Property Rights & What You Own
The shocking truth about what you actually control when you “own” property
The $100,000 Surprise:
Sarah buys a “perfect” $400k house with a big backyard for her kids. Six months later, the city announces they’re building a subway line—right through her backyard. She discovers she only owns 6 feet down, and the city owns “subsurface rights.” Her dream home becomes worthless overnight. The real shock? This happens to thousands of property owners who don’t understand what they actually own.
1. The Bundle of Rights: What Ownership Really Means
When you “own” property, you don’t own a thing—you own a bundle of rights. Think of property ownership like owning a bundle of sticks, where each stick represents a different right you can use, sell, or give away separately:
🎯 The Five Essential Rights (Remember: SPEED)
🔄 S – Sell
Right to Transfer
The right to sell, give away, or leave your property to heirs
🏠 P – Possess
Right to Exclude
The right to keep others off your property and control who enters
💰 E – Enjoy
Right to Use
The right to use your property for lawful purposes
🌊 E – Extract
Right to Natural Resources
The right to water, minerals, oil, and other resources on/under your land
🏗️ D – Develop
Right to Improve
The right to build on, modify, or improve your property
⚠️ Reality Check: You Probably Don’t Own All the Sticks
Most property owners discover too late that they don’t own the complete bundle. Here’s what commonly gets separated:
Mineral Rights (Subsurface)
Oil, gas, coal, metals beneath your property
Common situation: Previous owner sold mineral rights to energy company
Impact: They can drill under your property, you get nothing
Air Rights (Above)
Space above your property, typically 500+ feet up
Common situation: Airports control flight paths, cities control building heights
Impact: You can’t build as tall as you want, planes can fly overhead
Water Rights
Rights to use water from wells, streams, or aquifers
Common situation: Western states have complex water allocation systems
Impact: You might not be able to drill a well or use stream water
Development Rights
Rights to build or change property use
Common situation: Historic districts, conservation easements
Impact: You can’t modify or develop the property as desired
2. Types of Property Ownership: Not All Ownership is Equal
How you own property determines what rights you have and how long you can keep them. Here are the main types of ownership, ranked from strongest to weakest:
👑 Fee Simple Absolute (The Gold Standard)
What it is: Complete ownership with all rights, forever
Duration: Unlimited – passes to heirs automatically
Rights included: All rights in the bundle (SPEED)
Transferability: Can sell, gift, or will to anyone
✅ Advantages:
- Complete control over property
- No time limits on ownership
- Full inheritance rights
- Maximum resale value
❌ Disadvantages:
- Full responsibility for taxes and maintenance
- Subject to all government regulations
- Highest purchase price
🏰 Fee Simple Defeasible (Ownership with Conditions)
What it is: Full ownership that can be lost if you violate specific conditions
Duration: Unlimited, unless condition is violated
Rights included: All rights, but restricted by conditions
Transferability: Can transfer, but conditions transfer too
Common Conditions:
Fee Simple Determinable
Ownership automatically ends if condition is violated
Example: “To City Library, so long as used for library purposes”
Trigger words: “so long as,” “while,” “during,” “until”
Fee Simple Subject to Condition Subsequent
Original owner can reclaim if condition is violated
Example: “To John Smith, but if alcohol is sold on premises, then to Mary Jones”
Trigger words: “but if,” “on condition that,” “provided that”
⏰ Life Estate (Ownership for a Lifetime)
What it is: Ownership rights during someone’s lifetime only
Duration: Ends when the “life tenant” dies
Rights included: Use and enjoy, but limited transfer rights
Transferability: Can transfer, but only for remaining lifetime
Key Players:
Life Tenant (Current Owner)
Has right to live in/use property for life
Responsibilities: Pay taxes, maintain property, no waste
Cannot: Sell beyond their lifetime, destroy property
Remainderman (Future Owner)
Gets full ownership when life tenant dies
Rights: Ensure property isn’t wasted or destroyed
Cannot: Use property while life tenant is alive
📅 Leasehold Estate (Temporary Ownership Rights)
What it is: Temporary right to use property, not own it
Duration: Fixed term or periodic (month-to-month)
Rights included: Use and enjoy only, no ownership rights
Transferability: Usually requires landlord permission
Types of Leaseholds:
Fixed-Term Lease
Specific start and end dates
Example: 1-year apartment lease
Advantage: Stable, predictable terms
Periodic Lease
Automatically renews (month-to-month)
Example: Month-to-month rental
Advantage: Flexibility to move
Lease at Will
Can be terminated by either party anytime
Example: Informal family arrangements
Advantage: Maximum flexibility
Lease at Sufferance
Tenant stays after lease expires
Example: Holdover tenant
Problem: Legal limbo, potential eviction
3. Easements and Encumbrances: Other People’s Rights on Your Property
Even with fee simple ownership, other people might have legal rights to use parts of your property. These are called easements and encumbrances, and they can significantly limit what you can do:
🛤️ Easements: Legal Rights to Use Your Property
An easement gives someone else the right to use part of your property for a specific purpose. You still own the land, but they have a legal right to cross it or use it.
🚗 Easement Appurtenant (Benefits Neighboring Property)
What it is: Easement that benefits an adjacent property
How it works: Runs with the land – transfers automatically with ownership
Duration: Usually permanent unless specifically terminated
Real-World Example: Driveway Access
Situation: Property A is landlocked (no road access). Property B is between Property A and the public road.
Solution: Property A gets easement across Property B’s driveway
Result: Property B owner must allow Property A owner to cross their land forever
Transfer rule: If either property sells, easement stays with the properties
Impact on Property Values:
- Dominant property (Property A): Higher value due to access
- Servient property (Property B): Lower value due to loss of exclusive use
⚡ Easement in Gross (Benefits a Person or Company)
What it is: Easement that benefits a specific person or company
How it works: Personal to the holder, may or may not transfer
Duration: Varies – can be temporary or permanent
Real-World Example: Utility Lines
Situation: Electric company needs to run power lines across multiple properties
Solution: Electric company gets easement in gross across each property
Result: Utility company can access your land to maintain power lines
Transfer rule: Usually transfers to new utility companies, not individual people
Common Easements in Gross:
- Utility easements: Power, gas, water, sewer, cable, internet
- Pipeline easements: Oil, gas, or water pipelines
- Conservation easements: Prevent development to preserve land
- Railroad easements: Train tracks and maintenance access
📝 How Easements Are Created
1. Express Grant (Written Agreement)
Property owner voluntarily grants easement in writing
Example: Selling driveway access rights to neighbor
Advantage: Clear terms and boundaries
2. Reservation (Owner Keeps Rights)
Property owner sells land but reserves certain rights
Example: Farmer sells land but reserves right to cross it
Advantage: Owner maintains needed access
3. Necessity (Landlocked Property)
Court grants easement when property has no legal access
Example: Property divided, leaving one part landlocked
Requirement: No other reasonable access available
4. Prescription (Adverse Use)
Long-term use without permission creates legal right
Requirements: Open, notorious, continuous use (usually 10-20 years)
Example: Neighbor uses your driveway for 15 years, you never object
⚖️ Other Encumbrances: Financial and Legal Claims
Beyond easements, other encumbrances can limit your property rights or create financial obligations:
💰 Financial Encumbrances
Mortgages
Lender has right to foreclose if you don’t pay
Impact: Can’t sell without paying off mortgage
Tax Liens
Government can seize property for unpaid taxes
Impact: Takes priority over almost all other claims
Mechanic’s Liens
Contractors can claim property for unpaid work
Impact: Can prevent sale until paid
Judgment Liens
Court-ordered claims against property
Impact: Must be paid before property can be sold
📋 Legal Encumbrances
Deed Restrictions
Previous owner included use restrictions in deed
Example: “No commercial use,” “No structures over 2 stories”
HOA Covenants
Homeowner association rules and restrictions
Example: Paint colors, landscaping, architectural approval
Zoning Restrictions
Government limits on property use
Example: Residential only, height limits, setback requirements
Environmental Restrictions
Protections for wetlands, endangered species, etc.
Example: Can’t build within 100 feet of stream
4. Property Rights Due Diligence: Protect Yourself Before You Buy
Don’t become another horror story. Here’s how to research property rights before you buy:
🔍 Step 1: Title Search and Title Insurance
What it reveals: Ownership history, liens, easements, restrictions
How to do it: Hire title company or attorney to search public records
Cost: $300-$800 for search, $1,000-$3,000 for insurance
What Title Search Uncovers:
Ownership Issues
- Previous owner didn’t actually own property
- Forged signatures on deeds
- Inheritance disputes
- Divorce complications
Financial Claims
- Unpaid mortgages from previous owners
- Tax liens
- Contractor liens
- Judgment liens
Use Restrictions
- Utility easements
- Access easements
- Deed restrictions
- Conservation easements
Why Title Insurance Matters:
Owner’s Policy: Protects you from ownership disputes and financial losses
Lender’s Policy: Protects mortgage company (required for all loans)
Coverage: Legal defense costs, financial losses from title defects
Duration: Owner’s policy lasts forever, lender’s policy until mortgage is paid
📋 Step 2: Survey and Boundary Verification
What it reveals: Exact property boundaries, encroachments, easements
How to do it: Hire licensed surveyor
Cost: $500-$2,000 depending on property size and complexity
Common Survey Discoveries:
Boundary Disputes
Property lines don’t match what deed describes
Solution: Boundary line agreement or quiet title action
Encroachments
Neighbor’s fence, driveway, or building crosses your property line
Solution: Negotiate removal or grant easement
Easements Not in Records
Physical evidence of easements not shown in title search
Solution: Research prescriptive easement claims
Setback Violations
Buildings closer to property line than zoning allows
Solution: Apply for variance or require removal
🗺️ Step 3: Zoning and Land Use Research
What it reveals: Current zoning, planned changes, permitted uses
How to do it: Check with local planning department
Cost: Usually free, small fee for detailed reports
Key Questions to Ask:
Current Zoning
- What is the current zoning classification?
- What uses are permitted by right?
- What uses require conditional permits?
- What are the setback, height, and density limits?
Future Changes
- Are there any proposed zoning changes?
- Is property in a planned development area?
- Are there any planned infrastructure projects?
- Is property in a redevelopment zone?
Special Designations
- Is property in a historic district?
- Is it in a flood zone?
- Are there environmental protections?
- Is it in a special assessment district?
💧 Step 4: Water and Mineral Rights Investigation
What it reveals: Rights to water sources and subsurface minerals
How to do it: Check deed, county records, state water boards
Cost: Varies by state and complexity
Water Rights Research:
Eastern States (Riparian Rights)
Water rights tied to land ownership
Rule: Property owners adjacent to water can use reasonable amounts
Research: Check if property actually touches water source
Western States (Prior Appropriation)
Water rights based on “first in time, first in right”
Rule: Must have permit to use water, even from own land
Research: Check state water rights database for permits
Mineral Rights Research:
What to Look For:
- Has mineral rights been “severed” from surface rights?
- Are there existing oil/gas/mining leases?
- Has property been in oil/gas producing region?
- Are there pipeline easements?
Red Flags:
- Deed says “except mineral rights”
- Previous owners were energy companies
- Property in known oil/gas/coal region
- Unexplained easements across property
5. Property Rights Checklist Tool
Use this checklist to evaluate any property you’re considering. Each “No” answer requires further investigation:
🏠 Complete Property Rights Assessment
📋 Ownership Verification
🛤️ Easements and Access
📏 Boundaries and Encroachments
🗺️ Zoning and Restrictions
💧 Water and Mineral Rights
Assessment Results:
Recommended Actions:
Complete the checklist to see specific recommendations.
6. Real-World Property Rights Disasters (And How to Avoid Them)
Learn from others’ expensive mistakes:
🚨 Case Study 1: The Phantom Easement
The Situation:
Mike buys a beautiful 5-acre property for $300,000, planning to build his dream house in the center of the lot. Title search shows no easements. Six months later, the electric company shows up to install high-voltage power lines right through his planned house location.
The Discovery:
A 1960s utility easement was never properly recorded in county records, but the power company had physical evidence of the easement and legal right to use the land. The easement ran exactly where Mike planned to build.
The Consequences:
- $50,000 in architectural and engineering plans wasted
- Had to redesign house in less desirable location
- Property value decreased due to power lines
- Legal fees fighting the easement: $25,000
- Total loss: $75,000+
How to Prevent This:
- Get professional survey before buying
- Look for physical evidence of easements (power lines, worn paths)
- Ask specifically about utility easements
- Get survey that shows all physical features
- Consider utility easement insurance
🚨 Case Study 2: The Severed Mineral Rights
The Situation:
Sarah buys a $250,000 house on 2 acres in Texas, planning to enjoy the peaceful rural setting. The deed mentions “surface rights only” but her agent assures her “that’s normal.” Two years later, an oil company starts drilling in her backyard.
The Discovery:
Previous owner sold mineral rights to an energy company in 1995. The oil company had legal right to drill on her property and lease payments went to the mineral rights owner, not Sarah.
The Consequences:
- Oil drilling rig 50 feet from her house
- Noise, dust, and truck traffic 24/7
- Property value plummeted by $100,000
- Couldn’t sell property during drilling period
- Health concerns from air quality
- Had to move and rent elsewhere
How to Prevent This:
- Always ask: “Are mineral rights included?”
- Research area’s oil/gas/mining history
- Check for existing mineral leases
- If rights are severed, negotiate lower purchase price
- Consider mineral rights insurance or buy them back
🚨 Case Study 3: The Illegal Duplex
The Situation:
Tom buys a duplex for $400,000 as an investment property. Both units are rented, generating $3,200/month in income. Six months later, the city issues a cease and desist order—the property is zoned single-family only.
The Discovery:
Previous owner converted single-family house to duplex without permits. The conversion was illegal, and the city had received noise complaints from neighbors about “too many people” living there.
The Consequences:
- Had to evict tenants from one unit immediately
- Lost $1,600/month in rental income
- $30,000 to convert back to single-family
- $15,000 in fines and legal fees
- Property value dropped due to lost income potential
- Total loss: $45,000+ plus ongoing income loss
How to Prevent This:
- Verify zoning permits current use
- Check for proper building permits on any conversions
- Ask city if current use is grandfathered in
- Get zoning compliance letter before closing
- Include zoning contingency in purchase contract
⚡ Your Property Rights Mastery Exercise
Analyze a Real Property’s Rights (20 minutes):
Use the checklist tool above and your knowledge to evaluate this property scenario:
🏠 Scenario Property:
Property: 3-bedroom house on 1 acre, asking $350,000
Location: Rural area, 30 minutes from city
Deed: “Fee simple to buyer, subject to utility easement along eastern boundary”
Zoning: Agricultural with residential use permitted
Access: 200-foot gravel driveway from county road
Seller disclosure: “Mineral rights were sold to XYZ Energy in 2010”
Survey: 2015 survey shows neighbor’s fence encroaches 3 feet onto property
Title search: Shows mechanic’s lien from 2020 for $8,000 (unpaid roof work)
Document Your Analysis:
PROPERTY RIGHTS ANALYSIS:
- OWNERSHIP ASSESSMENT:
- Type of ownership: _______________
- Strengths: ________________________
- Concerns: ________________________
- EASEMENTS AND ENCUMBRANCES:
- Utility easement impact: ________________________
- Neighbor encroachment: ________________________
- Mechanic’s lien issue: ________________________
- MINERAL RIGHTS:
- What this means: ________________________
- Potential risks: ________________________
- How it affects value: ________________________
- ZONING ANALYSIS:
- Current use compliance: ________________________
- Future use limitations: ________________________
- ACCESS RIGHTS:
- Legal access status: ________________________
- Potential issues: ________________________
- RED FLAGS IDENTIFIED:
- 1. ________________________________
- 2. ________________________________
- 3. ________________________________
- DEAL RECOMMENDATION:
- ✅ Proceed / ⚠️ Negotiate / ❌ Walk Away
- Reasoning: ________________________________
- CONDITIONS FOR PROCEEDING:
- 1. ________________________________
- 2. ________________________________
- 3. ________________________________
- MAXIMUM OFFER PRICE: $__________
- (Considering all rights issues)
- LESSONS LEARNED:
- 1. ________________________________
- 2. ________________________________
- 3. ________________________________
🎯 Property Rights Mastery Takeaways
Property ownership is a bundle of rights (SPEED) that can be separated
Fee simple absolute is the strongest ownership, but not the only type
Easements give others legal rights to use your property forever
Mineral and water rights are often separated from surface rights
Due diligence prevents expensive surprises after you buy
✅ Property Rights Mastery Quiz
Question 1:
The “bundle of rights” theory of property ownership includes all of the following EXCEPT:
Question 2:
Fee simple absolute ownership means:
Question 3:
An easement appurtenant:
Question 4:
Which of the following is NOT a way easements can be created?
Question 5:
When mineral rights are “severed” from surface rights:
🎯 Ready to Complete Lesson 9?
Take the quiz to finish this lesson and earn progress toward your Real Estate Certification.
Students achieving 90%+ across all lessons qualify for potential benefits with lending partners and employers.
