Real Property VS Personal Property: What is the Difference?

Aug 4, 2022
5 min

Property is anything that can legally be owned or regulated by a person. This includes tangible items such as lands, buildings, clothes, and cash, as well as intangible ones like electronic money and software. In real estate, property can be categorized into personal and real property. 

It is unrealistic to think that comfort can be achieved without both property types coming together. For example, a person who owns a bungalow would need some furniture to live comfortably. This is to say that real and personal property go hand in hand in creating a conducive home for living.

Despite their connection, these two properties are viewed differently under the law. The laws that apply to personal property can’t be applied to real property. Understanding these differences will enable you to decide what laws apply to a property and which procedures are used to enforce property rights.

What is Personal Property?

Personal property are movable belongings. It is not permanently affixed to a location nor is it associated with land. It is noteworthy that personal property are divided into tangible and intangible personal property. Tangible personal property, also referred to as chattels, are items that can be touched or held.

Examples of tangible personal property are:

  • Vehicles
  • Furniture

On the other hand, intangible personal property are items that cannot be seen or touched. They are anything other than physical items. Examples of intangible personal property are:

  • Bank accounts
  • Money

Is a refrigerator personal property?

Yes, a refrigerator is personal property, and this is because a refrigerator can be moved around. It is also safe to say that a refrigerator is tangible personal property, seeing that it can be touched and held. 

Although people may presume that a refrigerator should come with a house, it technically remains personal property if it isn’t built-in or the contract dictates otherwise.

What is Real Property?

Real property are possessions that cannot be moved from place to place. This encompasses land, things attached permanently to land, and things that grow and exist beneath land. Like personal property, real property is divided into tangible and intangible real property. 

Tangible real property includes the physical aspects of real property. Examples are:

  • Mineral resources
  • Ponds

Intangible real property are mostly rights and privileges that the owner of a real property enjoys. Examples are:

  • Homeowners Insurance 

Real Property and Real Estate

While real property refers to all of real estate, including the intangible legal rights to land and all that is attached to it, real estate pertains to only physical aspects of real property such as buildings and structures.

The ownership of real estate can be divided into these two categories:

Freehold Estates

Freehold estates involve the long-term or permanent ownership of property. An estate holder could possess a property for an unlimited period, and in the eventuality of his death, the property can be inherited. In some cases, freehold estates could be limited to the life of the property owner or designated person.

Non-Freehold Estates

Non-freehold estates involve leases and exist without ownership. This means that they cannot be passed on to an heir. Also known as the law of landlord and tenant, non-freehold estates are created by written or verbal lease agreements.

What is a Fixture?

A fixture is a tangible personal property that is permanently attached to real property. An example of a fixture is landscaping which is anything placed into the ground to improve its appearance.

To determine if a fixture is real property or chattel, you need to know the purpose. If the fixture was attached to enhance the use of the land, it is real property.  If not, it remains tangible personal property. A fixture can be defined as real property by a declaration in a contract.

What is a Trade Fixture?

A trade fixture is any item attached to a rented real property by the tenant that they are allowed to take with them when leaving. These fixtures are usually things that require being affixed for optimal use. A typical example is a chair at a hair salon that is fastened to the ground.

Trade fixtures are classified as personal property no matter how they are affixed. Though they might not be subject to the rights of real property ownership, it is common for conflicts to arise when the tenant makes an improvement, and the lease does not define who gets to keep the item.

How Real Estate Agents Can Avoid Confusion of What’s Personal and Real Property

Real estate agents need to keep their clients informed about property because the distinction between personal and real property can be pretty confusing to non-professionals. Here are a few ways agents can avoid these confusions for clearer transactions.

Communicating with all parties

Effective communication is no doubt an essential aspect of any real estate transaction. The last thing an agent would want is for his clients to get confused. Whether it's about property or agreements, it is vital to make sure that details are clearly defined and that everyone understands what they are agreeing to.

Writing out what stays with the house in the contract

Uncertainties about the ownership of fixtures and trade fixtures can lead to disputes between parties. Real estate agents can avoid confusion by using contracts to describe and give information about transactions. When drafting a real estate contract, it is crucial to clearly define what stays in the house and what doesn't.

What Happens if the Seller Takes Real Property?

An agent’s fiduciary duty is to always act in the client's best interest. In the case of the seller taking real property, the buyer’s agent is required to negotiate with the seller’s agent for the return of the property. If no agreement is reached, the state can intervene and take back the property for the seller.

Final Thoughts

The biggest takeaway from this article is that real property is immovable and permanent, while on the contrary, personal property is movable and is not associated with land. Since the distinctions between both categories are not always clear, an in-depth understanding of property is necessary. For instance, a chandelier is a personal property until it’s attached to the ceiling of a building, and then, it becomes real property.

TL;DR: Real property is everything that faceted to the earth and the sky above it. Think of trees, a driveway, the house itself. Personal property are the items that are not fixed to the property itself. Think of a computer, couch, or table.

Aug 4, 2022
5 min