Modern Real Estate Practice In Nc Chapter 6- 2/2018

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Police Power

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The govt. right of the states is their inherent authority to create and adopt regulations necessary to protect the public health, safety, and general welfare of the citizenry. The states, in turn, allow counties, cities, and towns to make regulations in keeping with general law. Since urban populations are increasing and has placed an increasing demand on natural resources towns, cities, and villages have had to increase limitations on private use of real estate.

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Public Land-Use Controls include

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Planning

Zoning

Subdivision regulations

Building codes and

Environmental protection legislation

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Master Plan

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Also referred to as a General Plan is a primary method by which local govt. recognize development goals through the formulation of a comprehensive plan. Cities and counties develop long-term master plans for 20 years or longer to ensure that social and economic needs are balanced against environmental and aesthetic concerns. It is also both a statement of policy and presentation of how the policies can be realized.

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A Master Plan typically provides:

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Land use, including standards of population density and economic development

Public facilities, including schools, civic centers, and utilities;

Circulation, including public transportation and highways;

Conservation of energy and natural resources; and

Noise abatement

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What is essential for preparing a Master Plan?

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Both economic and physical surveys are essential. Countywide plans also must include coordination of numerous civic plans and developments to ensure orderly city growth with stabilized property values. City plans are put into effect by the enactment and enforcement of zoning ordinances.

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Zoning Ordinances

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These are laws imposed by local govt. authorities (such as cities and counties) that regulate and control the use of land and structures within designated districts or zones.

Zoning ordinances cannot be static; they must remain flexible to meet the needs of society

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Zoning Regulates and Affects such things as;

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Permitted uses of each parcel of land

Lot sizes,

Types of structures,

Building heights,

Setbacks(the minimum distance away from streets or sidewalks that structures may be built),

Style and appearance of structures,

Density(the ratio of land area to structure area)

Protection of natural resources

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Enabling Act

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This is Act that gives zoning powers that are conferred on by municipal governments by NC through the the General Assembly.

There are No Nationwide or statewide zoning ordinances; zoning is is local by nature. State/Federal govts. May regulate land use through special legislation.

Example- scenic easements or coastal management laws.

It is critical for brokers to check with local municipalities before answering zoning questions.

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Zoning ordinances are generally divide land use into general use of classifications such as:

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Residential

Commercial

Industrial

Agricultural

With many sub-classifications under each category- cluster zoning, multiple-use zoning, (PUDs- planned unit developments)

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Cluster Zoning

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A developer can provide the same number of housing units as traditional subdivision plans, but with substantially increased tracts of open space (example PUD’s Planned Unit Developments)

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Buffer Zones

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This is landscaped parks and playgrounds to separate and screen residential areas from nonresidential areas.

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In NC General Assembly zoning ordinances

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Has enacted legislation that allows a municipality to regulate development in areas adjacent to, but not within, the corporate limits.

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Extra-territorial Jurisdictions

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These are areas outside the incorporated limits, but subject to the zoning restrictions of a municipality. The population of the municipality will determine if the regulatory power extends one mile or up to 3 miles from the corporate limits.

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Zoning ordinances must not violate the rights of property owners how?

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(As provided under the due-process provisions of the 14th Amendment to the U.S. Constitution)or the various provisions of the NC State Constitution. If the means used to regulate the use of property are destructive, unreasonable, arbitrary, or confiscatory, the legislation is usually considered void.

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Tests commonly applied in determining the validity of ordinances require that;

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The power be exercised in a reasonable manner

The provisions be clear and specific

The ordinance be free from discrimination

The ordinance promote public health, safety, and general welfare under the police power concept

The ordinance apply to all property in a similar manner

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Downzoning

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When land is taken for public use by the government’s power of eminent domain.

Example- land is zoned for residential construction and is rezoned for conservation or recreational use.

The state is responsible for compensating them, but not responsible for a loss of value.

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Nonconforming Use

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(Simply nonconforming use) Is the use of real properties that uses that are not legally established before the adoption of the current zoning plan. (These properties are grandfathered in zoning to keep their use legal in the area they are in)

These properties cannot be enlarged(only maintained)and the zoning is not allowed forever

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Illegal Use

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An illegal nonconforming use is one that violates the zoning laws at the time it is put into place.

Example- opening a gas station in single-family residential zone

** illegal nonconforming use is a misdemeanor

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Conditional-Use Permit

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Or a Special - Use Permit is provided for in the zoning laws. It is granted to a property owner who wishes to use property in a special way that is in the public interest

Example- church, hospital

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Variance

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This is sought to allow a deviation from an ordinance due to unique circumstances. To get a variance, the property owner must prove that there is no other reasonable use for the property and the property owner will suffer a substantial hardship if not granted.

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Overlay District

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This is a type of zoning that is superimposed over another type of zoning. This can modify the use of the original zone.

Example- historic preservation and aesthetic zoning

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Historic Preservation Zoning

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Is to preserve historic buildings and sites that are irreplaceable. Any changes to these properties must be OK’d by zoning and they must obtain a certificate of appropriateness from the appropriate regulatory entity.

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Aesthetic Zoning

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Exterior surfaces of structures being restricted to a particular color palette or construction material

In NC an area can be zoned strictly for aesthetic or appearance considerations.

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Spot Zoning

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Is when a particular property or group of properties are rezoned to permit a use different from the neighboring properties use. This form zoning is truly in the public interest rather than being for the benefit of a single property owner (or few owners) at the expense of neighboring property owners or the community at large.

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NC factors that determine the legality of spot zoning include;

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1. The size of the rezoned area- rezoning a single lot is more questionable that rezoning multiple tracts.

2. The degree of compatibility of the different zoning with the government’s adopted plans for the area

3. The impact of the rezoning on the landowners, neighboring landowners and the surrounding community

4. The degree of difference between the zoning of the surrounding area and the new zoning for the tract(s) in question.

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Broker’s duty to disclose zoning

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Broker’s who work in urban area’s have more responsibility and require more knowledge than broker’s working in more rural areas where are usually fewer zoning classifications and/or restrictions.

Residential Broker’s may require more knowledge of subdivision regulations, street disclosure laws, and protective covenants than commercial brokers- who may require more knowledge about rezoning variances, and special-use permits.

Must be able to recognize mixed use and property alterations where a closer check of zoning may be necessary.

Must never make assumptions about zoning or future property on behalf of client or customer.

Must present proper disclosure and protective covenants to buyer/tenants.

A listing broker should acquire copies of any deed restrictions and protective covenants at the time of taking the listing.

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In NC the state law defines Subdivision as-

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All divisions of a tract or parcel of land into tow or more lots, building sites, or other divisions for the purpose of sale or building development (whether immediate or future) and includes all divisions of land involving the dedication of a new street or a change in existing streets.

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In NC what are the 2 types of parcels that are not considered a subdivision?

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1. A division of land if each parcel has more than 10 acres with no street right-of-way dedication

2. A division of land no larger than 2 acres into no more than 3 lots with no street right-of-way dedication involved, when the parcel is owned by a single entity.

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Subdivision Regulations

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1. Land is divided into two or more lots.

2. Cities and counties implement subdivision regulations.

3. Planning boards have administrative responsibilities

4. Subdivision must have preliminary plat approval before selling lots.

5. Final plat must be recorded prior to closing

6. Subdivision must comply with street disclosure laws.

7. Protective covenants are enforceable.

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Why is Environmental Impact report submitted prior to subdivision development?

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Because fear of polluted streams, rivers, lakes, and underground water sources, septic tank systems are no longer accepted in many areas.

And the shortage of water fears

And the drainage capacities or sewage-disposal

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The 3 distinct stages of development for a subdivision-

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1. Initial planning stage- seeks out suitable area. Property analyzed for its highest and best use. If area requires zoning variances, negotiations begin.

2. The final planning stage- Approval is sought from local officials, permanent financing is obtained, land is purchased, finial budgets are prepared and marketing programs are designed.

3. The dispositions or start-up- subdivision plans are recorded with local officials, and streets , sewers, and utilities are installed. Buildings, open parks, and recreational areas are constructed and landscaped. Marketing plans are intimated and title to the individual parcels of subdivision land is transferred as the lots are sold.

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Subdivision Streets Disclosure Law

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A developer must have streets approved based on construction by standards of NC Department of Transportation. A broker must disclose to a buyer whether the streets will be public or private. The disclosure actually must be signed by the buyer that they received disclosure and understand it if street is private and they are responsible for care/construction/maintenance.

** Despite if the street is public the size of subdivision/population does not assume that DOT has responsibility for a maintenance of the streets***

**Despite age of subdivision broker should determine whether the roads are public or private in subdivision

***Refer to page 120-122 for Compliance for subdivision streets disclosure statue***

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Before a Real Estate Broker sells or list lots in a subdivision what do they need to check?

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They need to be well aware of the needed verification of approved subdivisions, especially in regards to selling recently subdivided lots. They will need to check the Register of Deeds office in the county where they are located to ensure the plat has been properly recorded.

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Can changes be made to a preliminary plat map for a subdivision during selling stage?

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NC now allows the acceptance of monies and contracts on subdivisions parcels once the preliminary plat has been approved, but no changes can be made or a buyer is allowed to cancel any existing contract and all monies are refunded.

** A broker who closes sales on a lot before final approval is granted and recorded may be subject to a civil lawsuit or may be criminally prosecuted and face disciplinary action by NC Real Estate Commission.

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Plat Subdivsion

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This is a subdivider’s completed plat of a subdivision , a map of the development indicating the location and boundaries of individual properties, and must contain all necessary approvals from public officials and must be recorded in the county where located.

This plat will be the basis of future conveyance.

Survey monuments should be established and measured and should be from monuments, with the location of all lots carefully marked- must be approved by appropriate government body.

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Covenants and Restrictions

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These Deed restrictions can be included in the subdivision plat and are originated and recorded by subdivided as a means of controlling and maintains the desirable quality and character of the subdivision.

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Declaration of Restrictions

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These restrictions may be set forth in a separate and recorded instrument. These restrictions may include the size of structures than can be built, the cost often the minimum cost of structures that can be built; the number of structures that can be built; or even architectural styles, fence heights, setbacks, or outbuilding that can be built on the land.

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FHA Standards

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FHA has minimum standards that has been established for residential subdivisions and have to have approval for a FHA loan insurance. The minimum standards established by the FHA deal with the actual development infrastructure of the subdivision. These standards also apply to building construction. Since 1986 in recognition of more stringent local codes in effect the FHA has allowed local building codes to serve as the standards.

Exceptions generally include size conditions, thermal (insulation) standards, and certain other material standards.

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Interstate Land Sales Full Disclosure Act

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This was created in 1968 and the law requires those engaged in the interstate sale or leasing of subdivision lots (including condominiums, cooperative units, campsites) to file a statement of record and register the details of the land with HUD. Sales include out-of state mailers, newspapers ads, TV advertising directed to out-of-state buyers, and out-of-state telephone solicitation.

This Act exempts the sale of lots in a subdivision containing fewer than 25 lots.

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Property Report

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Prior to signing a purchase agreement or lease the developer must furnish prospective buyer or leases one. And must contain all of the following:

Distance over paved roads to nearby communities

Number of homes currently occupied

Soil conditions affecting foundations and septic systems

Type of title a butter receives, and

Existence of liens

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Exemptions for Interstate Land Sales Full Disclosure Act

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Does no apply to subdivisions consisting of fewer than 25 lots or to those in which each lot is 20 acres or more.

Lots offered for sale solely to developers also are exempt from the Acts requirements, as are lots on which buildings exist or where a seller is obligated to construct a building within 2 years.

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Failure to provide a Property Report

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Is grounds to void a contract

Is seen as a misrepresentation by seller in sales promotion materials and can be sue the seller for civil damages. Failure to comply with the law also may be subject a seller to criminal penalties of fines and imprisonment.

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Building Codes

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In NC the NCDI (NC Department of Insurance) has minimum standards to build homes, condos, etc. These standards include materials, sanitary equipment, electrical wiring, fire prevention standards, and etc.

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Building Permit

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Most communities require the issuance of one and it is done by the city clerk or another official before a person can build new structures or alter repairs on existing building or property within a municipality. The permit requirement allows officials to verify compliance with building codes and zoning ordinances as they examine plans and inspect work.

Not securing a permit can make the property uninsurable for hazard insurance purposes. Some municipalities will allow retroactive approval of permits.

Example- unheated living square footage quoted by a broker.

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Certificate of Occupancy (CO)

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Once a structure is completed and found satisfactory a building inspector issues one of these.

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Unpermitted Space

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This is a material fact and cannot be included in quoted heated living square footage, unless unpermitted status is fully disclosed.

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Federal Emergency Management Agency (FEMA)

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Produces maps that designate flood hazard areas, and flood insurance is required under the National Flood Insurance Program (NFIP) if a federally related mortgage loan is to be used for properties within those areas. Standard homeowner policies do not cover flood damage. Flood insurance is separate policy from NFIP but brokered through local insurance companies. Land in flood hazard areas is subject to restrictions in location, types and elevations of improvements. Real estate brokers should inform potential buyers of possible flood areas and have them review latest flood maps compiled by Army Corps of Engineers.

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Flood Hazard Areas

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Areas bordering on rivers and streams that have been designated this by FEMA. They are subject to federal regulations concerning improvements and construction in those areas.

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Highway Access Restrictions

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Broker’s can face disciplinary action if they do not disclose facts about road access. Changes can have big impractical on value. Owners must be compensated under eminent domain if government takes away road access

Example: Planned construction of new highways, freeways, loop roads, etc.

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How should brokers advise on city planning, zoning, and restriction of use?

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They should not. It is very technical, not altogether clear and should be referred to legal counsel.

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Brokers responsibility with environmental issues

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Broker’s should stay well informed on federal, state, city, and county environmental laws that protect natural resources and prevent pollution.

Example: Restrictions of septic tanks near rivers, streams, etc.

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Americans With Disabilities Act (ADA)

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Federal Government has mandated new commercial and older renovated public buildings must meet standards for those with disabilities. Doesn’t apply to residential.

Example: ramp construction, safety rails, wider doors.

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Private Use Land Controls

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Developers can restrict use of land to limit use of property.

Examples of restriction in deed:

Only bird sanctuary

Fences, parking, architectural details, etc

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Can developers restrict right to sell?

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No, this is a basic principle of free alienation and unenforceable.

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Declaration of Restrictive Covenants

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Limitations on right to use land can be established by developer through covenant in deed or reference to this separate recorded declaration. Binding on grantees.

Used primarily to protect property values and need not pass the test of promoting public welfare, the test that public use restrictions must pass.

Examples: type of construction, height, setback, square footage, cost.

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Protective Covenent

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Replacement term for restrictive covenant. More modern term. Fits meaning more which is to protect owners from uses that may have adverse affect on value or enjoyment.

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What takes precedence when zoning and covenants are in conflict?

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The more restrictive of the 2. Use restrictions are valid if reasonable and benefit property owner. If too broad and prevent free transfer, may be unenforceable. If rendered ineffective by court, property is freed from restriction. Deed restrictions can be more restrictive on owner’s use than zoning ordinances.

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How are covenant enforcement rights maintained?

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Developers will transfer them to owner’s association which give them and each lot owner right to apply to the court for injunction or legal action to prevent a lot owner from violating. Court will direct them to stop and if they don’t can be in contempt of court.

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Laches

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When a neighboring lot owner stands idle when a lot is in violation of a covenant restriction, they can lose the right to petition for injunctive relief by inaction or failure to assert it.

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Broker’s responsibility regarding protective covenants.

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Broker needs to inform buyer of these and advise to carefully read covenants before making an offer. See bottom of p. 127 and top of p. 128 for important things a broker should recognize, and specifics in NC.

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What should a broker say regarding land use and restrictions?

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They really should tell the buyer to refer to protective covenants and consult a lawyer. They should not advise on if a use of property is allowed or if certain acts are in violation of covenants, even if current landowner is using property in a specific manner.

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Government Ownership

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Has owned 80% of nation in past. Now own 775 million acres, approx 1/3. Form of land control.

Uses are: municipal buildings, state legislative houses, schools, and military stations, streets, highways, nation and state parks for public use, recreation, and preserving natural resources.