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Landownership Basics: Private Property Rights

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“The best investment on earth is earth.” -Louis Glickman

Fee simple landownership comes with some fundamental private property rights no matter what kind of land you own and where you own it. Understanding your private property rights from the start, even before owning a property, will ensure you get the most enjoyment from your property without violating the rights of others.

Fee simple “refers to real estate or land ownership. The owner of the property has full and irrevocable ownership of the land and any buildings on that land. He is free to do whatever he wishes on the land subject to local zoning ordinances. Fee simple and fee simple absolute are the same thing. Fee simple is the highest form of property ownership.”

“Private property rights are one of the pillars of capitalist economies, as well as many legal systems, and moral philosophies,” according to an article defining property rights.

Right to Possession

Once you fully own your own piece of land and hold the title, you retain possession and control its rights. If you have a mortgage, then the lender probably holds your land title until the loan and its interest is paid in full. Until then, you will have limited possession rights and potentially limited private property rights for use. Depending on where you live and the terms of your loan agreement, the lender could take the property quickly once you stop making payments.

land real estate private property

Right to Control

Assuming that you do not live in a neighborhood or city with zoning regulations or other laws that forbid certain activities, you can participate in any legal action on the land you own.

Keep in mind though that neighborhood associations and similar organizations often have covenants that restrict certain activities, so you’ll want to ensure none apply to your property. Covenants may include relatively harmless demands like requiring you to maintain grass that’s visible from the road. Other covenants may restrict activities like raising animals, operating a business, or using chemical fertilizers.

Always read local covenants and laws closely before purchasing land. Using a land expert in your area is the best way to learn about your property rights.

Right to Use and Enjoyment

The right to use and enjoyment means that you can engage in any legal activity on your property. The word “legal” carries a lot of weight in that sentence. For example, owning land does not mean that you can open a casino there without a state license. You must comply with local, state, and federal laws at all times. In fact, the Department of Justice can seize property that they think has been used to commit crime. Federal forfeiture law lets the government take ownership even without proof that it was connected to a crime.

You’ll also need to gather information on any zoning regulations that are tied to your property. According to legal experts, “Zoning regulations and restrictions are used by municipalities to control and direct the development of property within their borders,” and therefore restrict, limit, or otherwise define the uses of a property.

agritourism apple picking

Right to Allow Others a Right to Use

As a landowner, you can give other people access to your property. In fact, it is for many one of the most lucrative aspects of owning land real estate. You can choose to let others access the land for free, or you can charge for access. For example, investors may purchase farmland so they can earn money by leasing it to farmers. Recreational landowners may charge for access to hunt their properties. Agricultural landowners may charge visitors to access for agritourism like fruit picking, pumpkin patches, or corn mazes.

private property signRight to Privacy and to Exclude Others

No one has the right to access your property without permission. You have the right to tell other people that they cannot come onto your private property.

There are only two caveats to the right to privacy and exclusion. Law enforcement can come onto your property while pursuing a suspect. They do not need to stop their pursuit to seek your permission. Law enforcement can also access your property without consent by getting a judge to issue a warrant. If a judge has reason to believe that illegal activities take place on your property, then it only takes one document for officers to investigate.

Additionally, people who have been granted legal rights to use the property for access or another use by previous owners should be considered.

Right to Transfer Ownership

When you own land, you have the right to transfer ownership as you see fit. You could give the property to a relative or friend as a gift. You could include the land in a will or trust. You can also transfer ownership by selling the estate to someone.

Right to Use Property as Collateral

Your land has value that you can use as collateral when using a mortgage to purchase other properties. Collateral may help you qualify for a mortgage or other loan, and you may get a lower interest rate because your land offsets some of the lender’s risk. Keep in mind that failing to repay the mortgage could mean losing rights to your property.

Air Rights

For the most part, you own the right to use the air space that’s above your land. There are limitations to your air rights, though. You could potentially build a skyscraper on your property as long as doing so doesn’t prevent other owners from enjoying their land or violate any zoning laws as mentioned above.

You also don’t have the right to build horizontally across someone’s land. You can only construct vertical buildings that follow your property lines. If the building hangs over the property line, then the neighboring owner could demand that you remove the structure. Air rights especially come into play when it comes to developing on commercial land or residential land in urbanized areas.

What Landownership Rights Do Not Include

Owning land gives you considerable rights over its use, which is one of the biggest draws for land buyers in all markets. Surface rights, however, do not ensure that you control access to the ground below your feet or the air above your head. Before purchasing land, it makes sense to perform an extensive title search or Mineral Rights Search. You may discover that someone else already owns the minerals, oil, and other valuables under the surface of your property.

Understanding Your Private Property Rights

Landownership gives you exceptional rights, but private property rights can have limits. Make sure you understand your private property rights before you purchase a piece of land. Doing so could influence where you choose to buy property and how you use it.

When it comes to learning about your property rights, Accredited Land Consultant Matt Davis with Cushman & Wakefield in San Diego, CA, says “In addition to the personal enjoyment you and your family may receive from spending time on your property, owning land is a tried and true way of preserving and growing wealth. By leveraging the expertise of a land professional early in your property search, you can be confident you know what you are buying, what rights others may have that impact the property, and that you will be able to use the property the way you desire, for generations to come.”

The best way to learn about your property rights or to learn about the property rights of a property you are interested in purchasing is to Find A Land Consultant, like an Accredited Land Consultant, in your area with expertise in the land market.

Land – The Original American Dream

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Land has always been a staple of the American dream. From the Homestead Act of 1862 to the ongoing battle for Amazon’s second headquarters, Americans have held the desire to own and prosper from their own land close to their hearts. While owning private property today is different in many ways than land ownership in the 1800s, many of the same benefits still remain. Owning private property comes with a lot of hidden benefits that are good for you now and for years to come.

Before we dive into the benefits of private land ownership, let’s distinguish what exactly separates private property from public. Private property is land that is owned by individuals or corporations. The owner of a private property has the right of use, lease, and occupation over the land.

Public properties, on the other hand, are owned by public authorities. This land does not belong to any one person. That means the use and occupation of public land is decided on by committees and political groups instead of individuals. Owning private property makes it much simpler to decide what to do with the land. Let’s take a look at some other benefits of private land ownership.

Your Land, Your Choice

The most obvious (and biggest) benefit to owning private property is the freedom to do what you want with your land.  Of course, you still have to follow local and federal law, but how you use the land is largely up to you. This is a huge benefit if you’ve been eyeing some land as a potential transitional property. While sales can be extremely profitable, attempting them with public land can be difficult and can take years. Since public land doesn’t belong to one person, there will be lots of debates, meetings, and compromises over the best use of the land. There will be so many voices that yours might get lost.

Supply and Demand

Land is a limited resource. You can’t just create more land. That’s why land real estate in areas like California and New York are so expensive. There is only so much land to go around, and everyone wants some. Even when the market is bad, people will still need land to grow crops, raise livestock, and build homes.

In the current economy, you might not even be thinking about putting your private property on the market. Especially since owning property now can be seen as insurance against the next economic depression. Plus, keeping your land in good condition ensures that future generations will have a limited resource to profit on in tough times.

Long Term Increase

Historically, some investments in land have had better returns than the broad equity markets. Farmland investments averaged 10-13% total returns over the past two decades. It is also an excellent way to diversify your stock portfolio. Farmland values do not always mimic the market, so if other stocks plunge in value, you won’t lose all your money. People who invest all their money in a certain market or stock tend to risk losing it all when the market turns.

Tax Benefits of Private Property

Depending on the type of land you own, you could be entitled to certain tax benefits. For example, with vacant land, you can elect to add your expenses to your land’s cost bases. This will significantly decrease your taxable gain.

Here’s a great example of this theory in action from Inman.com:

Jean purchases a vacant lot for $10,000 in 2009. During 2009-2013 she elects to add $5,000 in carrying costs to the lot’s cost basis. In 2013, her adjusted basis in the lot is $15,000. She sells the lot for $20,000. Her taxable gain is only $5,000 ($20,000 sales price – $15,000 adjusted basis = $5,000).

Although private land ownership comes with tons of benefits, it has been on a slow decline for years. This is a result of many factors. Some people are wary of investing in land real estate after the housing crash of the early 2000s. Huge companies like Google gobbling up thousands of acres of land also doesn’t help. We hope this article inspires you to take advantage of the many benefits private land ownership has to offer. If you are interested in owning your own piece of land, make sure to Find A Land Consultant to assist with your purchase. Land transactions require the specialized expertise of an agent with education and experience in the field.

About the Author: Laura Barker is a Marketing Assistant Intern for the REALTORS® Land Institute. She graduated from Clark University in May 2017 and has been with RLI since October 2017.