Title vs. Possession

Title to land and possession of land are related, fundamental concepts regarding real estate that overlap considerably, but are not identical. Title is about ownership of land; possession is about, well, possession of land. A person who receives title to land, whether by way of deed or inheritance, has title to the land and the sole right of possession. Title also has its burdens – namely that the person with title owes the property taxes and has to pay for insurance and maintenance. But the right of possession that goes along with title allows the title holder to do with the land pretty much whatever he/she pleases (subject to local zoning and land-use regulations). The owner may prefer to do nothing with the land or may want to develop the land. It is the owner’s choice, depending of course on the owner’s pocketbook and budget.

Possession of land is probably the primary right acquired with title. The owner of the land has the ability to transfer the right of possession of the land to someone else. The most common example of this transfer of the right of possession is a lease. If the owner transfers possession to a lessee or tenant under a lease agreement, ownership of the real estate and the right to possess the real estate have been separated. The payment of rent by the lessee or tenant is essentially a payment for the right of possession. The tenant, now having the exclusive right of possession, may do all those things with the land that previously were the right of the owner to do. They may farm the land, if it is agricultural land, or may operate a business, or may use the land as a residence, or for any other purpose. When the lease expires or terminates, the right of possession will automatically revert to the owner.

In short, the rights of title and possession are usually united in the same person. But these rights can be separated when the owner transfers the right of possession to a tenant under a lease. When possession is transferred to another party by a lease, the obligations of ownership (such as payment of taxes/insurance and repair and maintenance of the property) may be retained by the owner and lessor or they may be transferred under the lease agreement to the tenant as an obligation of the tenant. This is often the case with commercial leases, where the tenant may be required to pay for insurance and maintenance, and taxes, in addition to paying the rent.

The rights of ownership and possession are two of the most valuable rights associated with real estate. When real estate is sold, essentially what is sold is title to the real estate. When real estate is leased, what is leased is the right of possession of the real estate. A sound understanding of the concepts of title and possession is necessary in order for the real estate to be utilized to its maximum value.