Real Estate Finance - Chapter Two Regulations

Chapter two (continued) Government entities regulate the following aspects of real property interests:  the bundle of rights: possession, usage, transfer, encumbering and exclusion  legal descriptions  financing  insurance  inheritance  taxation Regulation takes the form of federal and state laws and regulations; county and local ordinances and codes; and court decisions in the judicial system. Federal regulation In regulating real property rights, the federal government is primarily concerned with broad standards of real property usage, natural disaster, land description, and discrimination. Real Property Personal Property - Land - Fixtures - attachments - conversions by affixing - trade fixtures - emblements - conversions by severance 26 Principles of Real Estate Practice - Federal agencies such as the Federal Housing Administration promote and regulate home ownership. - The Environmental Protection Agency establishes protective usage restrictions and guidelines for dealing with hazardous materials and other environmental concerns. - Federal flood insurance legislation requires certain homeowners to obtain flood insurance policies. - Federal laws such as the Federal Fair Housing Act of 1968 prohibit discrimination in housing based on race, religion, color, or national origin. - Such laws as the Americans with Disabilities Act prescribe design and accessibility standards. - The federal government does not levy real estate taxes. State regulation: State governments are the primary regulatory entities of the real estate business. State governments establish real estate license laws and qualifications. In addition, state governments have established real estate commissions to administer license laws and oversee activities of licensees. State governments also exert regional influence in the usage and environmental control of real estate within the state. Relevant state laws might include laws relating to flood zones, waste disposal, drainage control, shore preservation, and pollution standards. - States also play a role in defining how real property may be owned, transferred, encumbered, and inherited. For example, in some states a mortgaged property becomes the legal property of the lender until the mortgage loan is paid. - States have the power to levy real estate taxes but generally pass this power to local government. - Local regulation County and local government regulation focuses on land use control, control of improvements, and taxation. Land use regulations and ordinances control how all property within the jurisdiction may be developed, improved, demolished, and managed. - County and local governments have the power to zone land, take over land for the public good, issue building permits, and establish the rules for all development projects. - County and local governments, along with school districts and other local jurisdictions, have the power to levy real estate taxes. Judicial regulation: - The judicial system exerts an influence on real estate ownership and use through decisions based on case law and common law, as distinguished from statutory law. - Case law consists of decisions based on judicial precedent. - Common law is the collective body of law deriving from custom and generally accepted practice in society. Real vs personal property: an item may be real or personal property depending on the "attachment", criterion and other circumstances Fixtures: real property converted from personal property by attachment to real estate Differentiation criteria: intention; adaptation; functionality; relationship of parties; contract provisions Trade fixtures: personal property items temporarily attached to real estate in order to conduct business; to be removed at some point Emblements: plants or crops considered personal property since human intervention is necessary for planting, harvesting Factory-built housing: housing pre-built off-site; includes mobile homes; real or personal depending on attachment to land Conversion: transforming real to personal property through severance, or personal to real property through affixing Land: surface, all natural things attached to it, subsurface, and air above the surface; unique aspects: immobile, indestructible, heterogeneous Real estate: land plus all permanently attached man-made structures, called improvements Property: something that is owned by someone and the associated rights of ownership the bundle of rights: possession, use, transfer, exclusion, and encumbrance Regulation of property interest: Federal regulation: grants overall rights of ownership, controls broad usage standards, discrimination State regulation: governs the real estate business; sets regional usage standards Local regulation: levies real estate taxes; controls specific usage Judicial regulation: applies case law and common law to disputes