Introduction to land law - Distinction between real property and personal property

Learning Outcomes

After reading this article, you will be able to distinguish between real property and personal property, explain the legal significance of this distinction, and identify the main types of legal and equitable interests in land. You will also be able to apply the tests for fixtures and chattels, and understand how these concepts affect property transactions and exam scenarios.

SQE1 Syllabus

For SQE1, you are required to understand the distinction between real property and personal property, and the consequences of this distinction for property rights, transactions, and disputes. In your revision, focus on:

  • the definitions and legal significance of real property (realty) and personal property (personalty)
  • the main types of legal and equitable interests in land
  • the difference between fixtures and chattels, and the tests used to distinguish them
  • how these classifications affect the transfer, registration, and enforcement of property rights

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

  1. What is the main legal difference between real property and personal property?
  2. Which test is used to determine whether an item is a fixture or a chattel?
  3. Name two types of legal interests in land recognized by the Law of Property Act 1925.
  4. True or false? All fixtures are automatically included in the sale of land unless expressly excluded in the contract.

Introduction

Understanding the distinction between real property and personal property is essential for SQE1. This classification determines how property rights are created, transferred, and enforced. It also affects what is included in a sale, the remedies available in disputes, and the formalities required for valid transactions. This article explains the definitions, legal consequences, and practical application of these concepts, focusing on the types of interests in land and the rules for fixtures and chattels.

Real Property and Personal Property: Definitions and Legal Significance

Real property (realty) refers to land and things attached to land, including buildings and fixtures. Personal property (personalty) covers all other property, such as movable items (chattels) and intangible rights.

Key Term: real property Real property means land and anything permanently attached to it, including buildings and fixtures.

Key Term: personal property Personal property means all property that is not real property, including movable items (chattels) and intangible assets.

The distinction is important because real property and personal property are subject to different legal rules for transfer, registration, and remedies. For example, real property transactions usually require a deed and registration, while personal property can often be transferred informally.

Legal and Equitable Interests in Land

The Law of Property Act 1925 (LPA 1925) restricts legal estates in land to two types:

  • the freehold estate (fee simple absolute in possession)
  • the leasehold estate (term of years absolute)

Other rights over land, such as easements, mortgages, and rentcharges, may exist as legal interests if they meet the statutory requirements.

Key Term: legal interest A legal interest is a property right recognized by law, enforceable against the world, and usually created by deed and registration.

Key Term: equitable interest An equitable interest is a property right recognized in equity, often arising where legal formalities are not met or where the right is not capable of being legal.

Legal interests bind everyone, while equitable interests may be lost to a bona fide purchaser for value of a legal estate without notice, unless protected by registration.

Fixtures and Chattels: The Practical Distinction

When land is sold, the buyer is entitled to all fixtures unless the contract states otherwise. Chattels remain the seller's property unless specifically included.

Key Term: fixture A fixture is an item attached to land or a building in such a way that it becomes part of the real property.

Key Term: chattel A chattel is a movable item that remains personal property and is not part of the land.

The courts use two main tests to distinguish fixtures from chattels:

  1. Degree of annexation: How firmly is the item attached? The more permanent the attachment, the more likely it is a fixture.
  2. Purpose of annexation: Was the item attached to improve the land/building (fixture), or for the better enjoyment of the item itself (chattel)? The purpose test is usually decisive.

Worked Example 1.1

A seller removes a fitted oven and built-in wardrobes before completion. The buyer claims these should have remained. Are these items fixtures or chattels?

Answer: Both the oven (if built-in) and the wardrobes (if fitted) are likely to be fixtures, as they are attached to the property to improve its use. The buyer is entitled to them unless the contract allows removal.

Worked Example 1.2

A heavy statue is resting by its own weight in the garden. Is it a fixture or a chattel?

Answer: If the statue is not attached and can be moved without damage, it is likely a chattel. However, if it forms part of an overall garden design, it may be a fixture.

Why the Distinction Matters in Practice

The classification of property as real or personal, and as fixture or chattel, affects:

  • what is included in a sale of land
  • what can be used as security for a mortgage
  • the remedies available in disputes
  • the registration and transfer requirements

For example, a mortgage over land includes all fixtures but not chattels. If a dispute arises over whether an item is included in a sale, the degree and purpose of annexation tests are applied.

Legal Formalities and Registration

Legal estates and interests in land must usually be created by deed and registered to be effective. Equitable interests may arise where legal formalities are not met, or where the right is not capable of being legal (such as a beneficial interest under a trust).

Key Term: deed A deed is a formal, written document that is signed, witnessed, and intended to be a deed. It is required for most legal property transactions.

Summary Table: Real Property vs. Personal Property

FeatureReal Property (Realty)Personal Property (Personalty)
What it coversLand, buildings, fixturesMovable items, chattels, intangibles
Transfer formalitiesUsually by deed and registrationUsually informal
Included in land sale?Yes (unless excluded)No (unless included)
Legal remediesSpecific performance, damagesDamages, delivery up

Key Point Checklist

This article has covered the following key knowledge points:

  • The distinction between real property (land and fixtures) and personal property (chattels and intangibles) is fundamental in land law.
  • Legal interests in land are limited to freehold and leasehold estates, and certain rights such as easements and mortgages, if created by deed and registered.
  • Equitable interests arise where legal formalities are not met or where the right cannot be legal, and may require registration for protection.
  • Fixtures are items attached to land/buildings intended to be permanent; chattels are movable and remain personal property.
  • The degree and purpose of annexation tests are used to distinguish fixtures from chattels.
  • The classification affects what is included in a sale, what is subject to a mortgage, and the remedies and formalities required.

Key Terms and Concepts

  • real property
  • personal property
  • legal interest
  • equitable interest
  • fixture
  • chattel
  • deed
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