Business Law 101 / Real Estate

By Albert L. Kelley

Real estate is different than any other type of asset or personal property. It is one of the few things that is truly unique. No two pieces of land are the same-they may be similar, but you cannot simply replace one piece of land with another. Another difference between real estate and other assets is permanence. Other assets may come and go, but real estate is forever. Aside from erosion or a severe earthquake, land is not destroyed (although things on the land may be).

What is land? This sounds like a simple question but the answer is more than people think. Land is not just the surface of the earth; it also includes the air above the ground (subject to the right of aircraft to fly over). It includes everything below the ground (technically as far as the middle of the earth). It includes the minerals in the ground and the water on it.

When a building is placed on land, it becomes part of the land. That is, the building and the ground are treated as one. Further, if any personal property is affixed to the land or to any building on the land, that personal property also becomes part of the land. As an example, if a tenant to an apartment installs a ceiling fan inside the apartment, the tenant cannot take the ceiling fan with them when they leave. By attaching the fan to the ceiling, it becomes a “fixture” or part of the building and thus part of the land.

Portions of land may be sold or transferred without transferring other parts of the land. A property owner may sell mineral rights to his property without selling the land itself. This allows the property owner to build a house on the property, but allows the holder of the mineral rights to mine under the house for ore. A property owner can also sell profits, that is the right to remove things from the land of another. As an example, the property owner may allow a person to cut timber from their property or may allow a person to use water from a spring on the property.

A property owner may also transfer rights of passage over his property. These are usually referred to as easements. Occasionally, a person will buy a piece of land that cannot be accessed from any roadways. This is called landlocked. To gain access to their property, a neighboring land owner may grant the person an easement of ingress and egress, which means they have the right to travel over the land owner’s property to reach their home.

Interest in land can be held in many ways and by many types of entities. When a person owns land outright, it is referred to as “fee simple”. In a fee simple, the owner has rights to the entire property and has the unconditional right to dispose of the property during their life or through their estate after death.

A fee simple can be qualified when additional terms are added. A “fee simple conditional” transfers the fee simple if a certain act is done or not done. If there is a breach in the condition, the transferor may reclaim the property.

A “fee simple defeasible” allows the fee simple to be ended upon the occurrence or non-occurrence of a certain event. The fee may last forever, or may end if the qualifying event happens. As an example, land that is sold “so long as it is always used for residential purposes” creates a fee simple defeasible, because the transfer reverts if the holder uses the land for commercial reasons.

Another method of holding an interest in property is a “life estate”. The holder of a life estate has the right to possess and use the land during their life, but does not have the right to sell it. Upon death, the property transfers automatically to the remainderman.   A life estate can be sold, however, it has little value as it only lasts as long as the original holder survives.

Al Kelley is a Florida business law attorney located in Key West and previously taught business law, personnel law and labor law at St. Leo University. He is also the author of “Basics of Business Law” and “Basics of Florida’s Small Claims Court” (Absolutely Amazing e-Books). This article is being offered as a public service and is not intended to provide specific legal advice. If you have any questions about legal issues, you should confer with a licensed Florida attorney.

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