Letís 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 ďRealty,Ē 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 youíre 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owner let someone keep their 1985 Firebird in their yard for a couple of years.† This is permission that can be withdrawn by the owner at any time and ends with transfer of property ownership.† This is the same concept as a driverís license.† Thatís a privilege, not a right.† This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 barberís 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 weíll let you know if youíre right)
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 anybodyís 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.
D.† A big mistake.