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Public Limits On Real Estate

There are some Public limits on the Private ownership rights of real estate:

1.   Condemnation, also called Eminent Domain - This means that the State has the right to take your property from you for the benefit of the public. The State must compensate you by paying you the fair market value for the property that they condemn. For example, let's say the State determined that a new airport was needed. They may have decided that the best place to build the airport was in a location where there were existing houses. The State would first have to condemn all of the houses in that location. This could be done on the basis that a new airport being built, in that particular location, was for the good of the public overall. They would then have appraisals done on all of the real estate in that area to figure out what the fair market value was for each property. Then the State would pay the owners of all of the condemned real estate the fair market value to compensate them.

Condemnation, also called Eminent Domain - This means that the State has the right to take your property from you for the benefit of the public.

Let's say an individual owner wanted to fight the State because they didn't want to sell. An owner might not want to move or may think that the condemnation sales price is too low. That owner would have to hire his own appraiser to find out if the State was paying him fair market value. If there was a large discrepancy between the two values, then the recourse would be to go to court to settle the matter.

Real Estate Expert Investing Advice FSBO Homeowners House Buyers Sellers Realtors Agents BrokersI have a friend who is a home builder that was involved in a long, drawn out lawsuit against a town in my area over their condemnation values on his property. The town approved a large project for a company to build a shopping mall complex over an area of several city blocks. The town condemned all the houses and commercial buildings on the block and paid the owners the appraised value. My friend, along with another builder who owned property on the same block, fought the appraised values in court. It took about five years to settle the issue, but in the end they got millions of dollars for their properties. The other property owners didn't get nearly as much money because they didn't want to go to court, or they couldn't afford to fight a long, drawn out legal battle with the town.

2.   Police Power - This refers to the restrictions on real estate due to the zoning regulations, housing laws, building codes, etc.

Real Estate Expert Investing Advice FSBO Homeowners House Buyers Sellers Realtors Agents Brokers I'll give you some appraisal trivia. Zoning laws started in 1916 when a building in New York City, located at 12 Broadway, was built so high that the adjacent property owners all complained to the city. The city then decided to impose restrictions on what property owners could do with their real estate. The purpose of zoning is to control the development of the land for the benefit of the general public. For example, if you live in a residential area you wouldn't want your neighbor building a warehouse. A warehouse next door would decrease your property value because buyers would pay less to live next to a warehouse.

It's the same thing with building codes. The State doesn't want people building unsafe housing, so they make sure that all construction is done to the minimum acceptable standards. Also, you wouldn't want your neighbor to be allowed to let his grass grow ten feet high would you? The building codes help protect the market value of your property. Building codes accomplish this by forcing a neighbor to maintain their property to conform with the other houses in the area.

Real Estate Expert Investing Advice FSBO Homeowners House Buyers Sellers Realtors Agents BrokersHere's a funny war story. There was a homeowner who lived in an upper income area in Westchester County, New York that was furious with the local town because they had re-assessed the value of his house and raised his property taxes. This happened because the real estate market housing prices had increased dramatically in recent years. Apparently this homeowner didn't know how, or couldn't dispute his property taxes to get them lowered (he should've read my book!). To "get even" with town hall, this angry homeowner protested the tax increase by hanging all of his laundry out in the front yard in full view from the sidewalk and street! Apparently he felt that if the neighbors all complained about his laundry being hung out in front of his house, then they would pressure the town to give in and lower this owner's taxes. Well, that's not what happened. The town not only didn't "give in" but they let this owner know that he was violating the building codes and creating problems for the property values of the neighborhood. So unless this guy took his laundry back inside the house and away from full view to the public, then he would have some building code violations and fines tacked onto his increased tax bills! As a result, this guy went back to doing his laundry inside the house with a washer and dryer, like everyone else in the area. (This made his neighbors happy since they didn't have to look at his dirty underwear anymore! Just kidding.)

Real Estate Expert Investing Advice FSBO Homeowners House Buyers Sellers Realtors Agents Brokers 3.   Escheat - This refers to a situation when someone dies without a Last Will and Testament drawn up or any heirs to inherit their assets. If this were the case, then all of the deceased person's assets would go to the sovereign, (State). A friend of mine, named Mike Roe, is a CPA accountant who used to deal with settling estates that were in an escheat situation in New York City. He said that there were people who had died that were worth millions of dollars but they had no heirs to inherit their assets. (How about giving it to me?) The city would take over the estate while they tried to locate an heir or relative of the deceased person. After a certain period of time, if there were any unclaimed assets then they would go to the State.

4.   Taxation - We all know what this is! This restricts the rights of real estate in the sense that the State can assess a tax for the ownership of the property. You can dispute your property taxes to get them lowered by hiring an appraiser to determine if the tax assessment is too high.

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