Land, real property and personal property (fixtures, air, mineral and water rights)

Bottom line first. Land and anything permanently attached to it are real property. Everything else you can pick up and carry is personal property. Real property comes with a bundle of rights, and in Colorado the water right is often worth more than the dirt.

Land, real estate, real property

Land is the earth's surface, plus everything above it and below it in theory (air above, minerals and soil below). Real estate is land plus anything permanently attached by nature (trees, a creek) or by people (a house, a fence, a well). Real property is real estate plus the legal rights of owning it. Test questions often use "real estate" and "real property" as near twins. The cleanest difference: real estate is the physical thing, real property is the physical thing together with the ownership rights.

Personal property (also called chattels or personalty) is movable: a couch, a car, a lawnmower. A chattel is simply a piece of movable personal property.

Fixtures: when personal property becomes real property

A fixture is a thing that began as personal property but was attached to the land or building so firmly that the law now treats it as part of the real property. A new ceiling fan is personal property at the store. Once it is wired into the ceiling, it is a fixture and goes with the house on sale unless the contract says otherwise.

Courts and tests ask five questions. A handy memory aid is MARIA:

• Method of attachment: bolted, glued, plumbed or wired in (permanent) versus sitting or plugged in (not).
• Adaptability: is it made for this building (custom shelves, a built-in)?
• Relationship of the parties: owner versus tenant; courts are kinder to a tenant who wants to remove things.
• Intention: did the person who attached it mean it to be permanent? This is usually the most important test.
• Agreement: what do the contract or lease say?

Examples: a built-in dishwasher, a furnace, a light fixture and a mounted garage door opener are normally fixtures. A free-standing refrigerator, a rug and a patio table are normally personal property. Because the answer can be argued, a contract should name items. (Describe the form by section title: the Colorado Contract to Buy and Sell has an inclusions-and-exclusions section for exactly this.)

Trade fixtures

A trade fixture is an item a tenant attaches to rented space to run a business: a restaurant's commercial oven, a barber's chairs, store shelving. The general rule is that the tenant may remove trade fixtures before the lease ends, as long as the tenant repairs any damage from removal. Trade fixtures left behind after the lease ends may be treated as abandoned and become the landlord's. This is the tenant-friendly exception to the usual "attached means real property" rule.

Crops: emblements and fructus naturales

Plants you plant and harvest each year, like wheat or sweet corn, are emblements (also called fructus industriales). They are treated as personal property, even while growing, and a tenant farmer who loses the lease through no fault of his own may usually come back to harvest them. Plants that grow naturally without human care, like wild trees and native grass, are fructus naturales and are real property until cut. Fruit trees (an orchard) are real property; the fruit, once picked, is personal property.

The bundle of rights

Owning real property is like holding a bundle of sticks, each stick a right: to possess it, to use it, to enjoy it (quiet use without interference), to exclude others, and to dispose of it (sell, give or leave it by will). You can give away or sell one stick and keep the rest. A lease hands over possession for a time. An easement hands over a right to cross. A mineral lease hands over the right to drill. The owner keeps the other sticks.

Important limits on the bundle come from government powers: police power (zoning, building codes), eminent domain (taking land for public use with fair payment), taxation, and escheat (property passing to the state when an owner dies with no heirs and no will).

Air, surface and subsurface rights

Air rights are the right to use the space above the land. In a city, you can sell the right to build above a building. They are not unlimited: aircraft may fly over at heights allowed by law. Surface rights are the right to use the top of the land. Subsurface rights are the rights below it. In Colorado, a seller can split the rights: sell the house and the lot but keep the minerals.

Mineral rights

Mineral rights are the rights to oil, gas, coal and other minerals under the ground. They can be owned separately from the surface (a severed mineral estate). Oil and gas dealers and pipeline right-of-way agents have their own exemption from the broker license, but only for their mineral and pipeline work (C.R.S. 12-10-201(6)(b)(VI)). When a buyer purchases a house, the contract should state whether the minerals are included. A seller who keeps them still has implied permission to use the surface as needed to reach them, which is why buyers ask.

Water rights in Colorado

Colorado is a dry state and uses prior appropriation, summed up as "first in time, first in right." The earliest person to put water to beneficial use from a stream has the first claim to it. When there is a shortage, the oldest right gets all of its water before a newer right gets any. A senior right is an older, higher-priority right; a junior right is newer and cut off first.

The statute defines an appropriation as applying a specified portion of the waters of the state to a beneficial use under the procedures set by law, and it says an appropriation is not made when it rests on the speculative sale or transfer of rights to people who are not parties to the appropriation (C.R.S. 37-92-103). Beneficial use means a use that is useful and not wasteful, such as farming, drinking, industry or lawn irrigation. A water right can be lost by abandonment: when the owner intends to permanently stop using it (C.R.S. 37-92-103(2)). Think "use it or risk losing it."

A riparian right belongs to the owner of land next to a stream under eastern-state law. Colorado generally does not follow it; owning the bank does not give you the water. A water right is a separate property right and can be sold apart from the land. A buyer should ask whether any water rights, wells or ditch shares are included and put the answer in the contract.

Example with real numbers

A seller lists a $500,000 Boulder County home that has a built-in $2,400 range, a free-standing $1,800 refrigerator and a $900 patio set. The buyer's contract does not mention any of these.

1. The built-in range is attached by gas and wiring: a fixture, so it conveys with the house.
2. The refrigerator is plugged in only: personal property, so the seller may take it unless the contract includes it.
3. The patio set is personal property too.
4. Value of what the buyer should expect to receive that was not named: $2,400. Value the seller may remove: $1,800 + $900 = $2,700.

The fix is one line in the contract listing the refrigerator, so no argument happens at the final walk-through.