. . . Real Estate Law Lecture Notes: Encumbrances . . . . ..
. . . . .
Lecture
Notes: Encumbrances
|
[click
one]
What
is an encumbrance? In real estate, an encumbrance is a claim or liability
attaching to the land that diminishes the value of the land or interferes
with the unrestricted use of the land by the owner. There are public encumbrances
and private encumbrances.
Public Encumbrances:
-
Zoning:
Statutory or legislative restrictions on the uses to which property may
be put, based on a plan that covers everybody and not just one person.
The zoning regulations will be considered constitutional so long as there
is some reasonable relationship of the zoning plan to the public welfare.
Zoning is not a "taking" which would require payment to the
property owner as if the land were being condemned, as long as some reasonable
use by the owner remains, even if it is not the use the owner likes. To
overturn a zoning ordinance or statute, there is the "clear abuse"
standard. The zoning is considered okay, unless there has been a clear
abuse of the law by the government. There are two exceptions to zoning:
a Pre-existing use, and a Non-conforming use. A pre-existing use is the
use the property was put to, before the zoning statute. The owner will
be allowed to continue doing what was legal to do before the zoning rules,
even if the new zoning would forbid that kind of use. If the owner stops
using the property in that fashion, the pre-existing use exception dies.
A non-conforming use is permission by the zoning authority, granted on
application of an individual owner, to use property differently from the
zoning rules. There is no right to be given a non-conforming use exception,
unless maybe the zoning authority has already granted such exceptions
to all the neighbors.
-
Building
Codes: Building codes provide rules to construct buildings. Typically,
there is an inspection process before a building can be used. Passing inspection
will provide a certificate to occupancy. Generally, there will also be a
requirement to apply for a building permit before starting construction.
Building codes may be descriptive or prescriptive and in either case, will
control how the owner uses the property. The justification for building
codes is often public safety, but many times aesthetic or economic considerations
are involved. Compare building codes to fire codes..
-
Subdivision
Regulations: Many municipalities have lists of requirements for subdivision
of large plats of property into smaller lots. The key enforcement provision
is the possible non-acceptance of streets and sewers, which would affect
the marketability of the subdivided lots..
-
Environmental
Protection: Federal "Clean Water" law intended to restrict
the use of lands, like wetlands, on the theory that birdies need wetlands,
and wetlands provide oxygen that we can't get anywhere else. Comprehensive
Environmental Response, Compensation and Liability Act(CERCLA), a.k.a. superfund
regulation. Both current and prior owners are liable for the costs of cleaning
up environmental hazardous substances, irrespective of who made the mess.
An "innocent" owner may assert a defense if he had no actual knowledge
of the hazard when the property was acquired, and he actually did everything
he could to learn of the possiblity of the hazard - "all appropriate
inquiry" into how the property was used in the past. Big problem areas
are underground storage tanks for gasoline, lead paints, natural radon,
any processes using petroleum based products, hazardous by-products of manufacturing,
closed dumps, illegal dumps.
-
Eminent
Domain: Government may take the property on a finding that is is needed
for public use. If the property is condemned, the govenrment must pay adequate
compensation, that is, fair market value.
-
Taxation:
Government may levy taxes calculated on the value of property (an "ad
valorem" tax). Usually, the tax is expressed as a "millage"
rate, that is, a dollar amount for every thousand dollars of assessed value
of the real estate. Unpaid taxes will be come a lien on the real estate.
What
is a lien? A lien is a money debt that attaches to specific property giving
the creditor the right to have the property sold to pay off the debt if the
lien is foreclosed, or giving the creditor the right to have the lien paid
out of the purchase price if the owner voluntarily sells the property. Liens
arise from operation of law and not from the owner signing some security agreement
document, like a mortgage.
