Possessory Interest in Real Property

What Is a Possessory Interest in Real Property?

A possessory interest in real property is a type of interest in land where a person or entity has physical possession of the property and can use it for their own purposes.

This type of interest does not necessarily confer ownership rights, but rather the right to use and occupy the property. Possessory interests can arise in several ways, such as through a lease or rental agreement, a license, or a permit.

In some cases, a possessory interest may be taxable, depending on the specific laws and regulations in the jurisdiction where the property is located.

Possessory Vs Non-Possessory Interest in Real Property?

In real property, a possessory interest is a right to use and occupy the property, while a non-possessory interest is a right in the property that does not involve physical possession.

A possessory interest in real property can be either a freehold estate or a leasehold estate. A freehold estate gives the owner an indefinite period of possession, while a leasehold estate gives the tenant a right to possession for a limited period of time.

Non-possessory interests in real property include easements, which give someone the right to use a specific portion of the property for a specific purpose, such as a right-of-way for a utility company.

Liens are also non-possessory interests that give someone a right to the property as security for a debt, such as a mortgage on a home.

It’s important to note that while possessory interests involve physical possession of the property, non-possessory interests do not. Instead, they give someone a right or interest in the property without the right to physically occupy or use it.

What Are The Two Main Types Of Possessory Interest In Real Property?

There are two main types of possessory interests in real property: freehold estates and leasehold estates.

Freehold estates are ownership interests in the property that last for an indefinite period of time, such as fee simple absolute ownership.

Leasehold estates, on the other hand, are possessory interests that allow someone to use and occupy the property for a set period of time, such as a tenant under a lease agreement.

It’s important to note that easements and liens are non-possessory interests, meaning they do not grant the right to use and occupy the property, but rather the right to use a specific portion of the property or to secure payment of a debt.

Possessory Interest Example.

A possessory interest refers to the right to use and possess a property that is owned by someone else.

Some examples of possessory interests that may be subject to taxation include cabins that are built on land that is owned by the government, hangars and tie-downs for aircraft located at government-owned airports, permits to graze livestock on land that is owned by the government, and businesses that operate on land that is owned by the government, such as concessionaires at county-owned fairgrounds.

In each of these examples, the possessory interest holder has a right to use and occupy the property for a certain period of time but does not actually own the property itself.

Types of Ownership Interests in Real Property. Here Are Some Of The Most Common:

  1. Fee Simple Absolute: This is the most complete form of ownership, giving the owner full rights to use, possess, and sell the property. The owner also has the right to pass the property on to heirs or other beneficiaries.
  2. Life Estate: This type of ownership interest gives a person the right to use and enjoy a property for the duration of their life. Once the person dies, ownership of the property passes to another designated owner.
  3. Joint Tenancy: This type of ownership is held by two or more people, with each person having an equal share of the property. When one owner dies, their share automatically passes to the surviving owner(s).
  4. Tenancy in Common: This is similar to joint tenancy, but with one key difference: when one owner dies, their share does not automatically pass to the surviving owner(s). Instead, it can be passed on to heirs or other beneficiaries according to the owner’s will.
  5. Community Property: This type of ownership is recognized in some states and applies to married couples. It gives each spouse an equal share in all property acquired during the marriage, regardless of who paid for it.
  6. Condominium Ownership: This type of ownership applies to individual units within a larger building or development. Owners have the right to use and occupy their individual units, as well as shared common areas like hallways and elevators.
  7. Cooperative Ownership: This type of ownership applies to a building or development where each owner holds a share in the entire property. Owners do not own individual units but rather have the right to use and occupy a specific unit within the building or development.

Similar Posts