Site Analysis: Land Description, Legal Aspects, and Historic Districts

Chapter Title: Site Analysis: Land Description, Legal Aspects, and Historic Districts

Introduction

This chapter delves into the critical aspects of site analysis, encompassing land description, legal considerations, and the unique characteristics of historic districts. A comprehensive site analysis forms the foundation for sound real estate appraisal, enabling appraisers to understand the potential, limitations, and highest and best use of a property.

1. Land Description

1.1. Defining Land and Site

• Raw Land: Undeveloped land in its natural state, lacking grading, drainage, subdivision, or utilities.
• Site: Improved land ready for a specific purpose, incorporating on-site and off-site improvements. Off-site improvements include utility lines, road access, and water/sewer systems. On-site improvements include landscaping, grading, driveways, and accessory buildings.

1.2. Legal Descriptions of Land

A legal description uniquely identifies a property, preventing confusion with other parcels. The three primary systems used in the United States are:

• 1.2.1. Metes and Bounds:

  • The oldest system, describing boundaries using precise reference points, distances (“metes”), and directions (“bounds”).
  • Begins at the Point of Beginning (POB), a surveyed reference point.
  • Progresses along intermediate reference points.
  • “Closes” by returning to the POB, ensuring accuracy.
  • Modern surveying uses “total stations” with infrared technology, augmented by coordinate geometry software and GPS for accuracy. GPS accuracy is limited by obstructions preventing satellite transmissions.
  • Used primarily in 21 states and as a supplement in others for irregular parcels.
  • Example: “Beginning at a point on the north line of Section 12, 260 feet east of the northwest corner of said section; thence south 400 feet; thence east 100 feet; thence north 400 feet; thence west 100 feet to the point of beginning.”

• 1.2.2. Rectangular Survey System (Government Survey System):

  • Established by the Land Ordinance of 1785.
  • Principal method for land description north of the Ohio River and west of the Mississippi River.
  • Uses Base Lines (east-west) and Principal Meridians (north-south) as initial reference points.
  • Land is divided into townships, each 6 miles square, further subdivided into 36 sections, each 1 mile square (640 acres).

  • Sections can be divided into quarter sections, quarter-quarter sections, etc.

  • Area calculation:

    • Area = Total area / ( Number of divisions)

    • Example: The S 1/2 of the NW 1/4 of the SE 1/4 of Section 10:

      • Total area = 640 acres
      • Area = 640 / (2 * 4 * 4) = 640/32 = 20 acres

• 1.2.3. Lot and Block System:

  • Developed from the rectangular survey system.
  • Developers subdivide land within the rectangular system and assign lot numbers to individual sites within blocks.
  • Subdivision maps (plats) are filed with the local government, creating a public record.
  • Each block is precisely identified by a ground survey.
  • Common in urban and suburban areas.

1.3. Title and Record Data

• Appraisers should obtain legal descriptions and property data from clients or public sources.
• Public records (deeds) are accessible, providing “constructive notice.”
• Useful supplemental data includes land registration systems, land data banks, and assessor’s maps.
• County recorders’ offices maintain deed and mortgage indexes.
• Municipal plat books are available in auditor’s offices. Many records are now online.

1.4. Ownership Information

• Define the specific property rights being appraised (e.g., fee simple, partial interest).
• Identify and analyze any excluded rights affecting value.
• Investigate surface and subsurface rights through title reports or abstracts.
• Easements and restrictions (e.g., air rights, water rights, mineral rights, obligations for lateral support, easements for common walls) can significantly influence value.

1.5. Easements

• May exist for overhead/underground utility lines, sewers, roads, etc.
• Unused easements might be automatically terminated in certain jurisdictions.
• Prescriptive Easements: Use of a property for access without permission for a specified period may grant a prescriptive easement.
• Diligently search for information about limitations on ownership rights.

1.6. Private Restrictions

• Covenants, conditions, and restrictions (CC&Rs) can limit building types, business activities, or future subdivisions.
• May apply for a defined period and “run with the land.”
• Carefully assess the impact on property value.

2. Legal Aspects

2.1. Zoning and Land Use Information

• Land use regulated by city/county governments, subject to regional/state/federal controls.
• Analyze current zoning regulations and the likelihood of changes.
• Zoning specifies general use (residential, commercial, industrial) and density.

• Zoning controls building height/size, lot coverage (Floor Area Ratio - FAR), landscaping, parking, setbacks, etc.

  • Floor Area Ratio Formula:
    • FAR = Total Building Floor Area / Total Land Area

• Use by Right: Uses permitted without special approval.

• Processes exist for nonconforming use permits, variances, and zoning changes.
• Special zoning in hazard-prone areas (floods, earthquakes).
• Building location/design governed in coastal/historic districts.

2.2. Legally Nonconforming Uses

• Apply only to properties with nonconforming land uses.
• Improvements may conform to land use but violate building/development standards (e.g., setback violations).
• This distinction is important due to lender requirements.

2.3. Potential Changes in Government Regulations

• Consider building moratoriums or application cessations.
• Evaluate the appropriateness of current zoning and the probability of changes.
• Highest and best use must be “legally permissible.”
• If based on a zoning change, investigate the probability of approval (interviews with planning staff, study zoning change patterns).
• Recognize that zoning changes are rarely 100% certain.

3. Historic Districts

3.1. Significance of Historic Districts

• Interest in preserving historically and architecturally significant properties has led to the creation of historic districts.
• Over 11,900 historic districts are listed in the National Register of Historic Places.
• More than 2,300 local historic preservation ordinances exist in the US.

3.2. Types of Historic Districts

• Some are actual zoning districts; others are overlay districts preserving architectural/historic character.
• Federally certified local districts meet stringent requirements, including compliance with National Register criteria.

3.3. Economic Incentives

• Developers/investors in federally certified or National Register districts may qualify for tax incentives (e.g., tax credits under the Economic Recovery Tax Act of 1981).
• State and local jurisdictions may offer tax credits or property tax assessment relief for contributing historic properties.

3.4. Appraising in Historic Districts

• Historic districts may include residential, commercial, industrial, or mixed-use properties.
• Listing on the National Register provides limited protections.
• Local historic preservation ordinances require review of alterations and demolitions.
• Appraisers must understand the criteria for district designation, reviewable actions, review criteria, and applicable tax incentives.
• Privately imposed historic restrictions (preservation easements, facade easements) can also limit future uses and influence value.

Conclusion

A thorough site analysis, including detailed land description, understanding legal aspects, and recognizing the nuances of historic districts, is essential for accurate real estate appraisal. This comprehensive approach ensures that appraisers can effectively assess the value and potential of any property.