Real Estate Principles: A Condensed Journey

Learning Objectives

Upon completion of this section, you should be able to:

• Define and describe land, real estate, real property, personal property, surface rights, subsurface rights, air rights, and water rights.
• List and give examples of the uses of real property.
• Define the concept of real property as a “bundle of rights.”
• Define fixtures, including trade fixtures, and apply the legal tests of a fixture.

Real Property

The term real estate evokes different images for different people. Some think of land; others think of homes or even condominiums. These interpretations are correct because real estate is the land and anything physically attached (e.g., buildings, trees, etc.). However, there is a second, more inclusive legal term that is actually what you purchase when you buy a home or condo, known as real property. Real property includes real estate and rights to the property (e.g., right to occupy, sell, lease, etc.). Let’s look at some key terms as we dive deeper into real property.

• Real property includes land, any fixtures or improvements attached to the land, and rights and privileges associated with the land. The interests and rights associated with land ownership can be defined as the bundle of rights.

• The bundle of rights includes the ability to mortgage, lease, will, subdivide, and sell. The bundle of rights is complex, particularly because rights can be broken up into parts, which means a person may not get all the rights of ownership during a transfer. An example is a person who bought the real property but does not have subsurface rights (i.e., rights to minerals, oil, and gas below the land’s surface).

• Land is one of the basic components of real property. It is not just the surface of the land and the boundaries within a parcel, but it also encompasses everything below and above the earth's surface.

• Real estate encompasses the land along with any fixtures. A fixture is anything permanently affixed to the land. Fixtures are man-made, permanent attachments to the land (e.g., buildings) or improvements that usually cannot be removed without an agreement (e.g., plumbing fixtures or fixtures permanently built into the property).

When a property is sold, anything affixed to the land (e.g., buildings or fences) or rights to be used with the land are known as appurtenances. Appurtenances include the following rights, each of which we will summarize.

• Air rights
• Water rights
• Mineral, oil, and gas rights
• Surface and support rights

Air Rights

As we stated earlier, in theory, a landowner owns the airspace above the surface of the land, which is also known as air rights. If this were the case literally, then air traffic would not be able to fly over land that was not owned by the public. When Congress gave the federal government complete control over the national airspace, it gave landowners the right to use airspace at the lower levels as long as they did not interfere with air traffic.

Water Rights

When a property is either adjacent to or surrounding water, there are considerations regarding both the ownership of the water and its use. Let’s first establish the ownership types and what they mean.

Ownership of Water

The two types of ownership are riparian and littoral.

• Riparian land ownership dictates the water rights for properties that are next to or surrounding a river or stream. 
• Littoral land ownership dictates water rights for properties that are next to or surrounding non-moving water sources, such as a pond, lake, or ocean.

In both cases, the following table summarizes whether or not the person who owns the surrounding land can also have control over the water: 

If a property is next to or surrounding a river or stream, the owner would be known as a riparian land owner. In these cases, the riparian land owner can either own the land 1) under the stream or river or 2) up to the water’s edge. The condition that decides whether the ownership extends into the river or stream has to do with the stream or river’s capacity to be used for transportation. The technical term for water that can be used for transport is navigable. If a river is navigable, then the owner can only own the land up to the water’s edge. 

The purpose of ownership only extending to the water’s edge for navigable rivers to allow the state to regulate transport and allow other parties to use rivers for commerce and enjoyment. If owners were allowed to own the land under the river and the river itself, then they could charge money for use or even stop the use of the waterway. However, if the waterway isn’t navigable and the owner has property on both sides of the river or stream, ownership can extend under the entire stream or river. If there is another property that is next to the river or stream on the other side, then each owner would own the land to the midpoint of the stream or river.

The second type of ownership is littoral land owners. Littoral land ownership occurs when properties are next to or surround a non-moving water source, such as a pond, lake, or ocean. Littoral owners are similar to riparian owners in the type of ownership they can have over the body of water. If they are adjacent to a non-navigable pond or lake, ownership may extend into the water. Like riparian owners, when the property is navigable, the ownership can only extend to the water’s edge. The reasons behind the need to have the land be public is exactly the same as well, allowing fair use of waterways is in the public good.

Water Rights

With an understanding of riparian and littoral ownership, we can turn our focus to water rights. Water rights is how the use of the water is allocated. Each state governs water allocation with little direction from the federal government. There are two main systems of water use that are adopted by most states, while others use a hybrid of the two approaches. The two main types are riparian theory and the doctrine of prior appropriation. Riparian theory is most common in the eastern US due to its water abundance, while the more arid western states developed the doctrine of prior appropriation. Here in Washington we follow the doctrine of prior appropriation. It's necessary to understand the basics of both systems. 

• Riparian theory is based on allocation of water to those properties that lie along the path of the waterway. Riparian theory allows "reasonable use" by all owners along the waterway. The use of water cannot unreasonably affect the use of others with riparian rights.

• The doctrine of prior appropriation is very similar to how little kids employ rights; the first person to arrive gets first rights. This evolved from situations such as the California gold rush, where the use of water was basically a system of "I called it, so I get it."  While it may seem odd that water rights are allocated how children allocate who gets to sit in the front seat of a car, it's quite common. Essentially, those who were using the water first can continue using it and newer claims to use are junior to those already in place. If there is an impact on water flows, the junior water rights holders will be first affected.

Here in Washington, the Department of Ecology describes the rights system as follows:

"Washington State follows the doctrine of prior appropriation, which means that the first users have rights senior to those issued later. We call this "first in time, first in right." If a water shortage occurs, senior rights are satisfied first, and the junior right holders can be curtailed. When we issue a water right permit, it is a permit to develop a water right. It is not a water right until the water has been put to full use, and we issue a certificate of water right. A water right will remain in good standing as long as you continue to exercise the right."

In practical terms, if you stop using a water right, you lose your place in line. Washington has ongoing argument between the courts, the Department of Ecology, and politicians regarding water rights within the state, so it is imperative that you check with the local jurisdiction to find out whether water is available and how to apply for a water right.

The next section covers scenarios where the water moves land, but there is one more key term that you should know about water rights: correlative rights. Correlative rights apply to ground water, basically underground aquifers. Under correlative rights, each land owner is entitled to reasonable use. You can equate the concepts of riparian theory and correlative rights when thinking of how use is allocated to land owners.

When Water Moves Land: Accretion, Erosion, and Property Changes

Water can affect the physical size and shape of land both through gradual processes (e.g., erosion) and through rapid ones (e.g., flooding). The speed at which a change occurs legally changes how ownership is determined and whether property lines are redrawn.

Natural borders are frequently used to determine property lines. For example, the border between Washington and Oregon state is the Columbia River. Should a change in the river cause a major shift in land, there could be a dispute over who owns what. Let’s look at some of the legal terms that are used to define what has occurred when water shifts land.

• Accretion - Accretion is when land is added gradually by water, such as a river, sea, or lake. For example, if soil gradually accumulates over time on the property of an owner living along a river, it is known as accretion. The key legal point is that when accretion occurs, ownership is granted to the property where it settles.

• Avulsion - Avulsion is a term that means that land has been rapidly added or removed from a property. The most common occurrence is when a flood happens, and a river moves land downstream to another location. The legal result of the event is the opposite of accretion. When avulsion happens, the land remains the property of the owner who lost it. While the land could be recovered by the owner who lost it, the cost usually isn't worth going through the recovery process.

The most common legal action that occurs in relation to accretion and avulsion is determining which of the two occurred. It essentially boils down to a fight over whether the addition of land was imperceptible and, therefore, gradual enough to be defined as accretion. If it can be proven perceptible over a short enough time frame, a court will rule that avulsion has happened, and therefore, ownership should remain with the owner who lost the land.

• Reliction - Reliction is the gradual increase in land that occurs when a body of water recedes, increasing the amount of dry land. The increase in dry land becomes part of the property adjacent to the body of water.