Real property is defined as land and improvements permanently attached to the land. It is also known as real estate, or realty.
Ownership of real property conveys six basic rights and privileges:
- The right to sell the property
- The right to use or destroy the property
- The right to rent or lease it
- The right to give it away
- The right to enter or leave it
- The right to do nothing with it
This "bundle of rights" may be imagined as a bundle of sticks with each stick representing a separate prerogative of the owner. Each right may be disposed of individually or together with one or more of the others. Real property is often transferred without the exchange of the full bundle. An example is a property sold without the mineral rights. This might significantly alter the value of the property, and thus the appraiser must always ascertain which rights have been conveyed, and what their worth may be. (A good way to remember these rights is the acronym "SURGED" formed by the first letter of each word.)
Powers of Government
Four powers of government limit the full exercise of the property rights listed above. They are:
- Taxation - the right to tax property for support of government functions and public programs.
- Eminent Domain - the right to take property for public use through condemnation proceedings, providing that just compensation is paid.
- Police power - the right to regulate property use in order to promote the public health, safety, morals, or general welfare. Traffic regulations, zoning ordinances, building codes, and sanitary regulations are all examples of use of the police powers of government.
- Escheat - the right to have ownership of private property transfer to the state if the owner dies without leaving a will or heirs (Intestate).
The four powers of government described above can be remembered by the acronym formed with the first letter of each: TEPE.
Private agreements may limit the ownership rights of property. Some examples are:
- Liens and judgment
Covenants, conditions and restrictions found in deeds and documents giving title to the property rights of other co-owners of a property, such as community property rights.
Private deed restrictions which limit occupancy on racial or religious grounds have been over ridden by federal, state, and local laws which guarantee the right to buy, sell, lease, hold, and convey property without discrimination.
Buildings and other relatively permanent structures located on or attached to land are called improvements. Improvements can be divided into two types: improvements on the land and improvements to the land.
- Improvements on the land are structures on a site which permit or assist its use for a specific purpose. Examples are: buildings, fences, driveways or parking surfaces.
- Improvements to the land make land usable and/or prepare the property for construction of improvements on the land. Examples are: sewers, drains, underground utilities, leveling, backfill, or landscaping.
An improvement on land where the owner of the land is not the owner of the improvement is called an improvement on possessory rights (IPR). An example of an IPR might be a billboard owned by a sign company, placed on a small piece of leased land.