Business, Legal & Accounting Glossary
The bundle of rights is a common way to explain the complexities of property ownership. Teachers often use this concept as a way to organize confusing and sometimes contradictory data about real estate.
The bundle of rights is commonly taught in US first-year law school property classes to explain how a property can simultaneously be “owned” by multiple parties.
Ownership of land is a much more complex proposition than simply acquiring all the rights to it. It is useful to imagine a bundle of rights that can be separated and reassembled. A “stack of sticks” – in which each stick represents an individual right – is a common analogy made for the bundle of rights. Any property owner possesses a set of sticks related directly to the land.
For example, perfection of a mechanics lien takes some, but not all, rights out of the bundle held by the owner. Extinguishing that lien returns those rights or “sticks” to the bundle held by the owner. In the United States (and under common law) the fullest possible title to real estate is called “fee simple absolute.” Even the US federal government’s ownership of land is restricted in some ways by state property law.
Variations on the division between public and private property use can be found throughout the world. While the bundle of rights concept is strongly rooted in common law, there are comparable ideas in civil law systems and religious law systems. National, sub-national, and municipal laws strongly influence what title owners can do with their property in terms of physical development. Quasi-governmental bodies (such as utility companies) are also permitted to create easements across private property.
Historically the degrees of individual and community control over real property has varied greatly. The differences between capitalism, despotism, socialism, feudalism, and traditional societies often define different standards for land ownership. The bundle of rights concept looks much differently when examined by different types of societies. For instance, a laissez-faire government would allow a much different bundle of rights than a communist government.
Community land trusts and land banking are examples of efforts to rearrange the bundle of rights. This is typically done by dividing the responsibilities of ownership and management from the rights to use the property. A typical community land trust strategy is to hold ownership over the land and sell the structural improvements (residential or other buildings) to low-income homebuyers. This allows people to buy a home at a price far below the market rate and to realize the benefits of their property value improving.
Real Estate Investment Trusts divide up the bundle of rights in order to allow commercial investments in real property. These legal structures are becoming more common throughout the developed world.
Squatting presents a non-economic way for people to transfer parts of the bundle of rights. Depending on the applicable laws, a squatter can acquire property rights by simply occupying vacant land for an extended period of time. Areas with high concentrations of squatters are sometimes thought of as informal settlements. Squatters face great instability due to their lack of title and governmental efforts at “blight removal”.
“Squatting” can result in “adverse possession”, that in common law, is the process by which title to another’s real property is acquired without compensation, by holding the property in a manner that conflicts with the true owner’s rights for a specified period of time. Circumstances of the adverse possession determine the type of title acquired by the adverse possessor, which may be fee simple title, mineral rights, or another interest in real property.
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This glossary post was last updated: 18th April, 2020 | 4 Views.