Public Restrictions on Real Estate

Expounding on my previous blog post, this entry will examine four common public restrictions on real estate and attempt to explain each one.  These public restrictions, property tax, power of eminent domain, police power, and escheat, differ from private restrictions due to the lack of a second individual/company as a property owner.  These restrictions deal solely with restraints and rules enforced between a property owner and the government.

1. Property Tax

As you likely knew, the government maintains the right to levee taxes on the owner of any piece of property.  These taxes, known as property taxes, serve as one of the governments largest sources of revenue.  In order to enforce these taxes, the government must assess the value of a piece of property through an estimation of the market value of the property in question.  From this estimate, the government develops and budget and tax rate, calculates the tax as a percentage of the property value, and bills property owners for the tax.

2. Power of Eminent Domain

The power of eminent domain refers to, quite simply, the government's right to possess property for public use, regardless of the owner's desires.  In practice, the government notifies the property owner of its intentions for the property through condemnation, determines the value of the land based on just compensation, and possess the property in exchange for the amount determined.  This practice is a slippery slope, however, as the government can bend the definition of public use in condemnation, as well as potentially low-balling a property owner in their determination of just compensation.  Citizens in my home town are up in arms over the practice of eminent domain to possess their land for construction of the TTC/Interstate 69...you can view an article from our paper, The Lufkin Daily News, here.

3. Police Power

Police power is somewhat of a self explanatory restriction through its name.  Although not referring to the actual police force, the government does maintain the right to police any piece of property.  This right serves as a means for the government to protect the public health, safety, morals, and general welfare of the public.  Through this power, the government regulates the practices of a piece of property, relative to the adjacent properties, community, and jurisdiction of the enforcing government entity.  These restrictions, usually maintained and enforced by a city, generally are influenced by factors such as: projected economic development, population gain, transportation and infrastructure feasibility and convenience,  public facilities and land use plans, and a city map.  These factors all play in to a city's determination of how certain pieces of property can and cannot be used.  This practice, known as zoning, specify how any given piece of property may be used in the city's plan for itself.  Once usage for a piece of property is determined, it is sorted into its corresponding zone.  Zones typically include property zoned for usage as: residential, commercial, or industrial.  Violations of zoning restrictions are typically enforced by mandatory dedication (allocating certain portions of property for public use to obtain approval), impact fees (promises to pay for a portion of/all costs of providing public services to a property), and takings (power of eminent domain without actual transfer of ownership of the property).

4. Escheat

Escheat is the rare practice of the government possessing property to prevent it from becoming unowned.  Escheat takes place when a property owner passes away without leaving a valid will and a lack of living family.  In this instance, the government will assume ownership of the property to ensure its use.

That about wraps up this rundown of private and public restrictions on real estate.  Hopefully, these two blog entries have helped you gain a bit of knowledge about your rights and restrictions as a landowner. As someone who hopes to own land in the near future, I know I've picked up on a ton of stuff I didn't, but needed, to know about the intricacies of real estate while putting this together!