realty is converted back to personal property it is severance (e.g., cutting timber, removing a built-in dishwasher). When a dispute arises over whether an item is a fixture, courts apply the total fixture test, summarized as M.A.R.I.A.:

• Method of attachment — how permanently is it affixed? Can it be removed without damage?
• Adaptation — is it custom-fit to the property (e.g., a tailored storm window, a key to a lock)?
• Relationship of the parties — landlord/tenant disputes favor the tenant; buyer/seller disputes favor the buyer.
• Intention — what did the person intend when installing it? (Most important factor.)
• Agreement — what does the contract say? A written agreement controls over all other tests.

Trap: Intention, evidenced by the surrounding facts, is generally the controlling factor, but a clear written agreement trumps everything. If the sales contract lists the chandelier as included, the M.A.R.I.A. analysis is moot.

Trade fixtures and emblements

Trade fixtures are articles installed by a commercial tenant to conduct business — bar shelving, walk-in coolers, salon stations. They remain the tenant's personal property and may be removed before the lease expires, with the tenant repairing any damage. If not removed by lease end, they become the landlord's realty by accession.

Emblements (also called fructus industriales) are annually cultivated crops produced by labor — corn, wheat, tomatoes. They are treated as personal property, so a farming tenant retains the right to re-enter and harvest a planted crop even after the lease ends. By contrast, fructus naturales (perennial plants, trees, uncultivated grasses) are part of the real property and pass with the land.

Annexation, severance, and accession

The exam expects you to name the event that moves an item across the realty/personalty line. Annexation converts personal property into real property by permanent attachment: lumber (chattel) nailed into a frame becomes part of the house (realty). Severance does the reverse: cutting standing timber, unbolting a built-in oven, or harvesting a crop converts realty back into personal property. Accession is the owner's acquisition of additions to the land, whether by improvement, by the gradual deposit of soil (accretion), or by a tenant's failure to remove trade fixtures before the lease ends.

Why the distinction drives real money

The realty/personalty line decides what conveys, what a lien attaches to, and what a deed transfers. A deed passes real property and its fixtures automatically; personal property transfers by a bill of sale, not the deed. So a refrigerator, unless bolted in and listed, normally stays the seller's chattel and leaves with them. Real-estate taxes and mortgage liens attach only to the realty, which is another reason a borrower cannot pledge a free-standing appliance under a real-estate mortgage.

Common fixture fact patterns

Worked trap: A seller lists a home with a chandelier they intend to keep. To avoid a dispute, the chandelier should be removed and replaced before listing, or expressly excluded in the contract. Removing it after a buyer has seen and contracted for the home — when the contract is silent — risks a M.A.R.I.A. analysis finding it a fixture that conveys, because a hard-wired light fixture is attached and adapted. The cheap fix is the written agreement, which the test reminds you trumps every other M.A.R.I.A. factor.