CORRECT!
Let’s get on with the lesson!
All property that does not fit the definition of real property is
PERSONAL PROPERTY, and just like real property can be called “Realty,” personal
property can be called PERSONALTY. This
also can be broken down into several categories.
Anything that can be moved is called a CHATTEL
(rhymes with cattle). That could
include a car, a book, a pencil and the computer you’re working on now. Some less tangible items would also be
considered personal property. This
would include rights in real property that last less than a lifetime.
The first example of this would be a LEASE. Leases transfer the right of possession to a
tenant for a specific period of time. The
tenant is not the OWNER of the property, so they do not have a real property
interest. Their interest is considered
a personal property right.
Another
example is a LICENSE. This is a
privilege given to someone by an owner of real property to use the property for
a specific purpose. For example, if a
property owner let someone keep their 1985 Firebird in their yard for a couple
of years. This is permission that can
be withdrawn by the owner at any time and ends with transfer of property
ownership. This is the same concept as
a driver’s license. That’s a privilege,
not a right. This is also considered
personal property.
The annual crops that grow on a property also can be
considered personal property. These are
called ANNUALS. They can also be
referred to as EMBLEMENTS, which are the fruits of the soil. Upon transfer of ownership, original owner
can come back one time and harvest the fruits of their labor (referred
to as Fructus Industrialis). Since they
are coming back after the REAL property has been transferred, those
crops are considered personal property.
This is primarily used in sales of agricultural property. Buyers might have issues with sellers coming
back and picking vegetables in their back yard.
Now that we understand the difference between real and personal property,
we can talk about FIXTURES. A Fixture
is an article or item that was once personal property, but has been permanently
attached or affixed to real property, and therefore is considered real
property. Light fixtures and plumbing
fixtures would be good examples. These
are personal property before they are installed, and real property after they
are installed. If a contract does not
say otherwise anything that is attached would transfer with real property when
it is sold. So the sale of a house
would include the light fixtures and plumbing. It would not include a table lamp or floor lamp, because
those items are not attached.
The one exception to this is with a TRADE
FIXTURE. This is attached to a rented
space and is used to conduct a business.
Even though these items are attached they are considered personal
property. If a barber puts in a barber
chair and bolts it to the floor he can take it with him at the end of his
lease. The tenant must, however, restore
property to the condition it was in when they occupied the property, so if the
barber’s chair left a hole in the floor, the barber would have to get it
repaired.
If the tenant does not remove the trade fixture at
the end of his lease, the landlord can takeover that item as real
property. This process is called
ACCESSION. Accession is acquiring trade
fixtures as real property when a tenant does not remove them when they
leave. So if the barber does not remove
his chair, that chair would become part of the real property. It would no longer be a trade fixture. Instead it would just be your everyday,
average fixture.
The process of changing a part of real property to
personal property by severing it from the real estate is called SEVERANCE. For example, if you dig up a rose bush. The opposite of severance is
ANNEXATION. Annexation is the process
of changing personal property into real property, like when you replant the
rose bush somewhere else. Annexation
also has a second definition. This is
when a town or city takes over a neighboring jurisdiction to grow into a larger
town or city.
Which of the following would be considered real
property and which would be considered personal property? (Click your pick, and we’ll let you know if
you’re right)
Wall-to-wall carpeting Real Personal
Prize-winning rose bush planted in the
front yard
The key factor in the above is whether or not the
item is attached. The sink, carpeting,
wiring and rose bush are attached. The
microwave, refrigerator and firewood are not.
The parties in a real estate transaction can decide that an item of
personal property would convey with a sale, or that something normally
considered real property would not convey.
There are also four legal tests to determine whether
or not something is a fixture. The
first test is INTENT. Did the person
that installed it intend for the item to be a fixture? If a seller has unique ceiling fans in the
bedrooms they may have always planned to take the fans with them as personal
property whenever they moved.
The second test is METHOD OF ANNEXATION. In other words, how is it attached. A microwave oven would normally be personal
property, but a built in microwave is attached would probably be considered
real property.
The third test is ADAPTATION TO REAL ESTATE (How is
it being used?). Is it being used as
real property or personal property? If someone
is using a trailer as a home, someone buying that property might reasonably
assume they are buying the trailer, even though a trailer could be considered
personal property.
However, the safest protection no matter what is
determined by the first three tests is the final test, AGREEMENT. Put EVERYTHING in the contract to be
safe. There will be and have been times
where buyers and sellers have had differences of opinion on what they thought
was staying or going, over things that were obviously real or obviously
personal property, sometimes resulting in major disputes or even causing sales
to fall through. If there is any
question about it in anybody’s wildest imagination, PUT IT IN THE CONTRACT.
Again, you know the rules (no peeking):
A farmer gives one of his neighbors permission to
store part of their corn harvest on his property until they can take it to
market. This would be considered:
A. A lease.
B. A license.