The term property rights refers to the laws governing the use, control, transfer, and economic benefit derived from property. Strong government enforcement of property rights is considered a key determinant of economic success in a given geography, since land is oftentimes acquired to generate additional wealth.
Individuals as well as companies oftentimes acquire the rights to property to exploit its economic value. They will do this if they can be assured their rights to the property will be protected. Without such protections, there would be little incentive for anyone to have or hold property.
Generally, these rights fall into four categories, and include the ability to:
Laws created by governments will usually outline how individuals can use, transfer, benefit from, and maintain ownership. However, there are costs associated with delineating, monitoring, and administering these rights.
Ownership rights can be categorized as follows:
Property rights may also give a business the right to use, produce, or sell something. If this right can be separated from land, it can be capitalized separately too. For example, the ownership of land might provide a timber company with the right to harvest the trees on the land. While land is never depreciated, the value of the timber can be held as a separate asset on the company's balance sheet, and amortized as the timber is harvested.