Tuesday, April 10, 2012
Fin180 Blog 2 - Real Estate Government Powers
Fin 180 - Real Estate Principle
Blog assignment 2
Real Estate Government Powers
Majority of government power comes from the citizen, but government also has its own limited power defined by the United State Constitution. Even though power is only limit to federal and state, the enabling act grants state to pass their own powers to local government (164, Diaz III and Hansz). In the real estate market, some of these limited powers play a roll to the citizen that own real estate property. Where these rights of powers a citizen will not have. Some of those power are: police power, eminent domain, taxation, and escheat. In this research I will be focusing on these four government powers.
Police power defined "is the power of the state to enact laws within constitutional limits to promote the order, safety, health, morals, and general welfare of our society (CA DRE)." There are many factors that could fall under police power, but one of the main factor is building code. Building codes are update annually to keep up with building standards and other time some codes may take a while to update. When constructing any building there are codes and regulations that needs to be follow. In the case of failing to follow building codes, it will cause hazardous condition now or in the future when the building is occupy. Police power will be enforce in order to maintain the safety of that building to the public. When the local or state government used police power to change the property it may or may not compensate the owner. Where when if the government compensate the owner is called eminent domain.
Eminent Domain is defined when a government takes a real estate property from an owner and used it as a benefit to the public, also called condemnation(165 , Diaz III and Hansz). In this case it may be road expansion, highway expansion, train track expansion, public housing, etc. "The government can take property within several weeks of advance notice, before any price is paid or even determined, upon depositing an estimated price in court and getting a court order (CS DRE)." If the government decides to take a property from an owner the compensation will be determined by the current market value at its "highest and best used" (165 , Diaz III and Hansz). Every eminent domain is not always positive, sometime there is negative affect that can also cause due to eminent domain. For example if a market parking lot is taken by the government and use it as a road expansion, the owner of the market might lose customers due to not enough parking space available. In this case the owner can sue the government and get compensation for the damages; this is also called inverse condemnation (Real Estate Broker Exam Video).
"Taxation is defined as a charge on real estate used to pay for services provided by the government (Real Estate Broker Exam Video)." Taxes come in many different forms, but there are two main type of tax in real estate. Sale tax where it is used for federal government programs such as Medicare, social security, highways, etc. While property takes are used for local government program such as school, hospital, road, etc. Overall taxes is the only primary source of income for the government (167 , Diaz III and Hansz). The last power is known as Escheat, it is defined when a property owner dies without a valid will and has no hire to the property then it is revert back to state ownership. The reason why is because there will be no one maintaining the property.
Overall, government power is limited but still has its own role in real estate. As defined in the constitution these power may be used by the government to maintain the safety and benefits of the public and while maintaining a revenue for the government. Not all power from the government are positive, as mention from the above reading, one or some may leave to some negative affects or damages. Aside from the negative and positive outcome of these government power, one should still keep in mind these power when choosing to buy a property.
Julian Diaz III and Andrew J. Hansz
2010 Real Estate Analysis Environments and Activities. First Edition. Dubuque, IA: Kendall Hunt Publishing Company.
Real Estate Broker Exam
2010 Real Estate Exam Content: Government Power. http://www.youtube.com/watch?v=gs9M1wnsfao
California Department of Real Estate
2012 DRE Reference Book: Chapter 1 - The California Department of Real Estate. http://www.dre.ca.gov/pdf_docs/ref01.pdf
California Department of Real Estate
2012 DRE Reference Book: Chapter 19 - Subdivisions and Other Public Controls. http://www.dre.ca.gov/pdf_docs/ref19.pdf