What are the different types of real estate (Civil Code section 765)? 

4122023-300x300An estate is categorized by the duration of time one holds an interest in the estate. For example, an estate acquired through inheritance is categorized differently from an estate for years. There are three different ways an estate can be categorized, which is codified in California Civil Code section 765. Essentially, section 765 categorizes an estate based on the character of the property. 

Under section 765, there are freehold estates, chattels real, and chattel interests. Depending on the character of the estate, a person holds different rights in the subject property. At the Underwood Law Firm, our attorneys are more than familiar with freehold estates, chattel real, and chattel interests. 

What is a Freehold Estate? 

California Civil Code section 765 defines a freehold estate as an estate of inheritance or an estate for life. (Civ.Code, § 765.) Therefore, a freehold estate is an estate for an indeterminate duration. (Auerbach v. Assessment Appeals Board No.1 (2006) 39 Cal.4th 153, 163.) This means that a freehold estate is an estate in which the ownership interest is held in fee simple. (Pacific Southwest Realty Co. v. County of Los Angeles (1991) 1 Cal.4th 155, 162.) An ownership interest is in fee simple when the owner’s interest is absolute. 

What is a Chattel Real? 

California Civil Civil Code section 765 defines a chattel real as an estate for years. (Civ.Code, § 765.) For example, a lease for a house would be considered a chattel real. Therefore, in California, an estate for years is not considered to be real property, but rather it is a chattel. (Pacific Southwest Realty Co., 1 Cal. 4th 155, 162.) As such, if an individual holds a lease to a piece of property for several years, in California, this lease would be considered that individual’s personal property, not real property. 

What is a Chattel Interest? 

California Civil Civil Code section 765 defines a chattel interest as an estate at will. (Civ. Code, § 765.) An estate at will is an estate that can be terminated by either party with proper notice. Therefore, similar to a chattel real, an estate at will is considered to be a chattel, or real property, in California. Therefore, when a tenant holds a lease that allows the tenant to stay on the property for as long as it is convenient for both the landlord and tenant, this lease is the tenant’s chattel interest. 

What is an Example? 

“Shawn” is the late husband of “Julie.” When they were married, Shawn inherited a house in Los Angeles from his father, and Shawn and Julie began living in it. Shawn and Julie raised three kids in the house and spent their whole lives in the house. 

Shawn passed away and gave the house to Julie in his will. Julie could not bare to stay living in the house because there were too many memories of Shawn. Julie decided to lease the property to someone else. Julie met “Max” at a market, and he reminded her of her first son, and she asked him if he was looking for a place to live. Max was ecstatic, and he agreed to rent the house. Julie drafted a lease for Max. The lease was set for six years. 

After six years, Max decided to move out of the house. Max did not like living in Los Angeles and decided it was time to move somewhere else. Max notified Julie that he would not be renewing his lease. Julie now needs to find someone else to lease the house. Julie decided to list the house for rent on Zillow. After interviewing several people, Julie met Amy, a young doctor who needed a house close to the hospital she worked at. Julie loved Amy from the moment they met and decided to lease the house to her. This time, Julie decided to draft a lease at will. Amy’s job was unpredictable, and two years from now, she could be working at a different hospital, so Julie thought it would be more beneficial to create a lease that could be terminated by either party at any time. Amy signed the lease and began living in the house. 

In this fact pattern, Julie holds a freehold estate, Max holds a chattel real, and Amy holds a chattel interest. Julie inherited the estate from Shawn, and therefore she has an estate of inheritance, in fee simple or for an indeterminate amount of time. Max has a lease for the property for six years, and the lease is not at will, which means that Max has had an estate for years. Finally, under Amy’s lease, Amy and Julie are free to terminate the lease at any time; therefore, Amy has an estate at will. 

How Can the Attorneys at Underwood Law Assist You?

An estate is characterized based on the character of the ownership interest. There are three categories of estates. A freehold estate refers to an estate of inheritance or an estate for life, which is an estate held in a fee simple for an indeterminate amount of time. A chattel real is an estate for years. Lastly, a chattel interest is an estate at will. The category of an estate determines the property rights of the person who owns the interest in the estate. For example, in California, when a person holds an estate for years or an estate at will, it is considered to be the person’s chattel or personal property; however, when someone owns an estate of inheritance or an estate for life, the estate is considered to be that person’s real property.   

As each case is unique, litigants would be well-served to seek experienced counsel familiar with the ins and outs of freehold estates, chattel real, chattel interests, and the law surrounding them. At the Underwood Law Firm, our knowledgeable attorneys are here to help. If you are seeking to determine your rights in a property, are worried about your rights to a property under a lease, or if you just have questions, please do not hesitate to contact our office.

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