What is a bundle of rights?
A bundle of rights is all of the legal rights incident to the ownership of a property.
For most, the term “property” means a physical or tangible thing. However, property can be more broadly defined, focusing on the rights which arise out of the object.
Thus, property is referred to as a bundle of rights in a thing – real estate.
The expression “bundle of rights” first appeared in 1893 in “The Distribution of Wealth” by American economist John Rogers Commons. Commons referred to property as “not a single absolute right, but a bundle of rights.”
Further, property is anything which can be owned. In turn, ownership is the right to possess the property owned and use it to the exclusion of others.
The bundle of rights includes:
- the right of possession;
- the right of control;
- the right of exclusion;
- the right of enjoyment; and
- the right of disposition.
The right of possession
The fee owner of property holds title to it. Most critically, the owner may freely possess (occupy) the property as they see fit. Thus, possession speaks to the most fundamental use of a property – its function as shelter.
Possession to real estate may be cut out of the fee ownership and conveyed for a period of time.
For instance, the fee owner of real estate acting as a landlord conveys possession of the property to a tenant under a lease agreement for a fixed term, called a tenancy. The tenant, in turn, may occupy or sublease a portion of their space to yet another person, known as a subtenant. When the tenancy expires or is terminated, possession of the property reverts to the landlord. The landlord retains fee title to the real estate at all times, subject to the lease.
A fee owner is entitled to the land’s surface and anything permanently located above or below it. [Calif. Civil Code §829]
Other non-possessory interests in real estate may be created, such as liens. Liens are interests in real estate which secure payment or performance of a debt or other monetary obligation, such as a:
- trust deed lien; or
- local property tax lien.
On nonpayment of a lien amount, the lienholder may force the sale of the real estate to pay off and satisfy the lien.
The right of control
A fee owner may use and control the activities on their property as they wish, as long as they do so legally and in accordance with any applicable ordinances, codes, zoning regulations or conditions, covenants and restrictions (CC&Rs) which are recorded against title to a property. CC&Rs are recorded rules, limitations and restrictions on use mutually agreed to by all property owners in a subdivision or common interest development (CID). Recorded CC&Rs bind future owners of the owners within a CID, a scheme referred to as covenants running with the land.
As long as these restrictions on control are obeyed, a fee owner may do as they please with their property. A fee owner may build new buildings, tear down old ones, plant trees and shrubs, grow crops or simply leave the property unattended.
For example, consider an owner in a community governed by a homeowners’ association (HOA). The trees on a lot in the subdivision have grown so tall they obstruct the homeowner’s ocean view from another lot in the subdivision. The homeowner, concerned about the loss of their view, reviews the title restrictions recorded on the neighbor’s lot for any height restrictions.
From the title restrictions, the homeowner determines:
- both their lot and the neighbor’s lot are part of the same subdivision; and
- the original subdivision documents contain a restrictive provision limiting the height of structures located within the subdivision.
The homeowner requests their neighbor comply with the title restrictions by trimming and topping the trees to conform to the height restriction on structures within the subdivision. The homeowner feels a reasonable interpretation of the subdivision height-of-structures restriction extends to improvements in the form of trees.
The neighbor refuses to trim the trees, claiming the wording of the restrictive provision applies only to structural improvements, not to improvements such as the trees growing on their lot.
May the owner force the neighbor to trim their trees under the title restriction?
Yes! The neighbor needs to maintain their trees at a height equal to the height limitations imposed on all structures in the subdivision, which includes trees. One purpose of the structural height restriction is to protect the views of all owners in the subdivision. Title restrictions are enforced according to their intent. [Ezer v. Fuchsloch (1979) 99 CA3d 849]
The right of exclusion
The right of exclusion allows a property owner to limit who may enter their property. A trespass is any wrongful and unauthorized entry onto real estate in the possession of another.
Anyone in possession of the property, such as the fee owner, a life estate owner, a tenant or even a person in wrongful possession, has the right to stop a trespass. [Allen v. McMillion (1978) 82 CA3d 211]
A fee owner can even trespass on the property they own in fee simple when the property is in the legal possession of another person, such as a tenant.
When an entry is not privileged, it is considered a trespass. A trespasser incurs civil liability for the monetary amount of any losses or injury they cause to the occupant’s person, real estate or personal property.
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The means by which the law justifies a private taking of another’s ownership is known as adverse possession.
Adverse possession is the only method of acquiring title to real property by a person other than the owner of record without compensation.
To establish title by adverse possession, an occupant needs to show:
- their possession is based on a claim of right or color of title;
- they have occupied the property in an open and notorious way which constitutes reasonable notice to the record owner;
- their occupancy is hostile and inconsistent with the owner’s title;
- they have been in possession for a continuous and uninterrupted period of at least five years; and
- they have paid all taxes assessed against the property during their occupancy.
Conversely, adverse possession by claim of right attacks the title held by the recorded owner and takes possession of the property with the intent to interfere with that title.
A person whose adverse possession is based on a claim of right is merely a trespasser or intruder who has taken possession of a property without any belief they are the owner.
Consider an adverse possessor who takes possession of an unoccupied residential property then rents the property to a tenant.
The absentee owner of the property seeks to terminate the adverse possessor’s occupancy within five years of the adverse possessor taking possession. The owner claims the adverse possessor is a criminal trespasser since they entered the property with the intent of interfering with the owner’s property rights. The adverse possessor claims they are not a trespasser since the renting out of the property conferred on them a title by occupancy. [People v. Lapcheske (1999) 73 CA4th 571.
Here, the adverse possessor is acting as a trespasser. The adverse possessor did not adversely occupy the property (and pay property taxes and any liens arising out of unpaid property taxes) for the five-year period required for their (or their tenant’s) possession to ripen into ownership with the right to obtain marketable title.
The right of enjoyment
A fee owner has the exclusive right to the use and enjoyment of their property.
This right to the use and enjoyment of a property includes not just the underlying land, but also the right to the use and enjoyment of the reasonable airspace above the earth. Under traditional English common law, the right to airspace continued to infinity. However, modern technological advances have altered the legal view on airspace.
For example, an owner runs a farm near a military airport with heavy air traffic. The government expands the military base by extending the runway to accommodate larger (and louder) aircraft. The aircraft, on their approach to the airport, now fly directly over the farmer’s barn, scaring the animals and causing the farmer financial loss.
The farmer sues the government for trespass on their real estate since the airspace is being occupied by others — the military.
Anything that impedes or interferes with an owner’s use and enjoyment of their property is referred to as a nuisance.
A nuisance can consist of anything that:
- is offensive to the senses;
- is injurious to health; or
- obstructs the use and enjoyment of a property.
Note that a nuisance does not need to be offensive to the senses or injurious to health. A nuisance only needs to interfere with the use and enjoyment of a property right in some physical manner.
The right of disposition
With the right of disposition, owners are able to transfer ownership of their property, fully or partially, to another party. Essentially, the transfer of property from one person to another as in occurs in a sale.
Thus, a fee owner may occupy, sell, lease or encumber their parcel of real estate, give it away or pass it on to anyone they choose on their death.