A real estate appurtenance is a permanent attachment or installment on a property, which can be either physical, such as a fence or deck, or non-physical, like a lease or an easement. Easements are rights granted by a party to allow the easement holder to use said party’s property for a predetermined purpose.
When considering whether or not to invest in a property, it’s crucial to consider any appurtenances that come with it.
For example, if a real estate investor is looking at a vacant lot, they should do their due diligence to determine if the lot is subject to a lease agreement, which could limit what the new owner can do with the property.
What Is an Appurtenance in Real Estate?
When it comes to real estate investment properties, an appurtenance is any immovable item or right connected to the property or land which gets passed on to successive property owners. There are several different types of appurtenances in real estate:
- Fixtures: These are permanent additions to the property, including cabinets, light fixtures, or a built-in bookshelf.
- Leases: A lease is a contract that gives the tenant the right to use a property for a certain period, usually in exchange for rent.
- Easements: An easement refers to a right to access someone else’s property or land for a specific reason, such as accessing a shared driveway.
A fixture must be permanently affixed to part of the property for it to be considered an appurtenance. It is not possible to remove appurtenances without causing damage to the piece of real estate.
Examples of appurtenances include driveways, garages, trees, central air conditioning units, fences, in-ground swimming pools, furnaces, and external structures like a shed.
Natural resources found on the property, including minerals and water, can also qualify as appurtenances. Appurtenances are generally transferable with real estate when there is a change in property ownership.
What Are Appurtenance Easements?
An appurtenance can take the form of an easement, which refers to a right to use someone else’s property for a particular objective.
Easements can be either positive or negative. Positive or affirmative easements give an individual the right to use or perform a specific action on the property, such as building a fence or planting trees.
Negative easements, on the other hand, could consist of liens, a legal claim someone has on another person’s property. A lien can be placed on real estate by a lender as security for a debt like a mortgage.
Also, negative easements may restrict what the easement holder can do, such as not being able to build a structure that would block views or sunlight.
Additionally, two easements are common in real estate: appurtenant and gross. The most common form of appurtenant easement is a right of way, which allows the easement owner to travel across the other person’s land.
For example, this easement holder may be permitted to use a neighbor’s driveway to access their own property. Plus, the new owner will typically acquire the appurtenant easement if the property is sold.
In contrast, an in-gross easement does not automatically transfer to a new landlord or homeowner when the property is sold. Instead, it is an agreement between two parties that they can terminate at any time.
In-gross easements apply when someone wants to use another person’s property for business purposes, such as setting up a cell phone tower on their land.
How Can Investors Audit Appurtenances in Real Estate Investment Properties?
In the context of real estate transactions, investors should consider several essential considerations when vetting appurtenances on a property. During the due diligence period, investors can consider the following:
- The condition of the appurtenances: Are they in good condition, or will they require repairs? If the latter, how soon will repairs be needed?
- The cost of maintaining the appurtenances: Who will pay for repairs and upkeep? Is this cost worth it in terms of the value it adds to the property?
- The risk of liability associated with the appurtenances: For example, if there is a swimming pool on the property, is there a risk of someone being injured while using it?
Remember that since appurtenances range from simple fixtures like ceiling fans to more complex items, including buildings, natural resources, and property rights, the value of an appurtenance can be difficult to appraise.
What Does Not Qualify as an Appurtenance?
Items that can be removed from real estate without causing property damage typically do not meet the criteria of an appurtenance. For instance, trade fixtures often do not qualify as appurtenances.
Trade fixtures are items temporarily attached to the property that could be necessary for commercial purposes. This could include shelving, equipment, or signage. The property owner can remove these without incident when they sell the property.
Are Sellers Liable for Damages Caused by Undisclosed Appurtenances?
In short, sellers can be held liable when appurtenances on their property cause damages.
This is why sellers need to disclose any information they have about their property’s appurtenances and provide a clear and concise warning to potential buyers about any risks associated with them.
Sellers found to be at fault for any appurtenant damage could be required to pay for repairs or even replacement costs.
Likewise, if a seller fails to properly maintain an appurtenance on their property, like a tree that causes damage to another person or their property, then the seller could be liable for those damages.
Real estate investors considering buying a property with an appurtenance should consult with a real estate attorney to discuss the potential risks and liabilities involved with the purchase.
Why Do Appurtenances Matter to Real Estate Investors?
Appurtenances comprise features and amenities that come with real estate, which can significantly impact how much a property is worth. These appurtenances add value to the property, from parking spaces to storage units.
Real estate investors should take the time to consider what appurtenances are included with a potential investment property, especially since they can make a big difference in its profitability.
Desirable appurtenances can attract tenants and lead to higher occupancy rates.
It is worth noting, however, that certain appurtenances may require more maintenance than others, such as a swimming pool that needs monthly upkeep.
Appurtenances matter because they add value to an investment property, potentially making it more appealing to tenants and new buyers over time.
Key Takeaways on Appurtenances in Real Estate
An appurtenance is a permanent fixture or right associated with a piece of real estate, such as a physical item like a swimming pool or an easement.
Appurtenances can be either positive or negative, depending on their nature. Affirmative appurtenances can include natural resources like water or oil, while negative appurtenances may consist of encumbrances and liens.
In addition, some appurtenances may be desirable to investors, like mineral rights that could allow buyers to mine for minerals on the property. Others, such as an inconvenient easement, may not be as desirable to investors. An easement is a right of way granted to another party, which means they could access part of an owner’s property.
Appurtenances can add considerable value to a property, but only if they are well-maintained and in good condition.
Ideally, real estate investors should maintain realistic expectations for their potential return on investment (ROI) when factoring in the cost of upkeep and repair for appurtenances.
As with any other real estate investment, there is always a degree of risk involved when purchasing a property with one or more appurtenances. Consult with a qualified real estate agent or attorney before making final decisions concerning buying an investment property.
