1. Real Estate Principles, 11th Edition
By Charles F. Floyd
and Marcus T. Allen

2. Public Restrictions on Ownership
Chapter 4
Public Restrictions on Ownership

3. Four Basic Powers of Government Over Real Estate
Taxation
Escheat
Eminent domain
Police power

4. Property Tax “Ad valorem” tax
Millage rate ($1 tax per each $1,000 of value)
Assessment ratio
Exemptions
The tax bill for a property with a market value of $120,000 in a jurisdiction that assesses a millage rate of 25 mills on 40% of a property’s market value and permits a exemption of $2,500 for this type of property is calculated as follows:

5. Tax Bill Calculation
Market Value $120,000 multiplied by Assessment Ratio × .40 equals Assessed Value $48,000 minus Exemptions (if any) – $2,500 equals Taxable Value $45,500 divided by 1000 ÷ 1000 times Millage Rate × 25 equals Property Tax $1,137.50

6. Administering the Property Tax
Identify all properties and estimate their values
Develop a budget and tax rate
The budget is determined by the appropriate government officials based on the costs of providing government services to the community (police and fire protection, schools, libraries, street, etc.)
Dividing the budget amount by the tax digest (total value of properties in the jurisdiction) yields the tax rate necessary to generate the budget amount.
Bill the property owners and collect the taxes
Unpaid property taxes create a lien on the property that takes priority over most other liens, even existing mortgages

7. Power of Eminent Domain
Per the 5th and 14th Amendments to the U.S. Constitution
Right of the government to take private property for public use upon the payment of just compensation
Use must be a valid public use
See Legal Highlight “What Constitutes ‘Public Use’?”
Property owner must be compensated fairly

8. Inverse Condemnation
Sometimes a property owner may feel that a governmental restriction has effectively “taken” the property from the owner.
In such situations, the owner can file a lawsuit for inverse condemnation to force the government to purchase the property under the concept of eminent domain.
See Legal Highlight “Inverse Condemnation”

9. Police Power
Power to regulate use of private property to protect public health, safety, morals, and general welfare
Land uses are interdependent, meaning that the way one property is used affects other nearby properties, therefore government regulates how properties can be used to protect other property owners
Preventing one land owner from using land in a way that interferes with another land owner’s rights

10. Police Power: Comprehensive General Plan
Many jurisdictions enact laws to create a plan for the orderly development of the community
These plans typically include:
Projected economic development
Transportation plan to provide for necessary circulation
Public-facilities plan that identifies such needed facilities as schools, parks, civic centers, water, and sewage disposal plants
Land-use plan
Official map
These plans are primarily implemented through zoning laws

11. Police Power: Zoning
Zoning – division of a community’s land into districts to regulate the use of land and buildings and the intensity of various uses
Type of use – residential, commercial, industrial, and other categories
Intensity of use – developmental density limits
Height and bulk limitations
Floor-area ratio (See Figure 4.1 Examples of Floor-Area Ratios)
Minimum lot size and setback regulations

12. Some Innovative Zoning Issues
Planned unit development
Performance zoning
Incentive zoning
Transferable development rights

13. More on Zoning See: Close-Up “The Smart Growth Controversy”
Legal Highlight “The Strange Case of the Incredible Shrinking Building”
Legal Highlight “The Case of the Costly Permit”

14. Zoning Laws May Be Challenged
Legislative relief
Administrative relief
Variances
Special use permits
Judicial relief
Note that uses that were in place before a new zoning ordinance made them illegal are often allowed to continue (legal non-comforming uses)

15. Police Power: Building Codes
Standards for construction
Protect public health and safety
Promote energy conservation

16. Police Power: Subdivision Regulations
Preapplication conference
Approval of preliminary plat
See Figure 4.2 for a preliminary plat
Approval of final plat
See Figure 4.3 for a final plat
Mandatory dedication
Impact fees

17. Takings: Police Power or Eminent Domain
As mentioned earlier, property owners can pursue inverse condemnation suits against the government when they feel their properties have been “taken” without compensation.
How far is too far before the owner is entitled to compensation?
See Legal Highlight “The Takings Issue”

18. Escheat
Government’s right to acquire ownership of land when the landowner dies without a will and without heirs
This power prevents real estate from becoming “unowned” should the owner die without a valid will or heirs.