Bundle of Rights: Everything You Need To Know

First Time Home Buyers, Industry Insights, Real Estate

You’ll probably receive a variety of housewarming gifts when you buy a home, but one of the best things you’ll get is the bundle of rights. This term is used to describe the various interests and legal rights that come with property ownership.

Sure, you can technically throw a few rager parties or paint your sidings hot pink, but are you certain that you have the right to do so? If you rent out a room to tenants, do they get the same rights?

In our quick guide, we’ll talk about what a bundle of rights is and how it works so you fully understand all of your legal rights and privileges as a property owner.

What Is a Bundle of Rights?

The bundle of rights describes the different rights homeowners receive and provides a base for anything that might impose or affect your rights. It might all sound complicated, but we’ll break it down for you.

The bundle of rights transfers to the new homeowner when they receive possession of the property.  It describes a set of legal rights related to how you use the property.

The bundle of rights includes several privileges:

  • The right of possession
  • The right of control
  • The right of exclusion
  • The right to enjoyment
  • The right of disposition

These are the traditional privileges associated with the bundle of rights. Each of the rights in the bundle has to do with how the property is used rather than its ownership.

How Does the Bundle of Rights Work?

When you have the full bundle of rights, it means you don’t have liens, encumbrances or other impositions on your homeownership. Sometimes called the “bundle of sticks,” the bundle of rights can be separated (like sticks) and lost or given to various parties or entities. But why would someone want to give up one of their precious sticks?

As an example, consider your mortgage. As long as your loan carries a balance, your lender gets to keep your possession stick as a kind of insurance. If you default on the loan, they can use that stick to take possession of your home.

The sticks can go to others, such as government agencies or renters. For example, you’ll give up the right of exclusion to gain rental income if you rent out a room on your property.

The bundle of rights describes what you’re allowed to do with your property but is subject to homeowners associations (HOAs), local and state laws, restrictions or conditions. Local land and zoning laws, HOA regulations or shared rights can be exceptions to the bundle of rights.

For example, regulations might prevent you from operating certain kinds of businesses on your property, subject you to noise restrictions or require you to pay certain real estate taxes.

Below, we’ll define each of the five rights that make up a full bundle.

The right of possession

This one is relatively straightforward. The right of possession belongs to whoever holds the title to the property.

Let’s say you buy your home in cash. There’s no mortgage or other financial claim on the property, which means you and only you get to keep the possession stick.

Many people take out a mortgage, however, which means the lender has a lien on the property. Because they hold the title to the property, they’re entitled to the right of possession. They get to keep the possession stick until the homeowner pays off the loan. That means the lender can foreclose or take possession of the property if the homeowner defaults on the mortgage payments.

Other stipulations like real estate taxes or HOA fees may also create liens on your property. To fully enjoy the right of possession, homeowners must keep up on paying the property taxes, mortgages and other financial obligations.

The right of control

Remember when your parents would say, “my house, my rules” when you were a teenager? Since they held the right of control, they had the right to make the rules.

The right of control denotes your ownership rights to use or control the property according to your interests. It gives a property owner the right to do things like renovate a room, keep a pet or other animals, operate a home-based business, plant a tree on the land or host parties.

Although homeowners get a significant amount of control over their property use, they’re still usually subject to any HOA rules, real estate bylaws, restrictions or other local or state laws. That might mean you can’t host a herd of goats on your land if it conflicts with bylaws. On the bright side, evening noise restrictions can give you a convenient excuse to end your parties early.

The right of exclusion

The right of exclusion allows you to ban other people from entering your property or home and is generally well protected. There are a few exceptions, such as law enforcement officers with a warrant or utility companies that need to access certain equipment on your property.

You’ll also have to share the right of exclusion with tenants if you rent part or all of your property. If they’re renting the entire property, you might need to get their permission to enter. You might rent a room and live in the rest of the house, in which case you’ll need to navigate more complex visitor dynamics.

The right to enjoyment

The right of enjoyment protects your legal right to decide how you live and operate on your property and overlaps a bit with the right of control. Assuming your activities don’t conflict with any laws, you can enjoy your property however you want.

That’s why the right of enjoyment is sometimes called the quiet right of enjoyment. Have as many noisy jam sessions in your garage as you want, but shut it down whenever noise restriction laws start.

The right of disposition

Homeowners have the right of disposition, meaning they can transfer ownership to any other party. They can include the home in their will, sell it or give it away as they like.

Liens or other financial claims are the only complications for the legal right of disposition. If your home still has a mortgage, you’ll have to pay it off with proceeds when you sell it.

Additional rights

Besides the main five rights, property owners sometimes have a few other more obscure or special-circumstances rights, such as the right to derive income or surface rights.

These property ownership rights can sometimes be broken down into the right to build on the ground, extract minerals or collect water from sources on your property. You might also be entitled to ban neighboring buildings from overhanging your property air or blocking your views.

Know Your Rights

Being a property owner isn’t as simple as owning real property. The bundle of rights helps you understand what you’re allowed to do – and not do – with your property. It protects other people’s rights as much as it protects yours.

It’s important to understand what the bundle of rights is and how it works so you know your legal rights in a variety of scenarios.

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