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How to Distinguish Between Real and Personal Property

March 17, 2015

You may not think there is much difference between what is real and what is personal where it comes to property. But there is actually a significant difference. Even so, why would you need to know the difference? When you're investing in real estate, the difference between real and personal property is very important, because it allows for a decision to be made about which rules should be applied to a specific item and what courses of action are available when property rights have been violated.

Real Property

The 'real property' term is reserved for both the land that a property sits on, as well as items that may be attached to that land. Interestingly, the term 'real estate' stems from this fact. Building materials like wood and steel are, of course, not land. However, when they are used to expand on a structure that's already on or attached to the land, these materials become real property.

Real property also includes any plant life that grows naturally on the land, which includes trees and other plants. However, real property does not always include any plants that must have regular human labor and cultivation in order to thrive, such as a vegetable garden or grain field.

Personal Property

Anything else that doesn't fall under the definition of real property is considered to be personal property. However, personal property can be divided into more than one category.

Chattel most often refers to that personal property which is tangible. This can include anything from a pair of scissors to a furnace. But there is more than one kind of chattel. In the furnace example, this item can become part of real property because it can be attached to a property. In this case, a furnace would come under the designation of a fixture. A fixture can be removed, however. When this occurs, the fixture can then be considered as personal property. An example may be when a tenant of an apartment removes a fixture they installed at the time they move.

Intangibles are another kind of personal property. Covering anything from a bank account to a trademark, intangibles often refer to legal rights and not items per se. Currency can sometimes be looked upon as an intangible.

Whether an individual owns real property, personal property or both, understanding the differences between them can have a significant impact on many aspects of the sale and purchase of real estate. In the case of a dispute or claim, the designations of real and personal property will most certainly be examined. Real and personal property also come into play where an individual's rights to use that property are concerned. And these designations also affect the rules which govern how the ownership of property is allowed to be transferred from one party to another.

Granted, the designations of real and personal property do appear to be clear-cut on the surface. But there could be exceptions. The best way to be sure is to seek professional advice.