Property Rights and Value, Part 1

This is my first post at this site.

The comments here, come from an article I wrote several years ago about real estate property rights. It evaluates rights to property as a three dimensional construct. I broke this article into several parts, of which this is the first. More parts will come in the future. It is technical and somewhat boring to read. Nevertheless, it explains an important topic in a new way.

As time goes by, I will post, hopefully, more interesting things. Soon, I will provide you with real sales and activity data and information, including graphs, about how real estate is trending in northern Arizona.

Sincerely,
Mike

Property Rights And Value
This treatise is an attempt to explain what real property rights are, how ownership of real property is related to these rights, and how these rights may correlate to value.
As a real estate appraiser, I have had opportunities to listen to and discuss with others the idea of rights to property. From this I have found that most people look at the issue only from a personal wants standpoint or with political preconceptions and do not grasp the big picture or see the situation realistically. Hopefully, this discussion and the diagrams presented here will help people better grasp the idea of property rights.
Real Property
Real property has been defined as: “All interests, benefits, and rights inherent in the ownership of physical real estate; the bundle of rights with which the ownership or the real estate is endowed.”[1] Although some may argue nuances or shades of meaning, real property is generally considered to be synonymous with real estate. Land and all things affixed to it, unless specifically exempted or separated out, are real property.
In the United States, ownership of real property entails with it both rights and obligations. These rights are protected by western cultural traditions, by federal and state laws, and by numerous court decisions. Although strong, these protections are not boundless, but subject to various limitations imposed by government and the rights of other property owners. These rights may be grouped into 3 categories:

Ownership: The right to sell, buy, bequeath, give, exchange, or lease in whole or part real property. The right to split property or transfer whole or fractional interests.
Quiet Possession: The right of an owner to possess property free of interference or encroachment from others, such as government, without due process of law and just compensation.
Use: The right of an owner to use his property as he sees fit, for example: extraction of minerals, development of agricultural products, construction of structures and roads, fencing, dwellings, residential, commercial, hold for investment, etc.

Complete ownership of property, i.e. ownership, quiet possession, and use, is typically referred to as “fee simple”, which has been defined as the “absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by governmental powers of taxation, eminent domain, police power, and escheat.”[2] Do rights to property exist beyond fee simple? The answer is yes. However, such a discussion is beyond the scope of this analysis, as such rights approach equality with national sovereignty.
In the marketplace in the United States, buyers and sellers generally do not recognize or place much value in ownership and possession, as these basic rights are take for granted. People tend to buy what they can see and/or feel. Although historians and political scientists may be a little chagrined at this lack of respect for these basic rights, since so much of mankind has not been able to enjoy them throughout history, it is use and/or potential use, that creates almost all value.
The obligations of ownership revolve around safeguarding the rights of other property owners. An owner of one property (or the government) cannot do things to his property that may damage the utility, enjoyment, or value of other properties.
One may conclude that the rights of property ownership, at least in a theoretical sense, are offset or balanced with the obligations. That is: rights = obligations or your rights end where mine begin.
[1] The Dictionary of Real Estate Appraisal, 4th Edition, by the Appraisal Institute, page 234.
[2] Ibid. page 113.