What Is Chattel?

Chattel is the tangible personal property that is movable between locations. It can refer to either animate or inanimate property such as hogs, furniture, and automobiles.

This property can be borrowed against using a chattel mortgage. Chattel property and other personal property is tracked separately from land or improvements made to land because it can be depreciated more quickly.

Additionally, legal systems consider the rights to chattel differently than rights afforded to real property. The rights to a real property typically have longer statutes of limitations and are harder to overturn.

Key Takeaways

  • Chattel is a form of movable personal property, like a manufactured home or even jewelry.
  • Individuals who want to purchase a mobile or houseboat (both considered chattel) can use chattel mortgages to buy the properties.
  • The distinctions between property types have important implications—both in terms of tax consequences and ownership rights.
  • Companies use chattel mortgages to buy property, and they authorize equipment, vehicles, and other assets as collateral.
  • If the company defaults on the loan, the lender is compensated by selling the chattel. 

Understanding Chattel

In the financial world, chattel refers to movable personal property such as jewelry or furniture. Chattel’s value drops rapidly due to depreciation, as often seen with the purchase of a car, and typically does not increase with improvements.

Real property is different, as it increases in value through improvements and renovations. For this reason, a chattel property is treated differently than real estate for taxation and other financial assessments.

In real estate transactions, a seller may take all chattel from the home, but fixtures must remain in place for the buyer.

How Chattel Works

Chattel is essentially an alternative name for tangible personal property. The primary difference between chattel and real estate is that chattel is movable while real estate is fixed permanently to one specific location.

Chattel can also be understood in comparison to intangible property that can't be moved, touched, or felt. For example, things like tradeable financial assets, patents, and intellectual property are all intangible assets.

The distinctions between property types have important implications—both in terms of tax consequences and ownership rights. For instance, property rights on chattel are generally weaker and less enforceable than one's rights on real estate.

Note

Chattel comes from the French word "chatel," which comes from the Latin word "capitale."

Chattel Mortgage

A chattel mortgage affords freestanding property—other than the home—as collateral for a loan. The lender secures the mortgage on the chattel, and legal ownership of the chattel is transferred to the lender. The mortgage is removed when the loan is repaid.

Chattel mortgages are secured loans and often have higher interest rates than traditional mortgages. You may also hear this form of financing referred to as a security interest or a trust receipt.

Mobile homes are financed using chattel mortgages that are set up on leased land. Unlike traditional mortgages, a chattel mortgage only pertains to "personal movable property." In addition, the actual mobile home acts as a form of collateral, and the loan can stay in place, even if the mobile home is moved to another plot of land.

Special Considerations

A chattel paper is a document containing information about the financial obligation of the borrower and the security interest held by the creditor.

Businesses frequently use chattel mortgages to purchase new equipment. Heavy machinery has a long lifespan, and its purchase can be financed over a period of time by the seller, but the seller will want to keep a security interest in the machinery in the event of default.

A chattel agreement will allow the buyer to use the equipment while maintaining a safe position for the seller at the same time. The seller can recover the equipment and sell it to recover losses from the loan balance in the event that the buyer defaults.

Chattel FAQs

What Is a Chattel Mortgage?

A chattel mortgage is a type of loan that is secured by a movable piece of property. In contrast, a traditional mortgage is typically secured by a fixed property.

What Is Chattel Paper?

Chattel paper is a piece of writing that shows evidence of two things: a monetary obligation and a security interest in, or lease of, specific goods. An equipment lease is a good example of chattel paper.

What Is the Difference Between Tangible and Intangible Personal Property?

Tangible personal property exists physically in nature. It can be seen, touched, and moved. Examples include cattle, clothing, vehicles, and factory equipment.

Intangible personal property, on the other hand, doesn't derive its value from physical attributes (can't be touched or moved). Examples include patents, trademarks, and intellectual property.

How Is Chattel Taxed?

In countries like the United Kingdom, a chattel is defined either as "wasting" or "non-wasting" for tax purposes.

A gain on the sale of a wasting chattel—an asset with a predictable life of 50 years or less—is exempt from capital gains taxes. Profits on the sale of a non-wasting chattel, however, are indeed subject to capital gains taxes.

What Is Chattel Slavery?

Chattel slavery is the most egregious form of slavery. Under chattel slavery, the enslaved person and their offspring are considered the personal property of the slave owner.