Real and personal property, uses of real property, and its characteristics

Real property and personal property

Land includes the ground, naturally growing vegetation, and associated rights in the space above and material below. Real estate includes land and permanent improvements, such as buildings. Real property includes that real estate and the ownership rights attached to it. Those rights include possession, use, exclusion, enjoyment, and transfer, subject to public and private restrictions. Personal property, or chattels, consists of movable property such as furniture and tools.

When classification changes

A fixture begins as personal property and becomes part of the real estate through attachment or adaptation. Consider the method of attachment, adaptation to the building, objective intent of installation, relationship of the parties, and their agreement. A built-in heating system normally goes with the building; a freestanding desk ordinarily does not. Physical removability alone does not settle the issue. Severance moves in the opposite direction: a tree cut into logs becomes personal property. Trade fixtures are items a business tenant installs for its business and generally may remove under the lease and applicable rules, repairing damage from removal. Resolve disputed inclusions and exclusions expressly in the contract rather than relying on a label.

Uses and characteristics

Residential property provides housing. Commercial property supports activities such as retail and offices. Industrial property supports manufacturing, processing, or distribution. Agricultural property supports farming. Special-purpose property is designed for a particular use, such as a house of worship. Mixed-use property combines uses, such as apartments above shops. A description of a property's use does not itself authorize that use under zoning.

The physical characteristics of land are immobility, indestructibility, and uniqueness. Land cannot be relocated; the land itself endures even when improvements are destroyed; and no two parcels occupy exactly the same location. Indestructibility does not mean buildings cannot burn or land cannot lose value.

Economic characteristics include scarcity, improvements, permanence of investment, and location preference, also called situs. Scarcity concerns limited suitable supply relative to demand. Improvements on or near a parcel can affect its value. Long-lived improvements commit capital for extended periods. Situs concerns the desirability of a location, which can change with access, services, and buyer preferences.

New York connection

New York Real Property Law § 254(1) gives specified mortgage wording an expanded meaning that includes appurtenances, fixtures, and articles of personal property attached to or used in connection with the premises. This mortgage provision addresses the scope of the security; it does not turn every movable object into real property.