All property is either real property or personal property. You may wonder why the distinction in terms matters. Think of it like this—what if a creditor wants to take possession of something that is attached to real property? If the item is considered real property—because it is attached to your home—then the creditor cannot remove it from the house.
If the item is considered personal property, then a creditor could conceivably take the items if the consumer stopped paying his or her credit card bill. So, if you stop paying your Home Depot credit card bill could the company come to your home and take away light fixtures, ceiling fans, faucets, and controls?
Taxes are another reason you need to be aware of whether your property is considered real or personal. In the past, many states taxed all tangible property. However, some have moved toward eliminating taxes on personal property, decreasing the overall tax burden. Taxpayers can also depreciate short-lived personal property faster than longer-lived real estate assets.
In its simplest form, if you can physically move the property, then it is personal property, while things that are attached to land are considered real property. Building materials, such as metal or wood, are not real property on their own. However, the law considers them real property once they are used to build something attached to the land. Plants and trees, however, even though technically “attached” to land, are more likely to be considered personal property because they require labor and cultivation.
Three-Part Test to Distinguish Real Property from Personal Property
There are three primary questions to ask when determining whether a specific property is real property or personal property.
1. First, is the property occupied or attached? If you remove the property will that removal cause damage to the real property? Are you living in the property—i.e., is it occupied?
2. The second question is how the property is used, relative to the real estate, or how has it been adapted? Once a window is installed in a house, it has effectively been adapted from personal property to real property because it is more or less permanently attached.
3. Finally, what is the intent? Was the door intended to get permanently attached to the house, or, in the case of a window A/C, is the intent to take the air conditioner with you when you move?
Personal Property
Personal property can further be broken down into chattels and intangibles. Chattels refer to all types of property, but the term is often used for tangible property, like a suitcase or the sheets on your bed. When a chattel personal property item is attached to the land, it becomes a part of real property. This would include things like light fixtures, windows, doors, faucets, etc.
While they start out as personal property, more specifically, chattels, once attached to a house (which is attached to the land) they become fixtures on real property. A fixture could conceivably remain personal property if it were something that had to be removed when the person moved out.
Intangible personal property are items that cannot be touched or seen. Personal property items like stocks and bonds, insurance policies, licenses, franchises, intellectual property, or bank accounts are considered intangible personal property. Personal property is generally anything you can move that is subject to ownership.
Real Property
Real property is immobile—it cannot be moved. Real property often refers to land, and things attached to the land, and is often referred to as real estate. A tree that naturally grows on the land is considered a part of the real property. Plants that require consistent human input and maintenance—like the hydrangeas you planted in the front yard—are more likely to be classified as personal property. Farm animals are considered personal property since they can be moved at any time to another farm or can be sold to another individual who will move them.
All the materials used to construct a home or other type of structure become real property once they are attached to the land. There are some gray areas regarding real property. If you purchase a small shed from Home Depot, once it is set down on your land does it immediately become real property? Or, does the fact that the shed could be loaded on a trailer make it personal property? Since the personal property is “moveable,” then is the shed personal property or real property? An argument could be made for both sides, so the answer might come down to whether the shed is taxed on your property taxes.
Call Our Experienced Atlanta Attorneys
At Hobson & Hobson, P.C., our Atlanta attorneys can help you identify real property from personal property. Our knowledgeable lawyers are here to help you answer any questions you may have and guide you through the legal process.
Call us today at (770) 284-6153 or fill out our confidential contact form. We can set up a consultation, so you can review all your legal options.
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