Chapter 3 - Land Use

• Government rights in land

  • States right to tax real estate

    • Passes authority to tax to counties and municipalities

    • Point of sale - appraised value established by how much the buyer paid for the property

    • Ad valorem - means “at value”

    • Milage - varies by district 

    • General and special assessments - additional taxes on properties benefiting from a betterment for something the district has done

  • Assessment rates in SC

    • 4% for owner occupied residential rates

    • 6% for all other properties

  • Tax formula 

    • Appraised value * assessment rate = assessed value 

    • Assessed value * millage rate = property taxes 

A rental property has been appraised at $92,500. If the millage rate is 127 mills, what are the property taxes?

$92,500 * 6% (assessment rate for rental) = $5,550

$5,550 * .127 = $704.85

• rollback taxes

  • Classify property as agricultural property to get 4% rate

    • Must have 5 acres or more if growing timber

    • Must have 1 acres or more for all other products

  • Must be used for agricultural purposes

  • If ever used for any other purpose the country will go back 5 years and calculate the difference between the 4% and 6% rate

• Eminent domain

  • Right of the state to take private property

  • Condemnation is the legal procedure exercised by the state in eminent domain

  • Two conditions must be met for eminent domain:

    • Must be for public benefit

    • Just compensation must be paid

• Escheat

  • Reversion of property to the state when one dies intestate (no will) with no legal heirs 

• Public controls based on police power

  • Police power

    • Authority granted by the government to enforce certain laws, regulations, or policies

      • Restrictive power - ex: the real estate commission has police power to enforce the license laws

      • Zoning laws - regulations/restrictions on how land can be used 

        • Categories of real zoning property:

          • Residential

          • Commercial

          • Industrial

          • Agricultural

          • Special purpose 

      • Ordinances - the primary intent is to assure proposed land uses conform with the master plan (state)

      • Variances - permits a change in the specifications required by the zoning ordinance 

      • Non-comforming use - exists when a property is currently being used for some purpose other than what the property is zoned

        • Can be used in this manner as long as the current owner owns the property

      • Spot zoning - occurs when a small area in an existing neighborhood is singled out and place in a different zone from the neighboring property 

• * Buffer zone - strip of land used to separate two conflicting zone types

• Building codes

  • Must receive a permit prior to constriction

  • Ensures constriction is to code

  • Ensures constriction meets zoning laws 

  • Permit applications are made to the municipality

• Subdivision regulations

  • HOA’s have police power to ensure owners comply with CC&R’s 

  • HOA’s cna take any actions necessary to ensure compliance 

• Health and sanitation laws

• Environmental protection laws

* environmental impact report 

• Assessment of possible impact a proposed project may have on the environment

•  Private controls based on police power

  • Restrictions we put on ourselves

    • Deed restrictions

      • Restrictions placed in the deed, which conveys from one owner to the next

    • CC&R’s 

      • Put in place by developers and enforced by HOA’s

      • All owners, present and future, must comply with the restrictions

• Environmental hazards

  • All known environmental hazards must be fully disclosed 

    • Asbestos

      • Can cause serious health issues such as lung disease

    • Underground storage tanks 

      • Used to store fuel oil or heating 

      • Should be inspected by DHEC

      • Must be removed or all fuel oil pumped out and filled with sand 

    • * radon

      • Corless, odorless and tasteless radioactive gas

      • Can effect new and old homes alike

      • Much greater concern for homes with living area below the surface of the ground and homes that have well water

    • EIFS (artificial stucco)

      • Water or moisture getting between the stucco and the wall can cause massive damage

      • Many class action lawsuits are pending

      • Should not be a problem if properly installed 

    • Toxic mold

      • Can cause serious health problems 

      • Can cause weakened immune systems

    • * Lead based paint 

      • Can cause serious illness or death if ingested

* all homes built prior to 1978 must have a written lead based paint disclosure before selling or renting

• Must provide all buyers/tenants or homes built prior to 1978 a EPA pamphlet “protect your family from lead in your home”

• Wetlands 

  • Land where saturation with water is dominant 

  • Protected areas due to some species living in the wetlands

  • Includes swamps, marshes, and similar ares 

• * Real property tax laws 

  • Homeowner tax breaks

    • * mortgage interest deductions

      • Up to 1 million dollars on acquisition debt

      • Up to $100,000 on equity debt

      • Up to 1.1 million dollars in total 

    • Property tax deductions

    • Homestead exemption (only in SC)

      • Those qualified may deduct $50,000 from their homes appraised value before property taxes are calculated

      • Qualifications for the exemption:

        • Must be 65 years of age

        • Totally disabled

        • Legally bind

        • Resident of SC for one year as of Dec 31st

    • * Discount points - prepaid interest to buy down the interest rate

      • Each point cost 1% of the purchase price

      • Each point will lower the interest rate by 1/8th of one percent

      • Deductible by the buyer only (regardless of who pays)

  • Capital gains tax on sale of real property

    • Basis - price paid for the property

    • Adjective basis - live paid for the property plus closing costs and any capital improvements to the property

    • Amount realized - sells price, minus selling expenses

    • Gain - amount realized minus adjective basis 

      • example:

$100,000 (purchases price) + $3,000 (closing costs) = $103,000 (adjusted basis)

$130,000 (sales price) + $9,000 (selling expenses) = $121,000 (amount realized)

$121,000 - $103,000 = $18,000 (capital gain)

• Capital gains exemption for personal residence 

  • $250,000 for single homeowners or married and file separately 

  • $500,000 for married homeowners

* must know all qualifications for the exemption:

• Must have owned the home for at least 2 years

• Must have lived in the home for at least 2 of the last 5 years

• No deduction if the home sold at a loss

• 1031 tax-deferred exchange 

  • Method to put off or delay paying capital gains by simply exchanging like properties and no monies passing hands

  • If the exchange is not even and one has to add anything of value to even up the trade, this is called “boot”

  • The party receiving the “boot” must pay taxes on the “boot”

• Delayed exchange 

  • Method to put off or delay paying capital gains taxes by selling a property and buying a like property in its place

  • One has 45 days to identify a like property

  • One has up to 80 days to close on new property

  • The 180 days starts on the day the property is sold, not the end of the first 45 days