What Is Chattel in Real Estate? Here’s What You Need to Know

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Written By Justin McGill

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Do you know what is chattel in real estate? Chattel is a catch-all category for moveable items. In common law, the term “chattel” referred to all assets not related to real estate such as leases, cattle, and clothing.

In contemporary times, chattel is often used for items that are tangible and movable.

Read on to learn what is chattel in real estate and its legal implications in taxes and ownership.

What is Chattel in Real Estate?

“Chattel real” refers to any land, building, or equipment that is under a lease agreement. With chattel real, a lease is signed allowing one person to use another person’s assets for a certain amount of time.

Items that fall under chattel real include a leased apartment or farming equipment.

A chattel is any piece of property that can be transferred. This can include things like furniture, farm equipment, or artwork.

In contrast, a fixture is something that is attached to the land or real property.

The distinction between fixtures and chattels is important when selling property.

Chattels are personal property that can be removed without causing damage. If the chattel is removed and it causes damage to the property, then it becomes a fixture.

Any chattel that the buyer wants to remain with the property must be listed in the sales contract.

While solar panels are moveable, they are not considered chattel but fixtures after installation.

Chattel in Real Estate Transactions

In the finance industry, the term “chattel” is used to refer to any personal possessions, such as cars, boats, or electronics.

The value of a chattel usually depreciates over time, and it does not increase in worth with upgrades.

Real estate, on the other hand, appreciates in value through renovations and upgrades.

It is important to know the difference between the two types of property when it comes to financial assessments and taxation.

If you’re buying a home, the seller may take all the chattel but fixtures must stay in place.

How Chattel Works

Chattel refers to personal property that can be moved from one location to another. Real estate, on the other hand, is an immovable property that is attached to a specific piece of land.

Chattel can also be described as personal property that can be moved, touched, or felt.

Stocks, patents, and intellectual property are all considered intangible assets.

The differences between types of properties have important legal implications in taxes and ownership. For example, the ownership rights of a leased car are weaker than the ownership of a house.

Chattel Examples

Chattel refers to property that you can see, touch and move. Its value can depreciate rapidly. Improvements generally don’t add value to chattels.

For example, adding a sound system to a vehicle will not increase the value of the car. When you remove the sound system, the value of the car is the same as before it was installed.

Meanwhile, any improvements to a house such as renovating the bathroom will add value to the property.

A bathroom remodel is permanent and it cannot be moved to another property. An increase in the value of a home will increase the value of the home’s contents.

Chattel vs. Fixture

The main difference between a chattel and a fixture is that chattels are personal property while fixtures are real property.

Chattels are moveable and can be removed from the premises without damaging the property, while fixtures are installed on the property and cannot be removed without damaging the premises.

What is Chattel Mortgage?

A chattel mortgage is a type of mortgage loan that is used to purchase items, such as a car or a commercial piece of equipment. A chattel mortgage includes the chattel (the car) and the mortgage (loan).

When a car is bought, it legally becomes the property of the company or individual buying it.

When taking out a car loan, the collateral is the car itself. This can help ensure that if the borrower cannot pay, the lending company can still recover its losses by selling the vehicle.

If, for whatever reason, the buyer fails to pay the loan, the bank can take the car or the equipment, or repossess it.

This is why a chattel mortgage is considered a mortgage because just like a house, the car can be taken if the borrower fails to make payments.

A chattel mortgage is not the same as a car loan. When taking out a chattel mortgage for business purposes, business owners can actually claim tax breaks on both the interest paid on the debt and the entire loan amount.

While you can deduct the interest on the loan, you can also write off the depreciation of the car. You can also enjoy tax benefits based on the car’s value.

One of the great things about a chattel mortgage is that it can cover the entire value of the car or equipment. This means that you don’t have to spend any money out of your own pocket.

Purchasers may be able to finance their car insurance and other potential add-ons into their chattel mortgage, making it easier to manage their budget. This could be especially beneficial for those who are buying a car for the first time.

Conclusion

What is chattel in real estate? Chattel refers to personal property. When used in relation to mortgages, the term usually refers to a loan where the item is used as collateral. Chattel mortgages are similar to regular mortgages in many ways but there are some key differences that you should be aware of before deciding whether this type of financing is right for you.

Justin McGill