By REAL ESTATE 101 BY MIKE HEAYN
As a land owner, you have many rights. Those rights are a theory known as the “bundle of rights.” The bundle of rights can be thought of as a bundle of paper with each sheet representing a separate right. The bundle of rights theory says that you have the right to sell, mortgage, bequeath, lease, use, occupy, grade, fill or excavate, install new roads, install new lake(s), occupy/use existing improvements, subdivide and develop, farm, etc. Some rights are different in other parts of the world. For example in Malaysia a person who owns land owns it to the center of the earth, which means if the city wants to build a subway they must build under an existing road in order to not infringe on a person’s land.
All real property is subject to four powers of government — taxation, eminent domain, police power and escheat. Taxation means that the government has the right to tax the land. If the government takes private property for pubic use by the state or municipality with just compensation, it is known as eminent domain. Police power means to impose restrictions on private rights for the sake of public welfare, order, and security.
As a fee-simple land owner you have the right to divide up all or none of your bundle of rights how ever you feel fit as long as each right abides with the law. Fee-simple title means a person has title without limits or restrictions. For example, a person who has fee-simple title could lease mineral rights to a gas company, surface rights to another individual and lease air rights for construction to a developer. Specific rights can be sold or gifted, which could make the salability of property more difficult in the future.
As a fee-simple owner you have many rights, which are part of your bundle of rights. One right is selling, which means to transfer or exchange land for money. Another right is placing property up as collateral or security as long as the property is not encumbered by another lien. This is known as mortgaging. The bundle of rights also allows the willing of property, known as bequeathing. The benefits of the bundle of rights extends to leasing, which allows someone to use the land or improvement for a set amount of time at a set price. You have the right to use and occupy the land however you feel fit within legal boundaries.
Rights extend above and below ground. If minerals such as granite or marble are found on your property you have the right, within legal boundaries, to excavate it. And if you wanted to grade your land so rain water flows around your house you can.
Many developers use the right to install or widen new roads for subdivisions. Some even install lakes. If you bought a property with a barn, which is considered an improvement, you have the right to use it or tear it down. And if you owned a great deal of land and wanted to subdivide it, you could if the city allowed it. What about developing the land and placing a Wal-Mart on it? If the city allowed improvements to your land, you could since development is part of your bundle of rights. Many other rights exist with the bundle of rights. All rights are limited to the city ordinances and zoning laws, in which they sit.
The bundle of rights gives people constitutionally guaranteed freedoms to do what they want with their land within legal limits. Although the bundle of rights are intrinsic with real property they can be affected by municipal changes. However, since many rights are guaranteed to land owners it is unlikely that any major changes will ever be made to the bundle of rights. (Mike Heayn is a Washington Mutual multi-family loan consultant. He (310) 428-1342, or e-mailed at Visit his Web site at www.re101.net.)
Originally published in the Santa Monica Daily Press print edition on September 20, 2006. Read the original PDF.