by Dave Miller
We say we bought real estate, land or property; but what did we really buy?
The terms most commonly used are: land, real estate and real property. Believe it or not they are three separate items.
- Land – is defined as the earth and the air. It consists of the surface of the earth extending downward to the center of the earth and upward into space. It also includes natural objects that are permanent such as trees and water.
- Real Estate – includes the land, listed above, and all things permanently attached to it; natural, artificial or man-made.
- Real Property – is all of the above, real estate which includes the land and then add in your rights. Better known as your “bundle of rights”.
When people today talk of buying and selling property it’s commonly referred to as real estate. For all practical purposes, the term is synonymous with real property as defined here.
Land consists of three rights; subsurface rights, surface rights and air rights.
- Subsurface are the rights to the natural resources below the surface of the earth. These can be sold off separately. They are commonly the mineral rights or gas rights. Currently in some areas of Pennsylvania gas rights are highly saleable since the new drilling techniques allow access to Marcellus shale areas far below the surface.
- The surface rights are the rights to use the surface of the earth. One may sell off his surface rights while retaining the ownership of the subsurface rights. These rights are separate and can be sold individually.
- Air rights are the rights to the air space above your land.
The ownership of property is at times referred to as the owning of a “bundle of rights” By owning a property you own some or all of the rights associated to the property. These rights are:
- right of possession
- right to control the property within the framework of the law
- right of enjoyment (to use the property in any legal manner)
- right of exclusion (to keep others from using the property)
- right of disposition (to sell, will, or otherwise dispose of the property)
These rights can be separated and bought, sold or leased individually. This happens when a right of way is sold to someone else or a tenant leases rights from the owner of the rights.
Just as Boaz took off his shoe in a seemingly strange manner in the book of Ruth so we view the next illustration. The real reason was a symbolic method of helping the persons involved to understand what was happening. Most people could not read or write so they relied on methods that allowed them to visualize the transfer. So when rights were transferred the symbolic method was to hand the new owner a bundle of sticks.
Old English law was the origin of the concept of the “bundle of rights”. When a seller transferred ownership of his property (or rights), he gathered sticks from a tree on the property and bound them together. If all the rights were transferred he gathered five sticks. This process was called the livery of seisin. The purchaser accepted the symbolic sticks as his method of receiving ownership of these rights. Because the rights, like the sticks, can be separated and sold independently, multiple parties may own certain rights to the same property.
So the next time you go to your banker tell him you need a loan to buy a bundle of sticks.