1. © 2010 Rockwell Publishing Lesson 5: Public Restrictions on Land Principles of California Real Estate

2. © 2010 Rockwell Publishing Land Use Controls Police power Police power: Power vested in state to adopt and enforce laws necessary for protection of public health, safety, morals, and general welfare. Allows government to restrict owner’s use of private property. State may delegate police power to local governments.

3. © 2010 Rockwell Publishing Land Use Controls Constitutional limitations To be constitutional, land use regulation must: be reasonably related to public health, safety, morals, general welfare be non-discriminatory not reduce property value to point of confiscation protect public from harm that (prohibited) use of property would cause

4. © 2010 Rockwell Publishing Land Use Controls Comprehensive planning City or county planning agency prepares comprehensive plan for development (also called master plan or general plan). General plan should set long-range goals for: population density, building intensity, housing, traffic, transportation, etc.

5. © 2010 Rockwell Publishing Land Use Controls Types of land use controls Types of land use control laws: zoning building codes subdivision regulations environmental laws

6. © 2010 Rockwell Publishing Land Use Controls Zoning Zoning ordinance: Divides community into land use zones that are set aside for particular type of use, such as agricultural, residential, commercial or industrial use. Areas zoned for incompatible uses may be separated by undeveloped areas (buffers).

7. © 2010 Rockwell Publishing Zoning ordinances may: establish minimum lot sizes limit building height set minimum distance (from property line) for building (setback and sideyard rules) limit how much building can cover lot Zoning Land use limits

8. © 2010 Rockwell Publishing Examples of possible residential zones: R-1: allows detached single-family houses R-3: also permits apartments and condominiums Commercial zones usually designated “C,” industrial zones typically designated “M” and agricultural designated “A.” Zoning Designations

9. © 2010 Rockwell Publishing To be valid, zoning ordinances cannot: be applied retroactively discriminate against (or favor) specific property create patently unfair situation Zoning decisions usually can be appealed to city or county government, and then to court. Zoning Limitations

10. © 2010 Rockwell Publishing Zoning Zoning exceptions Although zoning ordinances should be applied in consistent manner, sometimes circumstances require exceptions. Zoning exceptions: nonconforming uses variances conditional uses rezones

11. © 2010 Rockwell Publishing Zoning Exceptions Nonconforming uses Nonconforming use: Existing use that becomes violation when new zoning ordinance is imposed. May occur because of building, lot size, or use.

12. © 2010 Rockwell Publishing Nonconforming uses are usually allowed to continue (“grandfathered in”). However, restrictions usually apply. Use cannot be: expanded rebuilt after destruction resumed after abandonment Zoning Exceptions Nonconforming uses

13. © 2010 Rockwell Publishing Property can be sold, but new owner is subject to same restrictions. Zoning laws may establish reasonable time limits to phase out nonconforming uses. Zoning Exceptions Nonconforming uses

14. © 2010 Rockwell Publishing Zoning Exceptions Variances Variance: Authorization to build structure or use property in way that is prohibited (also called an exception). Used when enforcement of zoning would result in undue hardship to owner. Example: Variance requested when shape of lot makes it impossible to comply with setback requirements.

15. © 2010 Rockwell Publishing Zoning Exceptions Conditional uses Conditional use: Zoning authority may issue special permits for certain uses that don’t fit standard zoning categories but are necessary or beneficial to the community. Examples: schools, hospitals, churches, and cemeteries.

16. © 2010 Rockwell Publishing Zoning Exceptions Rezoning Property owner who believes his property is zoned improperly may petition local appeals board for rezone or zoning amendment.

17. © 2010 Rockwell Publishing Zoning Exceptions Spot zoning and downzoning Spot zoning: A rezone granted to one particular property is illegal in California. Downzoning: If area is rezoned for more restrictive use, it is known as downzoning.

18. © 2010 Rockwell Publishing Zoning Exceptions Conflicting restrictions When zoning ordinances (or building codes) and private restrictions conflict, generally the more restrictive rule controls. Example: If private restriction is more restrictive than zoning ordinance, the private restriction prevails.

19. © 2010 Rockwell Publishing Summary Land Use Controls Police power General plan Zoning Nonconforming use Variance Conditional use Rezone

20. © 2010 Rockwell Publishing Land Use Controls Building codes Building codes: establish minimum standards for construction require builders to use particular methods and materials protect public against dangers caused by unsafe design, substandard materials, poor workmanship

21. © 2010 Rockwell Publishing Land Use Controls Building codes Building codes are generally divided into specialized codes, such as fire code, electrical code, and plumbing code. Compliance with building codes is enforced through the building permit system.

22. © 2010 Rockwell Publishing Building Codes Construction inspections Once building permit is issued and construction begins, inspector can halt project if it conflicts with plans or codes. Finished building will be inspected and certificate of occupancy issued if every aspect of building complies with codes.

23. © 2010 Rockwell Publishing Building Codes Older properties If feature predates current building codes, but does not create health or safety hazard, it may be allowed to continue without modification.

24. © 2010 Rockwell Publishing Building Codes Contractor license law California’s construction industry is regulated through Contractor License Law, as well as local building codes and state Housing Law.

25. © 2010 Rockwell Publishing Land Use Controls Subdivisions Subdivision: Division of one parcel of land into two or more parcels (including conversion of apartments into condominiums).

26. © 2010 Rockwell Publishing Land Use Controls Subdivisions Subdivisions include: standard subdivisions typically no land owned in common common interest subdivisions includes condos and co-ops planned developments like standard subdivisions only with areas such recreational land owned in common

27. © 2010 Rockwell Publishing Land Use Controls Subdivision regulations Local governments also implement general plans by regulating new subdivision development. Developers must get subdivisions approved before selling individual lots.

28. © 2010 Rockwell Publishing Subdivision Regulations California has two state laws regulating subdivision of land: Subdivision Map Act: Law establishing procedures developer must follow when subdividing land into two or more parcels. Subdivided Lands Law: Consumer protection law requiring certain disclosures to consumers buying subdivided lots.

29. © 2010 Rockwell Publishing Subdivision Regulations Subdivision Map Act Gives local governments power to regulate subdivision creation. Developer must show compliance with general plan and adequacy of utilities. Law applies to subdivisions with two or more parcels, but key provisions apply to subdivisions with five or more parcels.

30. © 2010 Rockwell Publishing Tentative subdivision map: If subdivision contains five or more parcels, developer must file tentative subdivision map with local planning agency. Map must show developer’s plans to build adequate improvements (such as streets, curbs, sewers, and utilities). Subdivision Regulations Subdivision Map Act

31. © 2010 Rockwell Publishing Once tentative map is approved, developer has 24 months to file final map. No sale, lease, or contract for sale or lease of any subdivided property is valid until final map is filed. Subdivision Regulations Final map

32. © 2010 Rockwell Publishing Developer of a two- to four-parcel subdivision, condominium, or cooperative may file parcel map (less detailed) instead of tentative subdivision map. Subdivision Regulations Parcel map

33. © 2010 Rockwell Publishing Subdivision Regulations Subdivided Lands Law Requires subdivision developers to make certain disclosures to prospective buyers. Applies to most subdivisions with five or more parcels. Includes condominiums and cooperatives with five or more units.

34. © 2010 Rockwell Publishing Subdivision Regulations Subdivided Lands Law Final subdivision public report: Law requires Real Estate Commissioner to investigate subdivisions and then issue final report about development (unless Commission finds deficiencies). Until final report is issued, lots in subdivision cannot be sold, leased, or financed.

35. © 2010 Rockwell Publishing Final public report will be issued only if subdivision is in compliance. A developer must show that: all construction or blanket mortgage liens will be lifted adequate utilities will be available title will be conveyed to purchaser upon completion of transaction Subdivision Regulations Subdivided Lands Law

36. © 2010 Rockwell Publishing Anyone who requests public report must be given one. Each prospective buyer must receive report before signing sales agreement. Purchasers must sign receipt for report. Developer must keep receipt for at least three years. Subdivision Regulations Subdivided Lands Law

37. © 2010 Rockwell Publishing Final report is valid for five years, unless there is material change to subdivision such as: physical change to subdivision (for example, new lot lines) changes in method used to transfer or finance lots Subdivision Regulations Subdivided Lands Law

38. © 2010 Rockwell Publishing Subdivision Regulations Subdivided Lands Law Commissioner may issue preliminary report before issuing final report, which expires after one year but can be renewed. Buyer may reserve lot in subdivision after receiving preliminary report, but buyer has right to back out with full refund before receiving final report.

39. © 2010 Rockwell Publishing Subdivision Regulations Subdivided Lands Law If developer violates any provision of Subdivided Lands Law, Commissioner may issue desist and refrain order.

40. © 2010 Rockwell Publishing Subdivision Regulations Interstate Land Sales Full Disclosure Act ILSFDA: Federal consumer protection law that regulates subdivisions of vacant land offered for sale or lease across state lines. Law has registration requirements and anti-fraud provisions that apply, depending on size of development.

41. © 2010 Rockwell Publishing Summary Building Codes/Subdivision Regulations Building codes Subdivision Map Act Subdivided Lands Law Interstate Land Sales Full Disclosure Act

42. © 2010 Rockwell Publishing Land Use Controls Environmental laws Environmental laws: Laws intended to prevent pollution and protect ecological balance. May be federal, state, or local.

43. © 2010 Rockwell Publishing Environmental Laws CERCLA Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA): Federal law concerning liability for environmental cleanup costs. Enforced by federal Environmental Protection Agency.

44. © 2010 Rockwell Publishing Environmental Laws NEPA National Environmental Policy Act (NEPA): Federal law requiring federal agencies to prepare environmental impact statement for government projects that will have significant impact on environment.

45. © 2010 Rockwell Publishing Environmental Laws CEQA California Environmental Quality Act: State equivalent of NEPA, requiring state or local agencies to prepare environmental impact report (EIR) for any project, private or public, that may have significant environmental impact. If agency decides project won’t have significant impact, project can proceed without EIR.

46. © 2010 Rockwell Publishing Environmental Laws Alquist-Priolo Act Alquist-Priolo Act: State law requiring applications for new residential development or construction in designated fault zones to include geologic report. Also requires agent/seller to disclose any known hazards from earthquake fault lines.

47. © 2010 Rockwell Publishing Summary Environmental Laws CERCLA NEPA CEQA Alquist-Priolo Act

48. © 2010 Rockwell Publishing Public Restrictions on Land Eminent domain Eminent domain: Government power to take private property for public use, upon payment of just compensation to owner. Eminent domain is government’s right to take property for public use. Police power is right to regulate property for public good.

49. © 2010 Rockwell Publishing Condemnation: If government needs piece of private property and is unsuccessful in negotiating sale, government can file condemnation lawsuit and force sale, at fair market value. Public Restrictions on Land Eminent domain

50. © 2010 Rockwell Publishing Public Restrictions on Land Taxation of real property There are three types of taxation that affect real property: general real estate taxes special assessments documentary transfer tax

51. © 2010 Rockwell Publishing Public Restrictions on Land Taxation of real property General real estate taxes: Taxes on ownership of real property. Used to pay for government operating expenses. Calculation based on value of property; also called ad valorem taxes (Latin for “according to value”).

52. © 2010 Rockwell Publishing General Real Estate Taxes Assessment Assessment: Valuation of property by county assessor’s office, to determine tax liability. County assessor maintains assessment roll, which is used to establish county’s tax base. Owner can appeal assessment to county Board of Supervisors or Appeals Board.

53. © 2010 Rockwell Publishing Real property generally assessed at 100% of full cash value (market value). Proposition 13 limits California property tax rates to 1% of property’s full cash value. Assessed value cannot increase more than 2% per year, unless new owner or improvements. General Real Estate Taxes Assessment

54. © 2010 Rockwell Publishing General Real Estate Taxes Reassessment If property is sold, new owner has 45 days to file change in ownership statement. Property’s assessed value will be changed to reflect new price; new owner may need to pay supplemental assessment. Exemptions for transfers into trust, or between parents and children, spouses, and domestic partners.

55. © 2010 Rockwell Publishing General Real Estate Taxes Payment Property tax year runs from July 1 through June 30 of following calendar year. Taxes are levied annually, on or before September 1.

56. © 2010 Rockwell Publishing Tax bill sent on or before November 1. Taxes paid in two installments. First is due November 1, with installment delinquent on December 10. Second is due February 1, with installment delinquent on April 10. General Real Estate Taxes Payment

57. © 2010 Rockwell Publishing General Real Estate Taxes Delinquency Delinquent taxpayer must receive notice of impending default before June 30. If taxes not paid by June 30, property is considered ‘sold’ to state by operation of law. This begins five-year redemption period.

58. © 2010 Rockwell Publishing During redemption period, delinquent taxpayer can: redeem property by paying all back taxes, interest, costs, and penalties remain in possession of property make payments on delinquency, in installments if necessary General Real Estate Taxes Delinquency

59. © 2010 Rockwell Publishing If delinquency not paid within five years, property is sold and proceeds applied to debt. General Real Estate Taxes Delinquency

60. © 2010 Rockwell Publishing General Real Estate Taxes Exemptions Full exemption: All government property and most property owned by religious, educational, or charitable organizations is fully exempt from property tax. Partial exemption: Owner-occupied homes and homes owned by veterans, senior citizens, and disabled receive partial exemptions from real estate taxes.

61. © 2010 Rockwell Publishing General Real Estate Taxes Exemptions Exemptions are subtracted from property’s assessed value. Homestead exemptions have no effect on property taxes.

62. © 2010 Rockwell Publishing Taxation Special assessments Special assessment: Tax levied against properties benefiting from public improvement (also called improvement tax). Examples: street paving, sidewalks.

63. © 2010 Rockwell Publishing Special assessments differ from general real estate taxes in following ways: one-time charge to pay for specific project, not ongoing government operations levied only against properties that benefit from the project based on cost of project, not property value Taxation Special assessments

64. © 2010 Rockwell Publishing California Street Improvement Act of 1911: Used to assess fees for street improvements. Allows government to order improvements and bill affected owners. Funds raised under this law can only be used to pay for improvements and cannot be used to purchase land. Taxation California Street Improvement Act

65. © 2010 Rockwell Publishing Taxatio n Documentary transfer tax Documentary transfer tax: Tax on transfers of real property, based on selling price (also called excise tax). Current rate generally 55 cents per $500, although higher in some cities. No documentary transfer tax paid on assumed loan amount.

66. © 2010 Rockwell Publishing Summary Eminent Domain and Taxation Eminent domain General property taxes Special assessments Documentary transfer tax