Police Power, Zoning, and Land Use Regulations

Police Power and Land Use Controls

Learning Objectives

• Explain zoning ordinances, permits, building codes, and property use.
• Describe the issues and regulations involved in subdivisions.
• Explain non-governmental restrictions, such as covenant conditions and restrictions.
• Identify the advantages and disadvantages of investing in real estate.
• Learn the various laws and agencies that regulate land sales.

Key Terms

• Buffer zone
• Building code
• Certificate of occupancy
• Comprehensive plan
• Conditional use permit
• Covenant conditions and restrictions (CC&Rs)
• Deed restrictions
• Density zoning
• Developer
• Enabling acts
• Interstate Land Sales Full Disclosure Act
• Nonconforming use
• Planned unit development (PUD)
• Restrictive covenant
• Subdivider
• Subdivision

Overview of Land Use Restrictions

• Local governments develop comprehensive plans to restrict land use for orderly growth.
• Real estate professionals must be knowledgeable about local land use restrictions.
• Buyers are subject to limitations in property deeds or rules enforced by community associations.
• Individual parts of real estate may be subject to restrictions included in the deed or documents in the property's chain of title.

Advantages and Disadvantages of Investing in Real Estate

• Leverage funds to benefit from property appreciation.

Land Use Control

• Land use is controlled through public and private limitations as well as direct ownership by federal, state, and local governments.
• The U.S. has approximately 2,300,000,000 acres of land.
• The federal government owns approximately 0.9% of the land.
• State and local governments own approximately 9% of the land.
• Indian trust land accounts for about 3%.
• Foreign ownership accounts for about 2.2% of U.S. lands, an area the size of Ohio as of 2016.

Government Ownership

• Government-owned land is used for:
  • National parks and forests
  • Military bases
  • Federal office buildings
  • Schools and museums
  • State parks and government buildings
  • Municipal parks and buildings
  • Streets, highways, and bridges

Government Control on Property Use

• Government controls range from hazardous materials regulation to building design and construction.
• The police power of government is the authority to create regulations to protect public health, safety, and welfare.
• States delegate authority to counties and local municipalities through enabling acts.
• The degree of government regulation varies based on local priorities.

Comprehensive Plan

• Local governments establish development goals through a comprehensive plan, also known as a master plan.
• A comprehensive plan is a guide that anticipates changing needs and is usually long-term (20+ years).
• Includes general plans, specific area plans, and strategic plans.

Elements Considered in Systematic Planning

• Land use: residences, industries, businesses, agriculture, traffic.
• Housing needs: rehabilitation, new developments.
• Movement of people and goods: highways, public transit, parking, pedestrian and bikeway systems.
• Community facilities and utilities: schools, libraries, hospitals, fire and police stations, water resources, waste treatment, storm drainage.
• Energy conservation: reducing consumption and promoting renewable energy.
• Preparation involves surveys, studies, and analysis of housing, demographics, economic characteristics, and trends.
• The plan is drafted by a planning commission and approved by the city council or governing body after public comment.

The Great Chicago Fire of 1871

• The fire destroyed much of the city due to wooden structures and sidewalks.
• Led to the development of building codes.
• Building codes dictate how to build, where to build, and what materials are suitable.

Zoning

• Zoning ordinances implement the comprehensive plan and regulate land use by separating conflicting uses.
• Zoning affects:
  • Permitted use (residential, commercial, industrial)
  • Lot sizes
  • Type of structures
  • Building heights
  • Setbacks (distance from the road)
  • Style and appearance of structures
  • Density (population of the area)
  • Protection of natural resources
• Zoning ordinances should conform to the comprehensive plan but remain flexible.

Zoning Classifications

• Traditional classifications: residential, commercial, industrial, agriculture.
• Residential areas may be subdivided (single-family, multi-unit).
• Planned Unit Development (PUD): land set aside for mixed-use purposes.
  • Zoning regulations may be modified.
  • Heavily regulated by private restrictions.
• Buffer Zones: ease the transition from one use to another (e.g., parks, playgrounds).

Special Land Use Objectives

• Bulk Zoning: Controls density and avoids overcrowding by imposing restrictions such as setbacks, building heights, and open area percentages.
• Aesthetic Zoning: Specifies certain types of architecture for new buildings and communities.
• Incentive Zoning: Ensures that certain uses are incorporated into a development (e.g., retail on the street floor of an office building).

Constitutional Issues

• The Fourteenth Amendment prevents states from depriving any person of life, liberty, or property without due process of law.
• Due process of law means citizens can discuss ordinances in public hearings.
• Land use legislation that is destructive, unreasonable, arbitrary, or confiscatory is considered void.
• Ordinances must be nondiscriminatory and protect public health, safety, and general welfare under the government's police power.

Zoning Permit

• Compliance with zoning is monitored by requiring a permit before development.
• A zoning permit is required before a building permit is issued.
• Nonconforming Use: A lot or improvement that does not conform to the zoning use because it existed before the zoning change.
  • May be allowed to continue legally if it complies with nonconformity regulations.
  • Considered grandfathered into the new zoning.
  • Real estate professionals should verify the conditions under which it was allowed to remain.

Grandfathered

Exempt from new law or regulation. If a location is changed to residential but the store was already there, it is exempt from the regulation and allowed to stay.

Zoning Hearing Board

• Hears testimony about the effects of zoning ordinances on specific properties.

Exceptions

• Variances: relief if a zoning regulation deprives an owner of reasonable use of their property.
• Conditional Use Permit: also known as a special use permit, may be granted to a property owner to allow a special use of property that is defined as an allowable conditional use within that zone, such as a house of worship or day care center in a residential district. The intended use must meet certain standards set by the municipality.

Conditional Use Permit

• May be granted to allow a special use of property within a zone (e.g., a daycare center in a residential district).
• The intended use must meet certain standards set by the municipality.

Variance

• Provides relief if a zoning regulation deprives an owner of reasonable use of their property.
• The owner must demonstrate unique circumstances and prove that the regulation has caused harm or created a burden.
• Variances and conditional use permits are issued by zoning boards after public hearings.
• Owners of nearby property must be given an opportunity to voice their opinion.

Zoning Classification Amendment

• A property owner can seek a change in the zoning classification by obtaining an amendment to the district map or zoning audit for that area.

Building Codes and Certificates of Occupancy

• Building codes specify construction standards that must be met when repairing or erecting buildings.
• Building codes set requirements for materials, workmanship, sanitary equipment, electrical wiring, and fire prevention.
• A property owner must obtain a building permit before altering or repairing an existing building
• Municipal officials verify compliance with building codes and zoning ordinances through inspections.
• Certificate of Occupancy: Issued by the building official once the completed structure has been inspected, and it has been found satisfactory.
  • Indicates that the property is suitable for habitation.
  • Must be issued before anyone can move in and before the lender will allow closing.

Building Permit Compliance

• The issuance of a building permit will not cure a deed restriction violation.
• A building permit merely evidences compliance with local rules and regulations.

Aesthetic Ordinances

• Communities with historic districts may have aesthetic ordinances.
• These laws require that new construction or restoration be approved by a special board to ensure it blends with the existing building style.

Subdivisions

• Most communities have adopted subdivision and land development ordinances as part of their comprehensive plan.
• Laws governing subdividing and land planning are controlled by the local government bodies where the land is located.

Subdivider

Buys undeveloped acreage and divides it into smaller lots for sale to individuals or to developers.

Developer

Improves the land, constructs the homes and buildings on the lots, and then sells them.

Land Development Plan

• The subdivider must go through a process of land planning, and the resulting land development plan must comply with the municipality's comprehensive or master plan.

Subdivision Plan

• In plotting out a subdivision according to local planning and zoning controls, the subdivider determines the size as well the location of the individual lots.
• Most subdivisions are laid out by use of lots and blocks.
• Land must be studied so that the subdivision takes advantage of the natural drainage and land contours.
• A subdivider should provide for utility easements as well as easements for water and sewer main.
• A developer is often required to submit an environmental impact port with the application for that subdivision approval.

Impact Fees

• Are charges made in advance to cover the anticipated expenses involving off-site capital improvement, such as the additional water and the sewer facilities, the new roads, and school expansion.

Deferred Water and Sewer Charges

• Home sellers are obligated to disclose within all residential sales contracts any existing expense for deferred water and sewer charges, also known as tax fees or front foot benefit fees.
• These fees result from the expense of hooking a property up to public water and public sewer lines occurring during the construction of a new home.

Plat Map

• A detailed map illustrating the geographic boundaries of individual locks.
• The plat map shows a lot, block, section, street, public easements, and monuments in the subdivision.
• This plat map must be approved by the municipality before it can be recorded.
  *A metes and bounds or government survey system description will pinpoint the location of that subdivision's map on the surface of the earth and will become part of this description.

Subdivision Density

• Zoning ordinances typically mandate the minimum lot sizes as well as the population density requirements for subdivision and land development.
• Density zoning ordinances restrict the average maximum number of houses per acre that we have built in subdivision.

Accessory Dwelling Unit

• Many communities now allow and promote the addition of an accessory dwelling unit on a single residential lot.

Private Land Use Control

• Restrictions to control and maintain the desirable quality and character of a property or subdivision may be created by the private parties, including the property owner themselves.
• A private restriction cannot violate any federal state or local laws, and any attempt to do so would be void.

Deed Restrictions

Limitations to the use of property imposed by a past owner or the current owner, and they're included in the deed.

Restrictive Covenants

Private rule set up by the builder that established standards for all parts within that subdivision. Development's restrictions may be imposed through a covenant in the deed or separate recorded declaration that's referenced in the deed.

Covenant Condition and Restrictions

Typically govern the type, height, and size of building that individual owners can erect as well as the land use, the architectural style, the construction methods, setback, square footage, and the CCRs are enforced by HOA that is set up by a developer, and they're turned over to the homeowner within so many years, maybe twenty, twenty five years or so.

*Reasonable restraints protect property values; restrictions that are too broad may be construed as preventing the free transfer of property.
*A restrictive covenant, just like a derestriction, cannot be used for an illegal purpose, such as excluding from their subdivision members of certain races and cultures.
*If another lot owner or the HOA failed to take prompt action while that violation is occurring, the right to an injunction can be lost with a undo delay later to assert it.

If another lot owner or the HOA failed to take prompt action while that violation is occurring, The right to an injunction can be lost through latches (an undue delay to assert a right).

Advantages of Investing in Real Estate

• Rate of Return: Real estate investment typically shows an above-average or higher rate of return over time.
• Control of Investment: Investors control who lives in the property and how much they're renting it for.
• Appreciation: Properties can appreciate in value over time, increasing the investor's equity.
• Equity Buildup: Each mortgage payment increases the investor's ownership in the property.
• Leverage: The use of borrowed money (other people's money) to finance an investment.
• Tax Benefits:
  • Land does not depreciate.
  • Structures tend to lose value over time and depreciate.
  • The IRS allows investors to recover the cost of depreciation through tax deductions.
  • Capital gain: Is the profit made from the purchasing and selling price, is the difference between the purchase price and the net selling price. The investors get their cost based increased by the improvement to the property.
  • IRS, Ten Thirty-One: Is to avoid federal taxation on a capital gain, so instead of selling and getting tax on it, exchange it for another one. No limit of times you acquire and exchange before deferred.

Disadvantages of Investing in Real Estate

• Liquidity: Real estate is not highly liquid over the short term; it cannot be quickly converted to cash like stocks and bonds.
• Requires active management.
• Risks related to the market and economic conditions.

Regulation of Land Sales

• The sale of property in one state to buyers in another state is subject to federal and state regulations.
• Interstate Land Sales Full Disclosure Act: Created to prevent fraudulent marketing schemes.

Requires

Property sellers has to tell details before trying to make a sneaky scheme through commerce and mail with disclosures about the property.

Federal Compliance

• A property seller is required to file a statement of record with the Consumer Financial Protection Bureau before offering unimproved lots in interstate commerce by telephone or through the mail.
• The statement of record must contain numerous disclosures about the property.
• Developers must provide buyers with a printed report before they sign a sales contract or lease
• The report must disclose specific information about the property, including the type of title, number of homes occupied on the site, recreation facilities, distance to nearby communities, utility service, soil conditions, and construction problems.
• If buyers or tenants do not receive a copy of the report before they sign that purchase contract or lease, they have grounds of void contract.
• Most states have their own subdivided land sale laws.
• State land sale laws tend to be stricter and more detailed than the federal law.