Differentiating Real Property From Personal Property

Written by True Tamplin, BSc, CEPF®

Reviewed by Editorial Team

Updated on March 21, 2023

Property rights can be defined as entitlements to possession and use of something, including the right to equitable access to its income.

Different types of property can include real and personal property. The way that one defines different types of property is often a product of regional or cultural norms, but there are some key differences between real and personal property that they all recognize in general.

Property rights vary from one state to another within the United States due to local statutes and legal rulings; however, even if one lives outside the U.S., understanding these two major types of assets will help people understand their own systems of ownership around the world.

What Is Property?

Property is a broad category that can refer to anything that is legally owned or controlled, whether it be tangible or intangible.

Also known as "property rights", property includes the bundle of rights and privileges one has in their home, car, bank account, and other assets.

Types of Property

There are two different types of property:

  • Real Property - land and all things attached to it such as houses or buildings; these can also include natural resources such as minerals, trees, and crops. The term real estate refers to the entire business of buying and selling this type of property.
  • Personal Property - items that can be moved (tangible), such as cars and TVs; these assets cannot be transferred into another person's name without permission. Personal property includes anything that is owned, such as business inventory and equipment.

What Is Real Property?

Real property is a legal term used primarily in common law jurisdictions for anything related to rights over land, whether it be ownership, possession, or even rights to usage. Examples of real property include:

  • Home or property that is owned by a person or entity
  • Any improvements made to the home, such as new roofs, driveways, and landscaping
  • Land that is leased for farming, commercial development, etc.

It is generally divided into two types:

1) Fee Simple

This refers to ownership of real property in both legal and practical senses.

The owner has the right to use, manage, develop, control, transfer, sell or rent/lease their property in any way they see fit; this includes building new structures on it. This type of property isn't limited by time (like leases are).

It doesn't expire unless the owner decides to give up ownership of it completely or sell it to another person.

2) Freehold Estates

Historically, under English law, only hereditary estates were considered freehold. However, due to certain statutes within common law, these can be tenancies for life created by tenants who will then become landowners themselves.

What Is Personal Property?

Personal property is considered the opposite of real property because it can be moved from place to place.

This type of asset does not have an attached right to own or lease it, so the owner only has a claim to use and possess their personal belongings.

It isn't possible for one person to transfer ownership rights without written consent from another individual since they don't have a legal claim to that item just because they possess it.

Personal property must be distinguished from real property in order to differentiate between which assets are freehold estates and which ones are conditional licenses.

In some areas, there's no clear distinction between these two types of possession, but in others, ownership does expire after a period of time.

Examples of personal property include:

  • Items that are under your control, such as cars or TVs
  • Artwork that is hung on a wall in one's home
  • Jewelry and other items that are commonly worn by the owner

How to Classify Between Real and Personal Property

Real property is distinguishable from personal property through its attachment to land.

Without an attached piece of land, these assets are considered personal property.

For example, it is possible to be the owner of a car without owning the land that it sits on; however, if you own land, then everything on that land automatically becomes part of your real property (even if there's no building on it).

Therefore, homeownership would be classified as real property while possessing art or jewelry would be categorized under personal property.

Real estate agents often distinguish between these two types of properties when selling homes because this provides more options for their customers.

But in some cases - such as with artwork on one's walls -- making this distinction is not always easy since both types can exist simultaneously in different forms.

For example, it would be very difficult to track the ownership of an abstract painting. Although there is a way to distinguish between real property and personal property when dealing with art, different jurisdictions around the world may categorize these assets in different ways.

Final Thoughts

Real & personal property are two concepts that play a major role in many legal matters.

With their distinction comes unique challenges that must be overcome by businesses or individuals at some point.

If you're involved in legal proceedings involving real or personal property, understanding which type of asset you're dealing with can prevent serious complications within your case, especially if one incorrectly defines the other.

Thus, it is important to be able to correctly differentiate between real property and personal property.

Differentiating Real Property From Personal Property FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.

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