Chapter 3

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Chapter 3: Rights and Interests in Land

Exclusive Right to Use of Land

Feudal SystemAllodial System

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Government Rights

Property Tax• The right of government to tax private property.

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Government Rights

Eminent Domain

• The right of government to take private property for public use upon payment of just compensation.

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Government Rights

• The right of government to regulate private property for the protection of the general public’s health, morals, and welfare.

Police Power

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Government Rights

Escheat• When a person dies and leaves no heirs and

no instructions as to how to dispose of real and personal property.

• Ownership of property passes to the government

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The largest, most complete bundle of rights one can hold in land; land ownership.

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Fee Simple

The Fee Simple Bundle of Rights

Real estate ownership is, in actuality, the ownership of rights to land. The largest bundle available for private ownership is called “fee simple.” © OnCourse Learning

Real Estate as a Bundle of Property Rights

• Property rights are what gives value to the real estate.• Private property rights are subject to limitations

imposed by government. Thus, this can limit the value of the investment.

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Removing Sticks from the Fee Simple Bundle

Note that the fee simple bundle shrinks as an owner voluntarily removes rights.

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Control MortgageLeaseImpose covenants or conditionsGrant easementGrant licenseBuild or remove structures

Use & Enjoy Occupy as residenceUse as place of businessFarmMine/drill for oil, etc.Place of recreation

Exclusion Maintain privacyNon-trespass

Disposition Sell or refuse to sellGiveWillAbandon

Right or Benefit Stick in Bundle

Real Estate as a Bundle of Property Rights

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Commonly Found Easements

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Commonly Found Encroachments

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Other Estates

Qualified Fee EstatesLife EstatesStatutory EstatesFreehold EstatesLeasehold Estates

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Rights and Interests in Land

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Cross Section of Estates and Rights in Land

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Cross Section of Estates and Rights in Land (continued)

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Checkpoint

In the absence of any other factors, which bundle of rights has a higher value?

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Key Terms

Chattel Easement Eminent domain Encroachment

Encumbrance Estate Fee simple Lien Title

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