2.2 Real versus Personal Property

Real Versus Personal Property

When conveying real property, it’s important to distinguish between real property and personal property. An item’s classification can depend on whether it’s permanently attached to land or structures. For example, a tree growing in a yard is real property, but once it’s cut down, it becomes personal property.

Fixtures are personal property items converted to real property by being attached to real estate (e.g., chandeliers, toilets, window shutters). Unless specifically excluded in a contract, fixtures are included in the sale of real property.

Criteria for Differentiation:

• Intention: Was the item meant to stay or be removed?
• Adaptation: Is the item uniquely adapted to the property?
• Functionality: Is it vital to the operation of the building?
• Relationship of parties: Trade fixtures used in business are usually the tenant’s personal property.
• Contract provisions: The sale or lease contract overrides other criteria.

Trade fixtures are personal property items temporarily affixed by a tenant to conduct business (e.g., freezers, racks). Tenants can remove trade fixtures before the lease ends; otherwise, the landlord may claim them.

Emblements are crops requiring human labor and are considered personal property, even though they grow in the soil. Naturally growing plants are real property.

Factory-built housing (like manufactured homes) may be real or personal property depending on whether it’s permanently affixed to land and according to state law.

Conversion is the process of changing an item’s classification:

• Severance: Real property becomes personal property when detached (e.g., cutting down a tree).
• Affixing: Personal property becomes real property when attached (e.g., building a dock).

Check-In Questions

• Which of the following is considered a fixture?
  A chandelier installed in the dining room
  A potted plant sitting on the porch
  A lawnmower stored in the garage
  A car parked in the driveway
  Show Answer

  Correct Answer: A chandelier installed in the dining room
  Once installed, a chandelier is considered a fixture (real property).
• What is the process of changing personal property to real property by attaching it called?
  Severance
  Emblements
  Affixing
  Trade fixture
  Show Answer

  Correct Answer: Affixing
  Affixing is the process of converting personal property to real property by attaching it.