What is severance in real estate?

In real estate, the concept of severance is pivotal yet often overlooked. It involves the process of transforming an item or asset from real property into personal property by detaching it from the land. Understanding severance is crucial for property owners, real estate professionals, and investors, as it influences property value, ownership rights, and legal considerations. This blog will delve into severance in real estate, exploring key questions and topics to provide a comprehensive overview.

What is severance in Real Estate?

I’m sure you’ve heard the word severance before, I’m sure because I have too, from the Apple TV series. Severance is not very far from the definition of real estate, as it is about separation from the psyche. However, this time I will explain to you the meaning of severance in real estate.

Severance in real estate refers to the act of removing something that was once attached to the land, thereby changing its status from real property to personal property. Real property includes land and anything permanently affixed to it, such as buildings, trees, and minerals. When an item is severed, it is detached and becomes personal property, which is movable and not permanently affixed to the land.

What is the act of severance?

The act of severance involves physically removing or legally separating an item from the land. This can range from cutting down trees, extracting minerals, or moving structures. It fundamentally alters the item’s classification from real property to personal property.

What does severance mean in valuation?

In real estate valuation, severance can significantly impact property value. For instance, removing valuable timber or minerals can decrease the overall value of the land. Conversely, severing and selling these assets as personal property might yield financial gains. Appraisers consider the effects of severance when determining the market value of a property.

What is house severance?

House severance refers to the legal and physical separation of a dwelling from its associated land or property. This can occur through subdivision, where a property is divided into multiple lots, or by physically moving a house from one property to another. Such actions change the house’s status from real property to personal property during the move.

What is severance in company law?

In addition to real estate, “severance” appears in company law, which refers to terminating an employee’s contract with severance pay. This legal concept ensures financial protection for employees who lose their jobs, highlighting the term’s broad applicability across different fields.

Bottom line 

Understanding severance in real estate is crucial for navigating property transactions, ownership rights, and valuation. Severance, whether detaching fixtures, harvesting resources, or moving structures, fundamentally changes the classification and value of property assets. By comprehensively addressing the questions and implications, property owners and real estate professionals can make informed decisions that optimize the value and functionality of their properties.

Read more: NAICS code for real estate investment

Written by Vanessa Gallanti. January 22, 2025

Enthusiast about planning, project management, construction materials and technology, and construction. A civil engineer from Los Andes University and a content writer for Kukun.