BOY, ARE YOU GETTING GOOD!

Even though ownership of real property includes the bundle of legal rights, there are some limitations on the ownership of that property. There are both public (or government) and private limitations.

We’ll start with the public or government limitations. There are four powers that the government exercises over ownership of real property. The first government power is POLICE POWERS. Police Powers have nothing to do with the police. Police Powers are the government’s right to pass laws, which affect usage of a property. The best example of Police Powers is zoning. Zoning determines what can be built in a certain area, the usage of a property (retail, commercial, industrial, etc.), the height of a building, the number of houses per acre and more. Other examples of Police Powers would include building codes and environmental laws.

The second government power or limitation is EMINENT DOMAIN. This is the right of the government to take a property for the good of the public or for public usage. The person losing the property is entitled to fair compensation for the property. If the government wants to build a new highway, and the path happens to go through your house, they will probably acquire your property through the use of Eminent Domain.

If this happens and you do not want to sell your property, you do have some options open to you (other than barricading yourself inside with a semi-automatic rifle and a thousand rounds of ammo). Your first option would be to go to court and argue that it is not necessary for the government to take your property. Maybe they can build the highway somewhere else. If the courts agree you could successfully stop the highway. This has been done in the past.

Your second option would be to go to court and argue that the compensation they are giving you is not fair. The courts may agree with you and give you more. Of course there is a possibility that they won’t think it’s fair to the government, and give you less, so you better do your homework before you take action.

Eminent Domain is the right of the government to take a property. The process through which Eminent Domain is exercised is called CONDEMNATION. To take over a property, the government will CONDEMN it. Although you may associate this with unsafe properties, any property that is taken over by Eminent Domain must be condemned.

The third power the government has over real property is TAXATION (and I’m sure you know what taxes are). The government has the right to levy taxes on a property, and if the property owner doesn’t pay their taxes, the government has the right to sell off the property to get those taxes paid.

The last government power is ESCHEAT. This is the right of the government to take a property when the owner dies intestate (meaning they had no will and no heirs). All property has to be owned by someone, so if an owner dies and there is no one to take over the property, the government will do it (Isn’t that nice of them). The government will make a legitimate effort to find heirs (and then charge the heirs really high estate taxes).

The four government powers or limitations can be remembered by the acronym PETE.

Police Powers

Eminent Domain

Taxation

Escheat

There are also private limitations that can be placed on ownership of property. One example of this would be a DEED RESTRICTION. The Grantor (the person selling the property or giving it away) can put a restriction on usage of the property that would be written into the deed and transfer to ALL future owners of the property. The seller could say, “I’ll sell you my house, but you cannot build an addition onto the house because I want to preserve the original architecture.” That restriction can actually be written into the deed, and transferred to the new deed every time the property is sold, so that NO future owner could build an addition on the house.

Similar to a Deed Restriction is a COVENANT. In general terms, a Covenant is a promise or an agreement. In this situation, a Covenant is like a deed restriction on an entire neighborhood. Normally, the covenants would be recorded in the city or county records separately, and the deed would state that there are covenants on the property, and where they could be found in the local records. The covenants are still placed on a property by a grantor for ALL future owners to follow. In this case, the grantor would normally be the developer who built the neighborhood. An example might be if homeowners were prohibited from keeping commercial vehicles on their property. Covenants and deed restrictions are court-enforceable. If a homeowner violates a covenant or restriction, ANYONE could take them to court to force them to comply.

While covenants and deed restrictions theoretically could go on forever, there could also be limitations on ownership that are not a stringent. Homeowners’ Associations and Condominium Associations can place the same type of restrictions on property owners, through their Rules, Regulations and By-Laws, however, in most cases the property owners could vote to change the rules. If enough people wanted to park their commercial vehicles on the property, they may be able to vote to allow that to happen.

While the general idea behind deed restrictions and covenants is to preserve the value and quality of a neighborhood, in some peoples’ eyes the restrictions may lower the value of the property. A homeowner might WANT to park their commercial vehicle on their property. This type of limitation that is tied to a property is considered an ENCUMBRANCE. An Encumbrance is a claim, charge or liability that attaches to real estate. It lowers the value of a property where some owners are concerned, and by “attaching” to real estate, we mean that it can transfer from owner to owner. That deed restriction will be on the property no matter who owns it.

Another example of an encumbrance is a LIEN. A Lien is when real property is pledged as security for a debt. Liens can be voluntary or involuntary. An example of a voluntary lien is a mortgage. The homeowner voluntarily allows the lender to put a lien on the property (because if they don’t, the lender won’t give them the money). A tax lien would be involuntary. If you don’t pay your property taxes, the city or county will put a lien on your property. If the debt is not paid, the lien holder can force the sale of the property to get their money.

Still another example would be an ENCROACHMENT. This is an improvement that illegally extends over the property line of its owner. A house, fence or even a row of bushes that crosses over the property line could be considered an Encroachment.

Would a dishwasher (machine) attached to a building rented out as a restaurant most likely be real property?

Yes No