Real estate is defined as land and all permanent features attached to it, whether naturally occurring or man-made. Land includes not only the surface of the earth but also everything beneath the surface and the airspace above it within reasonable limits. Land is considered permanent and indestructible; it cannot be destroyed, only altered. Although land itself does not depreciate, any improvements made to the land may lose value over time due to wear, age, or obsolescence.
Improvements are permanent structures or additions that enhance the value of the land. These include buildings, roads, sidewalks, utility systems, and fences. Natural attachments such as trees, crops, oil, gas, and minerals are also considered part of the real estate as long as they remain attached to the land. When natural resources are removed from the land through a process known as severance, they become personal property.
Personal property consists of movable items that are not permanently attached to real estate. Examples include furniture, appliances that are not built-in, vehicles, and tools. Fixtures are items that were originally personal property but became real property once they were permanently attached to the land or a building. Examples of fixtures include lighting systems, built-in cabinets, and plumbing installations. Whether an item is considered a fixture often depends on the method of attachment, the intention of the parties, and local law.
Trade fixtures are items installed by a tenant for business purposes. These items remain personal property and may be removed by the tenant at the end of the lease, provided the property is not damaged. Examples include shelving, restaurant equipment, and machinery used in manufacturing.
The bundle of rights refers to the legal rights associated with owning real estate. These rights include the right of possession, control, enjoyment, exclusion, and disposition. Property ownership may include surface rights, subsurface rights, and air rights. These rights can be separated and sold independently. Subsurface rights include minerals and natural resources beneath the land, while air rights include the space above the property, which may be limited by government regulations or easements.
An easement is a legal right to use another person’s land for a specific purpose. Easements are considered appurtenances and usually transfer with the ownership of the property. Leases transfer the right of possession and use to a tenant but do not transfer ownership. Tenants do not own the land or any permanent improvements.
Real estate ownership is subject to government powers such as taxation, eminent domain, police power, and escheat. Zoning laws and land-use regulations control how property can be developed and used. Environmental laws play an important role in real estate transactions, particularly when dealing with hazardous materials or contamination.
Understanding real estate fundamentals is essential for licensees, investors, and property owners. These concepts form the foundation for property ownership, valuation, transfer, and legal use, and they are a critical part of real estate licensing examinations.
