Much of business law deals with property. There are actually two different types of property: personal property and real property. This lesson explains the differences between these two types of property.
There are two types of property. In legal terms, all property will be classified as either personal property or real property. This distinction between types of property comes from English common law, but our modern laws continue to distinguish between the two.
Each type of property is treated differently under the law. There are many different types of laws that specifically pertain to personal property, and many other types of laws that pertain specifically to real property.
Personal property is movable property. It's anything that can be subject to ownership, except land. Real property is immovable property - it's land and anything attached to the land.
Normally, a piece of property can be easily classified as either personal property or real property. The difference between the two is usually fairly straightforward. However, sometimes it's a little harder to categorize property. Let's look at one example.
Let's say that I buy lumber and other building supplies, such as a saw, a hammer, and some nails. These supplies are personal property. They're moveable and they belong to me.
Next, I use these items to build a shed on my land. Is this shed personal property? No. The shed is real property because it's attached to, and now part of, my land. Any leftover building supplies are still personal property, like my saw and hammer. But anything that's actually part of the shed is now real property.
Let's take a closer look at why this is. Let's look at the types of items that are classified as personal property.
Personal property includes possessions, of really any kind, as long as those possessions are movable and owned by someone. Personal property isn't affixed to or associated with land. These moveable items are sometimes known as chattels. The law regarding chattels includes those laws covering possession, gifts, lost property, abandoned property, and stolen property.
It's helpful to note that personal property includes both tangible and intangible items. A tangible item is an item that can be felt or touched. For a business, tangible personal property includes items the business owns such as:
- Office furniture
- Business equipment
- Business vehicles
- Business goods
An intangible item is simply an item that can't be felt or touched. For a business, intangible personal property includes items the business owns such as:
- Intellectual property
The key difference between personal property and real property is that real property is fixed permanently to one location. This includes land and anything that is built on the land. It also includes anything that's growing on the land or that exists under the face of the land. For a business, real property includes immovable property that the business owns, such as:
- Mineral rights
For example, let's say that I'm in the farming business; I own a large piece of land. On the land, I have a house, a barn, a grain silo, and a stable. Each of these items is a piece of real property, because these items are attached to the land.
Since real property includes everything growing on my land, my real property includes my crops. Once cut, these crops become a moveable good. But while these crops are growing on my land, they are a part of my real property.
Let's also say that, while digging a freshwater well, I found oil under my land. Is this also my real property? Yes. My real property includes the rights to anything found under the surface of my land. This is a common concept when discussing rights to water, oil, or minerals found under the surface.
Real property also includes any items attached to real property and considered legally part of the real property. These items are known as fixtures. Fixtures are items that would normally remain in place when an owner of real property moves. My barn, house, silo, and stable are all fixtures. But fixtures can also be smaller items. Let's glance into my farmhouse and see what other fixtures I have. Fixtures are such things as:
- Ceiling fans
As you can see, sometimes real property rights are complicated. There are many different laws that pertain specifically to real property. These laws include those that cover types of estates, types of ownership, easements, conveyances, and leases.
Let's review. Much of business law deals with property. There are actually two different types of property. In legal terms, all property will be classified as either personal property or real property. Personal property is movable property. It's anything that can be subject to ownership, except land.
It's helpful to note that personal property includes both tangible and intangible items. A tangible item is an item that can be felt or touched. An intangible item is simply an item that can't be felt or touched.
Real property is immovable property. It's land and anything attached to the land. This includes fixtures. Real property also includes items that grow on, or can be found underneath, the surface of the land.
After watching this lesson, you should be able to compare and contrast between two types of property: personal and real.