BUNDLE OF RIGHTS REAL ESTATE: Definition & Overview

BUNDLE OF RIGHTS REAL ESTATE
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Real estate owners have a “bundle of legal rights” that comes with the property when they buy it. This bundle includes the rights to own, govern, exclude others from it, and dispose of the property. Learn more about the bundle of rights real estate test and deeper definition.

A Bundle of Rights Real Estate Definition?

The definition of a bundle of rights in real estate means the collection of legal rights that are granted to a property owner following the purchase of (and receipt of a title to) a piece of real land in the United States. Possession, control, exclusion, income derivation, and disposition are all examples of property rights.

Each of the rights in the bundle acts independently (thus the term “bundle of sticks” in property law). Certain rights (or “sticks”) may be lost or chosen by property owners for specific reasons—for example, if they elect to rent out a room on the property, they give up the right of exclusion in favor of tenancy.

A Deeper Definition of a Bundle of Rights Real Estate

When you own property, you have a slew of options, including the ability to sell, lease, use, exclude, enjoy, dispose of, or develop it. The rights of owners can differ based on local regulations.

The rights of a property owner might be restricted in a variety of circumstances, such as when property taxes are not paid. In most circumstances, a property titleholder has the right to use, manage, and enjoy the property in any legal way, albeit there are some limitations. Due to subdivision laws or homeowners association covenants, playing music within a specified decibel range, for example, maybe prohibited.

Overview

From the above bundle of rights real estate definition, once the sale is completed, the normal homebuyer can expect the entire traditional package of rights. Homebuyers expect to have the right of possession, control, exclusion, pleasure, and disposition when they purchase a home.

These rights, however, can be divided and transferred to multiple parties. This is frequently the case when purchasing commercial or investment property. For example, local landlord-tenant rules and regulations may limit the rights of a purchase of a rental property, or the owner of a storefront property may share some rights with the tenant who operates a business there.

What Is the Importance of a Bundle of Rights Real Estate?

A bundle of rights is significant because it explains how real estate owners can legally use their property. Whether you’re a private home buyer or a commercial real estate investor, it’s critical to understand the set of rights that come with a property’s title so that you can set realistic expectations for its utility.

Land use laws, homeowners’ association (HOA) regulations, or shared rights with other renters or storefronts may all be encumbrances to these rights in specific situations.

How the Bundle of Rights Real Estate Works

Consider your rights to be a bunch of bananas. One of your five rights is represented by each banana.

You have a full bunch when you own your house outright with no liens, encumbrances, or joint ownership.

If you bought the house with a mortgage, you may have to divide one of your bananas with your lender. The lender will return your banana once you have paid off your loan. Alternatively, if you rent out your home as an investment property, your tenant may keep some of your bananas while they reside there. Even if you own the house, you might not always have your whole set of rights — or a full bunch of bananas.

Furthermore, even if you retain complete ownership of your house, the legislation and rules governing homeowners associations (HOAs) would limit your rights.

Bundle of Rights Real Estate Example

Lucas v. South Carolina Coastal Commission stated in 1992 that taking away a property owner’s right to develop the property is no different than taking away the property altogether because of the bundle of rights real estate test. Because of the state’s objective to conserve the land and provide public beach access, David Lucas, the owner of beachfront property in South Carolina, was refused development rights. The state did not compensate Lucas for his loss until the case reached the United States supreme court. This court ruling reinforced the notion that property ownership encompasses more than just actual possession of the real estate.

What Does the Bundle of Rights Real Estate Include?

Several distinct ownership rights are included in the bundle of rights real estate:

#1. The Right of Possession

When someone buys a house, they have the legal right to live there. Many stipulations can be to the right of possession, such as the owner’s obligation to pay property taxes and HOA fees (if applicable) in order to keep the right of possession. Furthermore, if the buyer has a mortgage, the mortgage lender has a lien (a legal claim against property) and technically owns the title as well as the right to foreclose (take ownership of the property if the mortgage owner falls behind on loan payments).

#2. The Right of Control

A homeowner has the right to govern their property, which means they can decide what happens there, including whether or not to keep a pet or earn money from it. Other constraints apply to the right of control—for example, the homeowner is still by homeowners’ association rules, local, state, and federal laws, and zoning regulations.

#3. The Right to Enjoyment

This right, often known as the “right of peaceful enjoyment,” preserves a homeowner’s right to design, operate, and live in their home (including real property and yard), subject to HOA and legal restrictions.

#4. The right of exclusion

Trespassing in a home or on private property is illegal, and a homeowner has the authority to keep outsiders out. There are a few exceptions to the right of exclusion, such as law enforcement officers with a warrant and utility easements, which allow them to use parts of the land for repairs and upkeep.

#5. The Right of Disposition

A homeowner has the legal right to transfer ownership of their home to another person, whether through a sale, a gift, or a bequest. If the house still has a mortgage, the seller’s right of disposition is subject to a lien, and the proceeds from the sale must be to pay down the mortgage.

#6. Additional Rights

Other less common rights awarded to the property owner are surface rights (related to the surface of the land), mineral rights (related to the chemicals discovered on their property), and air rights (related to the air) (legal ability to occupy the vertical air space above a plot of real estate).

Bundle of Rights Real Estate Test

In this section, we will consider a bundle of the rights real estate tests, one may encounter while preparing his/her real estate document, and they include:

The power company sent Jason a letter. They’ll have to run part of their lines through his land outside of town. They want him to sign a document stating that he is alright with it. What exactly is this?

  • Easement
  • Eminent domain
  • Utility power
  • Right to enjoyment

The following are the sources of the bundle rights:

  • The Constitution, common law, and easements
  • The Constitution, legislation, and common law all have a role in the legal system.
  • Easement, common law, and statutes
  • The Constitution, statutes, and easements

Keelan wishes to purchase a beach house on the water’s edge. What rights should he check into when it comes to using the beach?

  • Rights to the seabed
  • Coastal rights
  • Rights of Correspondence
  • Easement privileges

Different Types of Property

It is necessary to define property rights to something, monitor their use, and enforce ownership of those rights. The following is a list of several categories of property:

#1. Private Property

is excludable; the owner has the ability to prevent others from accessing or utilizing it. Its usage, exclusion, and management are all under the jurisdiction of the private owner. A group of legal owners may own private property, in which case the group has power over what happens to it.

All things tangible and intangible that a private individual or entity possesses and over which the owners have total property rights are private property. Buildings, land, copyrights, patents, and money are all examples.

Personal property, which is the property for personal use and consumption, is not the same as private property. Private property is a legal term that is defined and enforced by a country’s political system.

Your residence is your personal property. If you possess a second home but don’t live in it and don’t use it personally, it’s your private property but not your personal property. Communists claim to believe in personal property but not private property.

#2. Public Property

Property that we all own, often known as state property, is a property that we all own – it belongs to all of us.

However, the community has control over who has access to it (government, local authority, etc.). Public property includes state-owned businesses and national parks.

#3. Open-Access Property

The property is not ‘owned’ by anyone. Nobody can prevent others from utilizing it because it is non-excludable. Nobody manages this type of property, and no one has control over who has access to it.

Navigable rivers (ocean fisheries) and the upper atmosphere are examples of open-access property.

#4. Common Property

Property owned by a group of people is referred to as communal property. The joint-owners have control over who has access to it, as well as who can utilize it and who can’t.

Conclusion

Once you close on a property, you acquire the rights of possession, control, exclusion, enjoyment, and disposition. This set of rights provides you with all of the rights that come with owning a home. However, depending on the type of property you own and whether or not you rent it out to renters, there are some exclusions.

FAQs

What are the 4 property rights?

The right of possession, the right of control, the right of exclusion, the right to derive revenue, and the right of disposition are the most important legal property rights. These rights are subject to exceptions, and property owners have both obligations and rights.

What is property right in real estate?

Property rights describe who owns things and resources legally and intellectually, and how they can be used. Governments, individuals, and organizations can all hold these assets and resources, which can be intangible or tangible.

What is the bundle of rights theory?

Property ownership is compared to a bundle of sticks, with each stick representing a different and individual right of the owner, such as the right to test the bundle of rights real estate, sell it, lease it, give it away, or choose to exercise all or none of these rights.

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