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ISU FIL 260 - Restrictions on Real Estate Rights

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Topic 4:Restrictions on Real Estate RightsI. Restrictions on Real Estate Ownership: General DiscussionYou can’t do anything you wish on or to real estate, just because you own it.A. Public restrictions – imposed by law1. Eminent domain – power of the gov’t. (federal, state, local) to condemn land and take from private owners. Two conditions that must be met: a. Just compensation (Question: Is market value high enough compensation?)b. Public use, or (newer standard) public purpose. This condition, which tends to involve taking property from one private owner for another private owner’s use, often ostensibly to benefit the community through economic development, has been controversial since 1980s Poletown and Hawaii cases. Controversies have continued with the unpopular 2006 Kelo ruling (New London, CT took well maintained homes so Pfizer could expand) and subsequent state legislative restrictions on takings.2. Police power – government’s (usually local government’s) power to protect public health, safety, and morals. Most common types:a. Zoning – to control use of land (residential, commercial, etc.). [1922 Euclid case] Can include restrictions on sizes of lots and structures, along with “setback” requirements. Can’t be arbitrary, discriminatory, or unreasonable.b. Building codes – to set minimal construction standards. Some communities follow HUD’s MPS guidelines. Local governments design regulations, issue permits, make inspections. c. Subdivision regulations – to assure that subdividers comply with the local area’s building, zoning, and dedication codes. d. Environmental protection laws3. Taxation – local governments collect taxes based on the value of real estate (ad valorem). If taxes are not paid, the government has a lien (claim on value) and can eventually sell the property to get the missing tax money. 4. Escheat – state takes possession of property if owner dies with no will and no known heirs. 5. Tort & nuisance laws (I call these public because they rely on the court system) – must use your real estate in a responsible and non-negligent manner, e.g. no dangerous animals or activities.B. Private restrictions – imposed on land by its owner; runs with the land so that future owners are bound. 1. Restrictive covenants – can be of any type if not discriminatory or otherwise contrary to public policy. May apply to one lot or an entire subdivision. Much like zoning – tends to involve questions of use (no sale of alcohol), density, size and quality, style, height, even color of homes. These can expire by time limits set in original agreement or by law, or by widespread violations that accompany changes in the neighborhood (case involving dogs & horses) or in society (“dry” communities).2. Condition – accompanying a fee simple determinable or on a condition subsequent, allowing reversion or right of entry.3. Easement, profit, license (explained earlier)4. Lien – a right to the value of real property in payment of money owed.a. Mechanic’s lien – labor and materialsb. Mortgage – pledge of property’s value to lenderc. Judgment lien – after you lose a lawsuit, lien can be placed on your personal or real property5. Adverse possession – owner can lose his/her ownership interest in a parcel of real estate if that owner does not exercise the rights of use and exclusion, and another party does exercise “rights” of use and exclusion for a period of time specified by law. [This topic is sometimes covered in a discussion of deeds and title, rather than as a private restriction on ownership.]FIL 260/TrefzgerTo gain ownership under adverse possession, the occupant must be using the property in the following manner:a) Actual and exclusive use (makes use of the land, excludes others)b) Open and notorious (does not sneak around)c) Hostile (denies rights of the true owner, does not have true owner’s permission to be on the land)d) Continuous (not just occasional use on a sporadic basis)e) Under a claim of right (acts like he’s the owner)Required time period to gain ownership through adverse possession in Illinois is 20 years. However, the period is reduced to 7 years if the possessor has “color of title,” meaning a document that leads her to feel that she has a legitimate claim (e.g., maybe deed with incorrect legal description).Adverse possession can apply to entire parcels; however, its most frequent occurrence is in connection with boundary disputes (and secluded parcels).As with easement by prescription, a series of adverse possessors all claiming rights through the same “chain of title” can ultimately gain ownership through tacking. For example, G occupies the property for 10 years, then sellshis interest (whatever that may be) to H, and then H occupies the property for 10 years: H meets the 20-yr. requirement. II. Taxes and LiensA lien is a claim against the value of another party’s property. It is enforced through legal action leadingeventually to foreclosure and the forced sale of the property.It may be either: Equitable (voluntary) – with the consent of the owner (e.g., a mortgage) or Statutory (involuntary) – without consent of the owner (e.g., a mechanic’s lien) Furthermore, it may be either: Specific – e.g., a mortgage or tax lien against a specific parcel or parcels orGeneral – e.g., a judgment lien against all of someone’s real & personal propertyFinally, it may be either: Senior – highest in the priority of claims or Junior – subordinate to one or more other liensSeniority is normally based on the order in which the liens are recorded. But tax liens are an exception: they are senior to all other liens. Also, condominium association fees are senior to mortgages. So you can see why mortgage lenders often collect property taxes along with loan payments, and why lenders will intervene if a borrower’s condo fees are not paid. Types of Liens:A. Mechanic’s lien – if workers/material suppliers provide goods or services that enhance a property’s value, they have an enforceable lien until all amounts owed to them are paid. Both general contractors and subcontractors can file mechanic’s liens. Usually a home owner who has work done deals with a general contractor, who in turn hires and deals with subcontractors (plumbers, electricians, etc.). Buta subcontractor can sue the home owner if not paid by the general contractor. So before

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