Encumbrances and Governmental Powers Affecting Property Rights

Chapter: Encumbrances and Governmental Powers Affecting Property Rights

I. Introduction

This chapter explores the various encumbrances and governmental powers that can limit or affect real property rights. While fee simple ownership grants a comprehensive bundle of rights, these rights are not absolute. Encumbrances represent non-possessory interests that burden title, while governmental powers represent inherent authority to regulate and even take private property for the benefit of the public. Understanding these limitations is crucial for anyone involved in real estate transactions, development, and ownership.

II. Encumbrances

Encumbrances are claims, liens, charges, or liabilities attached to and binding real property that may diminish its value or restrict its use, but do not necessarily prevent transfer of title. Encumbrances can be broadly classified as financial (liens) and non-financial (restrictions, easement❓s).

A. Easements

An easement is a non-possessory right to use another person’s land for a specific purpose. Easements do not grant ownership but rather a limited privilege or interest in the property.

1. Types of Easements

   a. easement appurtenant❓❓: This type of easement benefits a specific parcel of land (the dominant tenement) and burdens another parcel (the servient tenement). The easement runs with the land, meaning it transfers automatically with the ownership of either the dominant or servient tenement.

   • Example: A right-of-way easement granting a neighbor access across your property (servient tenement) to reach their land (dominant tenement).
   • Illustration: Imagine two adjacent properties, A and B. Property A is landlocked without direct access to a public road. An easement appurtenant could be established, granting the owner of Property A the right to cross Property B to access the road. If Property A is sold, the new owner also gains the benefit of the easement. Conversely, if Property B is sold, the new owner takes title subject to the easement.

   • Mathematical Representation: Let D represent the Dominant Tenement and S represent the Servient Tenement. The easement (E) appurtenant runs with both:

     • E = f(D,S)
       b. Easement in Gross: This easement benefits an individual or entity, not a specific parcel of land. It does not have a dominant tenement. Easements in gross are typically commercial in nature and may or may not be transferable, depending on the specific agreement.

   • Example: An easement granted to a utility company to run power lines across a property.

   • Case Study: A telecommunications company secures an easement in gross to install fiber optic cables across multiple properties. This easement benefits the company directly by allowing them to provide services to a broader area, and it doesn’t depend on the company owning any adjacent land. The easement may be sold or transferred to another telecommunications provider.

2. Creation of Easements

   Easements can be created in several ways:

   a. Express Grant: A written agreement between the parties explicitly creating the easement. This is the most common and secure method.
   b. Express Reservation: An easement created when a landowner❓ conveys property but reserves an easement for themselves.
   c. Implication: An easement created by operation of law when certain conditions exist, such as necessity (e.g., landlocked parcel) or prior use (e.g., a path previously used openly and continuously).
   d. Prescription: An easement acquired through continuous, open, notorious, and hostile use of another’s land for the statutory period (typically 5-20 years, depending on the jurisdiction). This is similar to adverse possession, but only the right to use the land is acquired, not ownership.

   • Prescriptive Easement: Formula
     • To establish a prescriptive easement, the following elements must be met:
       • Open and Notorious (O)
       • Continuous Use (C)
       • Adverse Use (A)
       • Statutory Period (T)
       • Prescriptive Easement (PE) exists if: O + C + A >= T

3. Termination of Easements

   Easements can be terminated in several ways:

   a. Merger: If the dominant and servient tenements come under common ownership, the easement is extinguished.
   b. Release: The easement holder executes a written release surrendering their rights.
   c. Abandonment: The easement holder demonstrates an intent to abandon the easement, coupled with non-use. Mere non-use is generally insufficient.
   d. Expiration: If the easement was created for a specific term, it terminates upon the expiration of that term.
   e. Destruction: If the easement depends on a structure (e.g., a right to use a stairway in a building), the destruction of the structure may terminate the easement.

B. Profit a Prendre

A profit a prendre is a right to enter another person’s land and take something from it, such as crops, timber, minerals, or game. It is similar to an easement, but it includes the right to remove resources from the property.

1. Distinction from Easement: An easement grants the right to use property, while a profit a prendre grants the right to take something from the property.
2. Distinction from Lease: A profit a prendre typically does not involve royalty payments to the landowner, unlike a mineral or oil and gas lease.
3. Example: A company obtaining the right to harvest timber from a private forest, or an individual obtaining the right to extract gravel from a quarry.

C. Licenses

A license is a personal privilege to enter another person’s land for a specific purpose. Unlike an easement, a license is revocable by the landowner and is not considered an interest in the land.

Example: A ticket to a concert grants the holder a license to enter the venue.

D. Encroachments

An encroachment is a physical intrusion onto another person’s property, such as a fence, building, or overhanging structure. Encroachments can create legal issues and may lead to disputes between neighbors.

E. Private Restrictions

Private restrictions, also known as covenants, conditions, and restrictions (CC&Rs), are limitations on land use imposed by private parties, typically developers of subdivisions or planned communities.

1. Creation: Private restrictions are created by deed, usually when a subdivision is established. They are included in the deeds that transfer ownership of individual lots.
2. Enforcement: Private restrictions are enforced by the private landowners within the subdivision, often through a homeowners’ association (HOA).
3. Scope: Private restrictions can cover a wide range of subjects, including building sizes and styles, landscaping, fence heights, parking, and pet restrictions.
4. Comparison to Zoning: Private restrictions are similar to zoning in that they regulate land use, but they are not enforced by the government.
   • Mathematical Analogy: The effect of CC&Rs on Property Value
     • Let V be the property value.
     • Let R be the restrictive covenants (CC&Rs), where R is a vector of individual restrictions, R = (r1, r2, r3, … rn).
     • V = f(R, other factors)
     • *The effect of the CC&Rs depends on the market perception of their desirability. Some restrictions may increase property values by ensuring uniformity and maintaining property standards, while others may decrease value by limiting individual freedom. *

III. Governmental Powers Affecting Property Rights

Even fee simple ownership is subject to the legitimate powers of government, which can significantly impact property rights and values.

A. Eminent Domain

Eminent domain is the power of the government to take private property for public use, even if the owner does not want to sell it. This power is rooted in the Fifth Amendment of the U.S. Constitution, which requires that “just compensation” be paid to the property owner for the taking.

1. Public Use: The property must be taken for a legitimate public use, such as building roads, schools, parks, or other public facilities. The definition of public use has been broadened in some jurisdictions to include economic development projects that benefit the community.
2. Just Compensation: The government must pay the property owner fair market value❓❓ for the property taken. This is often determined through appraisal and negotiation, but if the parties cannot agree, the issue may be resolved through a condemnation lawsuit.
3. Condemnation: The legal process by which the government exercises its power of eminent domain.
   • Mathematical Calculation of Just Compensation
     • Just Compensation (JC) ≈ Fair Market Value (FMV) + (Severance Damages (SD) - Special Benefits (SB))
     • Where:
       • FMV is the price a willing buyer would pay a willing seller.
       • SD are damages to the remaining property after the taking.
       • SB are any benefits the remaining property receives from the project.

B. Taxation

Real estate is subject to taxation in the form of general property taxes and special assessments.

1. General Property Taxes: These are annual taxes levied on the value of real property. They are the primary source of revenue for local governments and are used to fund schools, roads, and other public services.

   • Ad Valorem Taxes: General property taxes are based on the value of the property (ad valorem means “according to value” in Latin).
   • Assessment: The process of determining the taxable value of a property.
   • Tax Calculation
     • Property Tax = (Assessed Value - Exemptions) x Tax Rate

2. Special Assessments: These are taxes levied against specific properties to cover the cost of public improvements that benefit those properties, such as street paving, sidewalks, or sewer lines.

   • Special Assessment District: The geographical area that benefits from the improvement and is subject to the special assessment.
   • Special Assessment Distribution: An Example
     • Let C be the total cost of a new sewer system in a district.
     • Let A be the total area (in square feet) of all properties in the district.
     • Let Ai be the area of property i in the district.
     • Then, the special assessment for property i (SAi) could be calculated as:
     • SAi = (Ai / A) * C

C. Police Power

Police power is the power of government to regulate private property for the protection of the public health, safety, and welfare. This is a broad power that is the basis for many land use regulations.

1. Zoning: Regulations that divide a municipality into districts and specify the permitted uses of land within each district. Zoning can control density, building heights, setbacks, and other aspects of development.
2. Building Codes: Regulations that set minimum standards for the construction and maintenance of buildings, to ensure safety and structural integrity.
3. Subdivision Regulations: Regulations that govern the division of land into smaller parcels, including requirements for street layouts, utilities, and open space.
4. Environmental Protection Legislation: Laws that protect natural resources and regulate activities that could harm the environment, such as wetlands regulations, air and water quality standards, and endangered species protection.

D. Escheat❓❓

Escheat is the power of the state to take ownership of property if the owner dies without heirs or a will (intestate). This prevents property from becoming abandoned or unclaimed.

IV. Conclusion

Encumbrances and governmental powers are significant factors that affect property rights and values. Understanding these limitations is essential for anyone involved in real estate, as they can impact the use, development, and transfer of property. Due diligence, including title searches and expert legal advice, is crucial to identify and assess the potential impact of these factors on any real estate transaction.

V. Exercises and Application

1. Research local zoning ordinances and identify the permitted uses for a specific property address.
2. Investigate any existing easements or private restrictions on a property using public records.
3. Simulate a condemnation scenario and calculate just compensation based on appraisal data.
4. Discuss the ethical implications of eminent domain and the balance between public good and private property rights.
5. Design an experiment to assess the impact of CC&Rs on property values in a specific neighborhood.