Easements, Profits, Restrictions, and Government Powers

Chapter 1: Easements, Profits, Restrictions, and Government Powers

VI. Non-Possessory Interests in Real Property

Real property ownership encompasses a bundle of rights, but these rights are not always absolute. Non-possessory interests allow individuals or entities to use or control property owned by someone else without possessing it. These interests can significantly affect property value and usage.

a. Easements

An easement grants a non-owner the right to use another person’s land for a specific purpose. The property subject to the easement is known as the servient tenement (or burdened tenement), while the property benefiting from the easement is the Dominant Tenement❓❓.

Case/Example: If your neighbor has a right-of-way easement across your property to access their land, your property is the servient tenement, and your neighbor’s property is the dominant tenement.

1. Types of Easements:

   • Easement Appurtenant: This type of easement benefits a specific parcel of real estate (the dominant tenement). The easement right is attached to the ownership of the benefited parcel and transfers with the property upon sale. The mathematical relationship that describes the dependence between the dominant and servient tenements can be expressed as follows:

     Let D represent the utility or benefit gained by the dominant tenement, and S represent the burden or restriction placed on the servient tenement. Then,

     D = f(S)

     Where f is a function that quantifies the relationship. In simple terms, the utility D gained by the dominant tenement is a function of the burden S imposed on the servient tenement.

   • Easement in Gross: This type of easement benefits an individual or organization rather than a specific parcel of real estate. A common example is an easement granted to a utility company for installing and maintaining utility lines. These easements typically do not transfer with the land.

2. Creation of Easements:

   Easements can be created in several ways:

   • Express Grant: Created by a written agreement between the property owners, typically recorded in the public records.
   • Express Reservation: Created when a property owner conveys land but reserves an easement for their own benefit.
   • Implication: Arises when an easement is necessary for the reasonable use of the property (e.g., an easement by necessity when a landlocked parcel has no access to a public road).
   • Prescription: Acquired through continuous, open, notorious, and hostile use of another’s property for a statutory period (similar to adverse possession). Prescriptive easements would not be a matter of record but would likely be discovered by physical inspection of the property.

3. Scope and Termination of Easements:

   The scope of an easement is determined by the terms of the agreement or the circumstances surrounding its creation. Easements can be terminated by:

   • Merger: When the dominant and servient tenements come under common ownership.
   • Release: A written agreement by the easement holder to release the easement.
   • Abandonment: Intentional relinquishment of the easement, evidenced by actions demonstrating an intent to never use the easement again. Abandonment requires more than just non-use, there has to be some action indicating that the easement is being given up.
   • Expiration: If the easement was created for a specific term, it terminates upon the expiration of that term.
   • Destruction: If the easement involves a structure (e.g., a stairway), its destruction may terminate the easement.

b. Profit a Prendre

A profit a prendre grants the right to take something from the property, such as crops, fruit, gravel, timber, or minerals. It is a negative encumbrance that diminishes the value of the property.

1. Distinction from Easements and Leases:

   • A profit a prendre differs from an easement in that it confers the right to take something from the property, while an easement is merely the right to use the property.
   • A profit a prendre differs from a lease for minerals or oil and gas in that there are NO royalties paid to the landowner.

Mathematical Representation:

If Vp is the value of the profit a prendre, and Q is the quantity of the resource extracted over time t, and P is the price per unit of the extracted resource. Then, the value of the profit a prendre can be modeled as:

Vp = ∫0t P(t) * Q(t) * e-rt dt,

where r is the discount rate reflecting the time value of money and the risk associated with the extraction. This formula integrates the present value of the revenue generated from extracting the resource over the specified time period.

c. Emblements

An emblement is the “one-time” right of a tenant to harvest a crop that they planted before the property’s sale. This right extends only to the first crop after the sale and does not diminish the property’s value.

1. Distinction from Profit a Prendre:

   An emblement should not be confused with a profit a prendre, which is an “ongoing” right to grow and harvest a crop.

d. Private Restrictions

Private restrictions, also known as private deed restrictions or covenants, conditions, and restrictions (CC&Rs), are non-governmental limitations on how property can be used. These restrictions are typically created by the developer of a subdivision and included in the deeds transferring ownership of each lot.

1. Scope of Private Restrictions:

   Private restrictions can cover a wide range of subjects, including building sizes and styles, fence heights, landscaping, parking, and even the types of pets allowed on the property.

2. Enforcement:

   Unlike zoning, private restrictions are NOT enforced by the government. They must be enforced by the private landowners in the subdivision, usually through a homeowners’ association.

Example: A homeowner’s association might enforce a restriction requiring all houses to be painted in earth tones.

VII. Government Restrictions of Property Rights

Even fee simple ownership, the most complete form of real property interest, is subject to the legitimate powers of government. These powers include eminent domain❓❓, taxation, police power, and escheat.

A. Eminent Domain

Eminent domain is the power of government to take private property for public use, provided that just compensation is paid to the property owner.

1. Condemnation:

   If a government agency cannot acquire needed property through a voluntary sale, it may use eminent domain to file a condemnation lawsuit, forcing the owner to give up the property in exchange for just compensation.

2. Just Compensation:

   Condemnation lawsuits commonly require appraisers’ services to provide expert testimony regarding the fair value of the condemned property.

Mathematical Representation of Just Compensation:

Just compensation, JC, can be conceptualized as the sum of the fair market value of the property, FMV, plus any consequential damages, CD, minus any benefits, B, the property owner might receive from the project for which the property is being taken.

JC = FMV + CD - B

B. Taxation

Ownership of real estate is subject to taxation in the form of general property taxes and special assessments.

1. General Property Taxes:

   General property taxes are usually assessed annually and apply to all properties that are not exempted by law. Because they are based on the real estate’s value, they are often referred to as ad valorem taxes, Latin for “according to value.” General property taxes are levied by the individual states, each with its own laws governing tax rates, assessments, exemptions, and other details.

   Example: A property tax rate of 1% on a property assessed at $300,000 would result in a tax bill of $3,000.

   Mathematical Representation of Ad Valorem Tax:

   Let T represent the total property tax, r represent the tax rate (expressed as a decimal), and V represent the assessed value of the property. Then:

   T = r * V

2. Special Assessments:

   Special assessments are taxes levied against particular properties to cover the cost of public improvements that benefit those properties. The properties subject to the assessments comprise a special assessment district or local improvement district. Properties outside the district are not subject to the special assessment tax. Unlike general property taxes, special assessments are a one-time tax that expires once sufficient tax revenue has been collected to pay for the improvements.

   Example: A special assessment may be levied on properties along a street to pay for new sidewalks.

C. Police Power

The third power of government that influences real estate ownership is the police power. This is the power of government to make and enforce regulations for the protection of the public health, safety, and welfare.

1. Scope of Police Power:

   This broad power is exercised in many forms and frequently has significant effects on property values. It is the basis for land use regulations such as community planning ordinances and zoning laws, and also for building codes, subdivision development regulations, and environmental protection legislation.

   Example: Zoning ordinances can restrict the types of businesses allowed in a particular area, affecting property values.

   Mathematical Model for the Impact of Zoning on Land Value

   Let VL represent the land value, I represent the expected income from the land use permitted by the zoning, r represent the discount rate (opportunity cost of capital), and Z represent zoning regulations. The effect of zoning on land value can be modeled as follows:

   VL = I(Z) / r

   Where VL is a function of zoning regulations, affecting the potential income derived from the land.

D. Escheat

Escheat is the power to have property revert to the state if the owner dies without heirs or a will (intestate). Heirs are relatives and may inherit without a will. A will allows personal property to be given to a legatee and real property to a devisee. Those named in a will do NOT have to be related to the person making the will.

VIII. Appraisal Considerations

Easements, profits a prendre, restrictions, and government powers all affect property value and should be considered in the appraisal process. Appraisers must identify and analyze these factors to determine their impact on the property’s market value.