Understanding Real Estate (II)

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Sunday, August 3, 2014


CONTINUING our discussion on the topic, the other perspectives of real estate are:

Real Estate as a Legal Concept
The law defines rights and interest in real estate by indicating the extent of real property ownership. This ownership involves an aggregate of rights, powers and privileges which are guaranteed and perfected by the government.

Property rights and interest are compared to a Bundle of Sticks which represents a different right or interest. Ordinarily, the bundle includes rights of possession, use, enjoyment, disposition and the right to exclude others.

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Property ownership however is not absolute. These are subject to limitations and restrictions. These restrictions are: (1) police power; (2) power of taxation; (3) power of eminent domain and (4) power of escheat. These public restrictions will be discussed more fully in our future articles.

Property may be classified as real property or personal property. Real property refers to land and improvements both on and to the land. It also refers to the physical aspects of real estate including surface, air and subsurface (mineral) rights. Further, it refers to all man-made objects and articles permanently annexed or attached to the land. On the other hand, Personal property refers to movables which are not annexed to or part of the land. Personal property also applies to objects such as trees which have been severed from the real property.

The distinction between real and personal property is important for several reasons:

1. In a transfer of real estate, all objects which are classified as real property go to the purchaser and all objects classified as personal property stays in the ownership of the seller unless contractual provisions specify differently.

2. Proof of ownership and sale is different depending on whether an object is real property or personal property. If a person dies, the law in the person's state of residence controls the disposition of personal property, but the law where the real property is located controls is disposition.

3. The taxes levied on real ane personal property differ.
Because of the different ways the law treats real versus personal property, our courts have developed several tests to determine whether mixed property, which has attributes of both, is real or personal property. This realty is referred to as fixtures. A fixture is broadly defined as personality (personal property) which has become realty (real property). A fixture is an object, which has become annexed to real property. Examples of fixtures include built-in cabinets in a kitchen, bathtubs, permanent bookcases, air conditioning units/system and other similar objects.

The tests include: (1) Reasonable intent of the party annexing the object - where custom ordinarily presumes an object to be a fixture, the secret subjective intent of a party annexing an object will have little weight; (2) Adaptation of the object - if an object has been custom-made to be used with and as part of the realty, this will lead the courts to believe that the intent was for the object to be a fixture; (3) Method of annexation - if the removal of an article or object will cause permanent damage to the realty, it is ordinarily considered to be a fixture; and (4) Relationship of parties - in cases where property is leased to a commercial tenant, any fixture that the tenant brings to the realty for the purpose of conducting business such as shelving and counters will not be considered as realty.

Real Estate as a Social and Cultural Concept

Decisions involving how real estate is used have important social and cultural impacts. The basic needs of life, food, shelter and clothing, are satisfied through the use of land. Where we live, where we work and where we play are all real estate decisions. Social services such as public schools, police and fire protection, construction and maintenance of roads, hospitals and recreational facilities are all financed at the local government through the property tax collected.

Many social scientists have argued that human behaviour is influenced by both heredity and environment. The environment includes both the physical and human surroundings. The manner in which land-use decisions are made and implemented has a significant impact on the physical surroundings. Such factors as the quality of housing, the density of development, the distance from residence to places of work of the overall structure of the city or locality are all important in forming either beneficial or detrimental environments for humans to live, work and recreate.

For example, studies have shown that the design of residential buildings can increase or decrease the crime rate in public housing projects. Cases exist of parks being designed on the basis of artistic aesthetics which ignore the human element and thus fail in their primary function. A news feature reported a local park which had to be closed at night because, although it was considered to be beautiful, was used by muggers and other undesirable persons to hide and attack innocent citizens in the community.

Failure to consider the need of the human user has often led to financial disaster on the part of real estate investors. Not considering demographics in the design of shopping centers and residential projects has led to massive investment losses. Both private and public real estate decisions have impact on the social environment. Careful design of residential neighborhood streets with well-planned curves and cul-de-sacs, neighborhood parks, sidewalks and open spaces can contribute to improved community spirit and a sense of neighborhood involvement.

As part of the profession, which is in a position to influence these decisions, real estate brokers and practitioners have a major responsibility to be knowledgeable and well informed. The profession has a major public trust. One reason that professional standards and licensing requirements have become stricter is the public's growing awareness of how important real estate service practitioners are to the human environment.

Thus far, our full understanding of real estate and its various concepts, perspectives and features will help us out plan and utilize these God-given resources to its full and maximum use. These natural resources are given to us not only for the present generation to enjoy but have also to be passed on to future generations. We should always keep this in mind with many decisions we make on this.

(For comments, questions, queries, updates and other matters of concerns, you can email me at bert_capili@yahoo.com)

Published in the Sun.Star Baguio newspaper on August 04, 2014.

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