In my last post, “Real Estate Alphabet Soup: O is for Option” I continued my primer on the “alphabet soup” of real estate. This post continues to stir the “alphabet soup” with the letter “P.”
P is for “Property”. The legal term “property” in the world of real estate can include both personal property and real property. “Real Property” includes real estate; specifically, the land and improvements built and situated upon it. “Personal Property” may include items contained within the improvements located on the real property, such as furniture, furnishings and equipment.
In a real property sales contract, there should be a legal description of the real property being sold, as well as the identity of any personal property. For example, the contract should indicate whether the residential or commercial conveyance includes the furniture. Sometimes the personal property will be conveyed at closing via separate bill of sale.
In a real estate lease, the lease may be for all or a portion of the real property and improvements. Accordingly, the lease should contain a legal description to identify the real estate that is the subject of the lease, generally defined as the “Property”. And, if the lease is for less than the entire “Property”, there should be a separate description of that leased portion or portions, generally defined as the “Premises” or the “Leased Premises”. So, for example, the “Property” may be a parcel of land developed as a commercial shopping center containing multiple acres of land and buildings. However, the “Premises” may be only one building or one unit within a building, containing a certain amount of square feet of useable leased space, and therefore, must be described separately. The “Premises” may also include common areas of the Property, such as entrances, lobbies, elevators, interior pathways or sidewalks, parking, and driveways, or a right to the use the common area with other tenants.
“Property” may also be either “public” or “private”. “Private” property is property owned personally, by a person, persons or an entity, for the exclusive use by and benefit of the property owner. By contrast, “Public” property is property that is owned by the sovereign, or government, or property dedicated for use by and for the benefit of the general public. So, for example, although you may own the land and improvements on which your house or business is situated as your “private” property, with the exclusive rights, privileges and responsibilities inherent in property ownership, you may not own the street, sidewalk and street trees or utilities adjacent to your property located in the public right of way, or the public park next door, all of which typically are publicly owned and dedicated to and for the use and benefit of the public.
In my next post, I will move on to the letter “Q”, the next letter in this real estate “alphabet soup.”
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format that complies with IRS rules and may be relied upon to avoid penalties.