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A Guide To Understanding Bundle Of Rights In Real Estate

Molly Grace4-minute read

August 11, 2021

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Though “while you’re under my roof, you live by my rules,” is a bummer to hear when you’re a teenager, it’s a pretty good intro into rights that come with homeownership.

But homeownership is complex; when you buy a home, your rights to that property are multifaceted, and there are many things that can impact those rights.

This is where the bundle of rights comes in.

What Is A Bundle Of Rights In Real Estate?

The bundle of rights is a concept that helps us understand our rights to the property we own. So what does it mean, exactly?

The term “bundle of rights” describes the set of legal rights associated with ownership of real property. The “bundle” is made up of five different rights: the right of possession, the right of control, the right of exclusion, the right of enjoyment and the right of disposition.

How The Bundle Of Rights Works

Think of your bundle of rights as a bunch of bananas. Each banana represents one of your five rights.

When you own your home outright without any liens, encumbrances or shared ownership, you have a full bunch.

However, if you used a mortgage to purchase the property, you may have to share one of your bananas with your lender. Once you pay off your loan, the lender will give you your banana back. Or, if the home is an investment property that you rent out, your renter might hold some of your bananas while they live there.

Essentially, when you own a home, the rights you have as a property owner can be separated and held by someone other than you. So you might not always have your full bundle of rights – or a full bunch of bananas – even if you’re the owner of the home.

Additionally, even if you retain all the rights to your home, those rights will still be limited by the law and things like homeowners association (HOA) rules.

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The Five Rights In The Bundle Of Rights

Let’s take a closer look at each of the five rights that makes up your bundle of rights.

The Right Of Possession

The right of possession is fairly simple; it just refers to the right to possess, or own, the property. If you’re the title holder, you’re the legal owner of the property.

The Right Of Control

This is the “my house, my rules” right.

The right of control is your right to use or control the use of the property. This could include things like making renovations or changes to the property, having guests over to visit or live with you or renting it out to earn an income.

If you live in a community governed by an HOA, the HOA’s regulations can put certain limits on this right. For example, you might not be able to paint your house an outlandish color or keep a pet in your condo if it’s against HOA rules.

Local laws can impact your right of control as well. Depending on how your neighborhood is zoned, for example, you might not be able to run certain types of businesses out of your home or keep a coop of chickens in your backyard.

The Right Of Enjoyment

Being a homeowner can be a lot of fun. And as the property owner, you have a right to that fun.

The right of enjoyment gives you the right to lawfully enjoy your property how you see fit. For example, you can choose to throw a party at your home – provided you don’t break any local noise ordinances.

The Right Of Disposition

The right of disposition gives you the right to “dispose” of the property. This means you have the right to sell it, will it or otherwise transfer ownership to someone else.

If you have a lien on the property, this can complicate your ability to sell it. When you sell a home with a mortgage lien on it, you’ll have to pay off the remaining loan balance with the proceeds from the sale.

The Right Of Exclusion

A kid with a “no girls allowed” or “no boys allowed” sign outside their secret clubhouse is exercising their right of exclusion. With this right, you get to say who can and can’t set foot on your property.

This right can be limited in certain circumstances. For example, a police officer with a legal warrant can enter your home without your permission.

The Importance Of Understanding Ownership And Your Bundle Of Rights

As a homeowner, it’s important to understand exactly what you own.

As we’ve seen, owning a home isn’t as simple as just holding title to the property. Depending on your situation, you may have full access to your full bundle of rights (or your full bunch of bananas) or you may share those rights with other entities. Understanding what rights you have and what rights others have to your property will help ensure that any actions you take regarding the home don’t infringe on other’s rights.

This can be particularly helpful if you co-own a home with somebody, such as a spouse. When you share homeownership, you can’t always make unilateral decisions about what happens with the property. For example, you’ll generally need your co-owner’s permission before you can put the house up for sale.

The Bottom Line: The Bundle Of Rights Defines What We Own When We Buy Property

Remember, your bundle of rights as a property owner is like a bunch of bananas: they’re all sold together, but you sometimes have to share an individual banana or two with others.

To learn more about property ownership, check out our explainer on chain of title next.

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Molly Grace

Molly Grace is a staff writer focusing on mortgages, personal finance and homeownership. She has a B.A. in journalism from Indiana University. You can follow her on Twitter @themollygrace.