Principles of Real Estate Chapter 2-Nature and Description of Real Estate

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Principles of Real Estate Chapter 2-Nature and Description of Real Estate This chapter will offer an outline of the different ways in which land

1 Principles of Real Estate Chapter 2-Nature and Description of Real Estate This chapter will offer an outline of the different ways in which land and personal property are distinguished, the various water rights, and provide the methods used to provide the location of land. Overview 2.1 P a g e

Objectives At the end of this chapter, the student will be able to: Identify the rights that accompany the ownership of property Distinguish between personal and real property characteristics

2 Objectives At the end of this chapter, the student will be able to: Identify the rights that accompany the ownership of property Distinguish between personal and real property characteristics Differentiate between realty, real property, and real estate Recognize the areas that the term "land" includes Describe the test used to determine whether an article of personal property becomes real estate Classify types of plants and vegetation that run with the land, and which would be considered personal property Differentiate between riparian and littoral water rights List and identify the common method of land descriptions Bundle of Rights A great emphasis is placed on the private ownership of property, often without a clear understanding of exactly what it is we own. Property is generally considered to be a specific object like a car or a house, but it is more than just the object itself: The word "property" includes rights the owner has in the object owned, commonly called "bundle of rights." The bundle of rights includes the rights of possession, use, enjoyment, control, and disposition. 2.2 P a g e

Personal Property Personal property, also called personalty or chattels, is distinguished from real property by its mobility. Chattels may be further classified as chattels personal or chattels real.

3 Personal Property Personal property, also called personalty or chattels, is distinguished from real property by its mobility. Chattels may be further classified as chattels personal or chattels real. Chattels personal include items such as cars, boats, furniture, or clothes. Chattels real are items of personal property which extend to their owner an interest in real estate. A lease, for example, is an item of personal property but it conveys the rights to occupy and use a specific parcel of real estate to the holder. Ownership of personal property is usually transferred by a bill of sale. Real Property Realty, real property and real estate have different meanings, but are generally used interchangeably. Realty is a word which refers to tangible objects such as land, buildings and trees. Real property refers to the rights associated with ownership Real estate consists of the object and the rights associated with it. Realty, or real estate, is distinguished by its immobility. Ownership of real property is conveyed by a deed. 2.3 P a g e

4 Corporeal and Incorporeal Real property can also be broken down further into corporeal and incorporeal property. Land Corporeal property is tangible property -- such as a building or fixture. Incorporeal property is not tangible, and can include things such as rent or rights associated with an easement. When one thinks of land, it is generally considered to be the surface of the earth -- the ground we walk upon -- but it is more. Land consists of: The earth's surface Everything beneath the surface to the earth's core The airspace above the surface extending into space Improvements -- anything affixed to the land with the intent of being permanent -- become part of the land and are considered real estate. Examples include fences, roads, and landscaping. Fixtures An item of personal property attached to the land or to a building on the land so as to become a part of the real estate is called a fixture. A fixture can be removed from the property by severance and thus returned to classification as personalty. For example, a chandelier is realty, but once it is removed from the ceiling and packed in a box it becomes personal property. Whether an article becomes real estate is determined by four tests: The manner of attachment The adaptation of the article The existence of an agreement The relationship of the parties involved 2.4 P a g e

5 Fixtures-Manner of Attachment The manner of attachment or the method of annexation refer to the intent of the party attaching the article. If the article was attached with the intent of being permanently installed, it becomes real estate. If it is placed temporarily by hanging on a hook, it remains personal property. Adaptation of the Article The adaptation of the article refers to the manner in which it "fits" a specific building. A key, for example, is carried around in a pocket or purse, but it is adapted to fit a particular building and, therefore, is part of it. Another example is custom-built storm windows. Existence of an Agreement With the third test, the existence of an agreement, a seller can clarify in advance what he or she considers personal property and will take when he/she leaves. When the classification of an article is not clear, the use of an agreement can assist the parties involved in avoiding later difficulties. Relationship of the Parties The fourth test is the relationship of the parties. For example, fixtures attached to a rented building by the tenant for the purposes of doing business are classified as trade fixtures. Common trade fixtures include display shelves, counters, steam tables, and other items that may be bolted or otherwise permanently attached. Trade fixtures remain the personal property of the tenant because of the special relationship between the owner and the tenant. They must be removed before the expiration of the lease and the property must be returned to its original condition by the tenant. Plants and Vegetation Natural vegetation is classified in a couple of ways: 2.5 P a g e Fructus naturales is the term attributed to vegetation upon the land, including cultivated perennial plants. These are considered part of the land. Annual cultivated cash crops are called fructus industriales, or emblements, and are regarded as personal property.

6 Appurtenances Anything that is attached to the property and conveys with the title to real property is called an appurtenance. An appurtenance can be an improvement, a right, or a privilege. Common appurtenances include: Easements Water rights Appurtenances -- Water Rights-Riparian Right Land that borders on a flowing body of water such as a river or stream carries with it the right to use the water in common with the other landowners whose land also borders the watercourse. This right to use the water is known as a riparian right. Under a riparian right: The landowner does not have absolute ownership of the water but may use it in a reasonable manner. The ownership of land bordering a river or stream extends to the high water mark on a navigable river and to the middle of the watercourse on a non-navigable river. In states where water is scarce, the ownership and use of water are often determined by the doctrine of prior appropriation. Under prior doctrine: The right to use any water, with the exception of limited domestic use, is controlled by the state rather than by the landowner adjacent to the water. To secure water rights, a person must show a beneficial use for the water, such as crop irrigation, and obtain a permit from the proper state department. Once granted, water rights may be perfected through the legal processes prescribed by the individual state. When the water right is 2.6 P a g e

7 perfected, it generally becomes attached to the land of the person holding the permit. The permit holder may sell such a water right to another party or let it convey with the land. All access rights-of-way over the land of another (easements) must be obtained from the property owner. Appurtenances -- Water Rights-Littoral Rights Land bordering a large body of water such as a lake, sea, or bay carries littoral rights. Littoral rights include: Allowing the landowner to use the water touching his land provided he/she does not alter the water's position by artificial means. Ownership of the land extends to the high water mark. Water beneath the surface of the land and not confined to a defined waterway is known as percolating water. The level at which such water is found is called the water table. Land Descriptions There are five commonly used methods to describe the location of land: Informal Reference Metes and Bounds Rectangular Survey Recorded Plat Vertical Land Description Land Descriptions -- Informal Reference An informal reference is a street address. It is not a precise method of land description. Consequently, it is used more for convenience and is not used in situations requiring precision. 2.7 P a g e

8 Land Descriptions - - Metes and Bounds Metes and bounds is an early method of land description that provides a legal reference. It depends heavily on natural monuments such as trees, a pile of rocks, or a stream. The major drawback was that trees died or were cut down, a pile of rocks could be moved, and streams might dry up. Over the years, this drawback has been resolved by setting permanent, manmade monuments in convenient locations. To guard against the possibility that the monument might be moved or destroyed, it is referenced by a connection line to a nearby permanent reference marker or benchmark. Metes and bounds surveying depends upon measurements, distances and directions or bearings (metes) and monuments or landmarks (bounds). Distances are measured to one-hundredth of a foot and directions are shown in degrees, minutes, and seconds. A bearing is determined by starting north or south and then turning a certain number of degrees, minutes, and seconds to the east or west. Metes and bounds is considered the best method of land description for an irregularly shaped parcel because the surveyor has an unlimited number of distances and directions at his/her disposal. Although measurements are usually made in a clockwise direction, it is not absolutely necessary. A metes and bounds land description must, however, begin and end at the same point - called the point of beginning or POB. Stated another way, the description must completely enclose the parcel. Metes and bounds is the most precise method of land description. 2.8 P a g e

9 POB Land Descriptions -- Rectangular Survey System The rectangular survey system (also called government survey system) was authorized by Congress in 1785 to provide a simpler method of land description in the new states and territories. This method of land description is based on the imaginary lines that encircle the globe. The lines are the north-south longitude line or meridians The east-west latitude lines or parallels. Certain lines of longitude were chosen to be principal meridians and certain latitude lines were selected to be baselines. There are 36 principal meridians and 32 baselines in the United States. 2.9 P a g e

Land Descriptions -- Recorded Plat Whether a state uses metes and bounds or rectangular survey, a convenient method for describing subdivision lots may be used in conjunction.

10 Land Descriptions -- Recorded Plat Whether a state uses metes and bounds or rectangular survey, a convenient method for describing subdivision lots may be used in conjunction. When a large plat is subdivided into lots and recorded, it is a recorded plat. Each plat is given a map or plat book number and page reference number. Plats do not show the position of improvements on the lot. In order to discover any encroachments or to research improvements, it is necessary to order a spot survey P a g e

11 Land Description by Recorded Plat Land Descriptions -- Vertical Land Description If an interest in real estate that exists above or below the surface is to be described, it will be necessary to use a vertical land description. This type of measurement is used to describe mineral rights or air lots in multi-story condominiums. A point from which a vertical height or depth is measured is called a datum. Datum from any given area can be obtained from a benchmark P a g e

Contour Map/Topographic Map A contour map indicates elevation. The purpose of a contour map is to show hills and valleys, slopes, and water runoff.

In Review Types of property are distinguished by mobility, and further classified by whether it is chattels personal or chattels real Items attached to land are known as fixtures and become part of

12 Contour Map/Topographic Map A contour map indicates elevation. The purpose of a contour map is to show hills and valleys, slopes, and water runoff. The map shows a developer where soil will have to be moved to provide level building lots. In Review Types of property are distinguished by mobility, and further classified by whether it is chattels personal or chattels real Items attached to land are known as fixtures and become part of the real estate; four tests determine whether an item becomes real estate Anything that is attached to the property and conveys with the title to real property is called an appurtenance; common appurtenances include easements and water rights There are five commonly used methods for describing the location of land: Informal Reference, Metes and Bounds, Rectangular Survey, Recorded Plat, Vertical Land Description Water rights can be riparian or littoral 2.12 P a g e

OWNERSHIP (REAL PROPERTY CHARACTERISTICS, DEFINITIONS, OWNERSHIP, RESTRICTIONS, AND TRANSFER) PERSONAL PROPERTY (personalty or chattel)

OWNERSHIP (REAL PROPERTY CHARACTERISTICS, DEFINITIONS, OWNERSHIP, RESTRICTIONS, AND TRANSFER) Property is everything subject to ownership (also known as title). Tangible (corporeal) means physical items