Real Estate PL Topic - Real Property and Personal Property

Real Property and Personal Property

Property may be classified as either real or personal. Personal property, sometimes called personalty, is all the property that can be owned and that does not fit the definition of real property. An important distinction between the two is that personal property is movable. Items of personal property, also called chattels, include such tangibles as chairs, tables, clothing, money, bonds, and bank accounts.

Conversion

Severance (Real Property $\Rightarrow$ Personal Property)

An item of real property can become personal property by severance, which is the act of separating it from the land. For example, a growing tree is part of the land until the owner cuts it down, literally severing it from the property. Similarly, an apple becomes personal property once it is picked from a tree.

Annexation (Personal property $\Rightarrow$ Real property)

It is also possible to change personal property into real property through the process known as annexation. For example, if a landowner buys cement, stones, and sand and mixes them into concrete to construct a sidewalk across the land, the landowner has converted personal property (cement, stones, and sand) into real property (a sidewalk).

Fixtures and Trade Fixtures

In considering the differences between real and personal property, it is necessary to distinguish between a fixture and personal property.

Fixtures

A fixture is personal property that has been so attached to land or a building that, by law, it becomes part of the real property. Examples of fixtures are heating systems, elevator equipment in highrise buildings, radiators, kitchen cabinets, light fixtures, and plumbing. Almost any item that has been added as a permanent part of a building is considered a fixture.

Trade Fixtures

A special category of fixtures includes property used in the course of business. An article owned by a tenant, attached to a rented space or building, and used in conducting a business is a trade fixture, or a chattel fixture. Some examples of trade fixtures are hydraulic lifts in an auto repair shop, lanes and pin-setting equipment in a bowling alley, and dining booths in a restaurant. Agricultural fixtures, such as chicken coops and tool sheds, are also included in this category. Trade fixtures must be removed on or before the last day the property is rented. The tenant is responsible for any damage caused by the removal of a trade fixture. Trade fixtures that are not removed become the real property of the landlord. Acquiring the property in this way is known as accession (this is related to the legal principle of constructive annexation).

Trade fixtures differ from other fixtures in the following ways:

• Fixtures belong to the owner of the real estate, but trade fixtures are usually owned and installed by a tenant for the tenant’s use.
• Fixtures are considered a permanent part of a building, but trade fixtures are removable. Trade fixtures may be attached to a building so they appear to be fixtures.

In general, fixtures are real property, so they are included in any sale or mortgage. Trade fixtures, however, are considered personal property and are not included in the sale or mortgage of real estate, except by special agreement.

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