Real property: Definition and examples

What is real property? Real property is more than land and buildings. It also includes the legal rights to use, control, and transfer that property. Understanding how these rights work can shape your ownership interest and land ownership decisions. If you’re buying, we’ll show you what to know and how Rocket Mortgage can help.

What is real property in real estate?

Real property has two components: the physical property and the ownership rights to that property.

The physical property aspect includes anything permanently attached to or built on the land. For example, a built-in outdoor kitchen qualifies because it would sell with the property. However, a freestanding grill on the patio is removable, so it would not be considered real property.

Real property also includes all legal rights attached to that property. It’s what gives you the right to own, use, lease, and sell the property in any way you like, subject to such legal restraints as taxes, zoning, police power, and eminent domain.

“In short, real property encompasses both the tangible elements of land and structures, as well as the intangible legal interests tied to them,” says Neil Cohen, a real estate attorney in Canton, Massachusetts.

Before committing to buying a home, it’s important to understand the property rights that are included in the transfer of ownership. If you’re in the process of buying a home, your real estate agent or attorney can help you understand your ownership rights.

Real property rights

Let’s take a closer look at real property rights, which can include the following.

• Possession. This right establishes legal ownership and grants the owner authority over the property, including the right to physically occupy and control it.
• Control. This is the right to use the property as you wish, within the law.
• Enjoyment. The owner can use the property peacefully and lawfully without interference.
• Exclusion. This is the right to deny access to others.
• Disposition. This permits the owner to sell, transfer, or lease the property, or to pass it on to heirs.

Types of real property

It’s important to distinguish between different classifications of ownership. Here are a few examples of real property types.

Freehold estates

A freehold estate is a property with permanent ownership. There is no time limit to the ownership of a freehold estate. A freehold estate must be immovable. An example would be land and anything permanently attached to it, like a house or a storage shed.

There are three primary types of freehold estates.

Fee simple absolute

Fee simple refers to absolute, unrestricted ownership. That means the property owner can use the land any way they like. As long as you pay your mortgage and taxes, you can own the property forever.

Fee simple defeasible

Fee simple defeasible refers to conditional ownership of a property. This applies to properties subject to legal restrictions on land use.

“A fee simple defeasible is an estate that has the potential, though not the certainty, of infinite duration,” says attorney Joseph Perotti Jr.

Possessory interests can have three kinds of limits:

1. In a fee simple determinable, ownership automatically ends if a specific event occurs.
2. In a fee simple subject to condition subsequent, ownership doesn't end immediately, but the original owner has the right to take the property back if the condition is broken.
3. In a fee simple subject to an executory limitation, ownership automatically transfers to another person upon the occurrence of a specific event.

Life estate

A life estate grants homeowners an interest in the property for as long as they live. The property holder is responsible for maintaining the property and keeping it in good condition.

Nonfreehold estates

A nonfreehold estate is a property that is leased or rented. Also known as “leasehold estates,” this is a step below freehold estates. That’s because the interested parties do not own the property or properties.

There are three types of nonfreehold estates.

Tenancy for years

In this type of lease agreement, a tenant has an interest in a rental property for a specified time. The contract specifies the beginning and end dates.

Tenancy at will

This is a lease agreement that can be terminated at any time, provided reasonable notice is given. Typically, the tenant will be given a specific time frame for when the agreement concludes, after which the tenant can face eviction.

Tenancy at sufferance

This type of tenancy arises when someone remains on the property without a legal right to do so and without the property owner's consent. This can happen when a tenant doesn't move out after their lease has expired.

Concurrent estates

In a concurrent estate, property ownership is divided among multiple owners. There are three types of concurrent estates.

Joint tenancy

Joint tenancy means that multiple people acquire real property and have equal ownership of the property. According to Perotti, a joint tenancy exists when all owners get their interest at the same time, through the same deed, with equal shares, and with the right to use the whole property. Once one joint tenant dies, their share automatically goes to the surviving tenant or tenants.

Tenancy by the entirety

In a tenancy by the entirety, spouses can jointly own property as a single legal entity. “Tenancy by the entirety applies to married couples and provides protections such as requiring both parties to approve transfers,” says Dennis Shirshikov, a professor of finance and economics at City University of New York-Queens College.

Tenancy in common

Tenancy in common is an agreement in which two or more people share ownership of real property. If one tenant dies, the property rights pass on to that person's estate.

Real property vs. personal property: Meanings and examples

Every kind of property falls into one of two categories: personal property (sometimes referred to as “chattel”) or real property. The determining factor is whether you can take the object with you when it’s time to move.

“Real property refers to land and anything currently attached to it, along with the legal rights that come with ownership. This includes the land itself as well as buildings, structural improvements, and features like landscaping that are intended to remain in place,” Cohen says. “Personal property consists of movable items that are not permanently affixed to the land and can be relocated without damaging the property. These belongings are owned by the individual but do not transfer with the land unless specifically included in a sale.”

What is the difference between real estate vs. real property?

Real estate refers strictly to the physical aspects of land and the permanent structures attached to it – the tangible elements you can see and touch.

Real property expands upon that by including physical real estate along with the intangible ownership rights associated with it, like the rights to control, use, and transfer the property.

When you purchase or sell real estate – such as a parcel of land or house – you’re actually buying or selling real property, which includes both the physical property and the accompanying ownership rights.

All real property includes real estate. But not everyone with an interest in real estate holds all the real property rights.

Some interests – such as leasehold interests, life estates, or easements – permit someone to use real estate without owning the full bundle of rights that accompanies full real property ownership.

The bottom line: Real property helps define ownership rights

Real property is a concept that defines physical property you own, as well as your legal rights associated with that property. It's essential to clearly understand your legal rights and any caveats related to property ownership before finalizing a home purchase. When in doubt, consult a trusted real estate agent and/or real estate attorney – especially if you are in the market to buy real estate.

Eager to lock in that property for sale, but need financing? Explore your borrowing options with Rocket Mortgage today.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.