Real Property Law in Emerging Markets

1. Real Property Law in Emerging Markets Harland L. Miller, III Visiting Fulbright Scholar Pravna Fakultete Univerze v Mariboru Lecture #7 26.3.2008

2. Eminent domain The lawful power of the government to take privately owned real property to be used for a public use.

3. U.S. Constitution Fifth Amendment No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in

4. the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness

5. against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

6. Vermont Constitution, Chapter 1, Article 2nd That private property ought to be subservient to public uses when necessity requires it, nevertheless, whenever any person’s property is taken for the use of the public, the owner ought to receive an equivalent in money.”

7. Condemnation Proceeding Civil Complaint in U.S. District Court • Authority for taking • Intended use of property • Description of property • Interest or estate to be taken • Identification of owners

8. Commencement of Action Personal Service of notification on the property owners. In rare circumstances, a Court may allow service by publication (advertisement in Newspaper). This must be supported by an affidavit.

9. Two Elements • Public Necessity (a question of fact that the court or jury must decide – not the government) • Damages (what must the Government pay the property owner for the value of the property taken)

10. Public Necessity Three types of takings for “public use”: 1. Private ownership to Public ownership (Roads, Hospital, Jails) 2. Private ownership to Private party who makes property available for public use (Railroads, public utility, football stadium)

11. Public use (cont.) • Private ownership to private parties to serve a “public purpose”.

12. Kelo v. City of New London The concept of “pubic purpose” was the issued raised by the property owners opposing the taking. Intended result: • Creation of jobs • Increased tax revenues

13. Opponents position • No elimination of public harm (public saftey) or exercise of police powers • The “taking” was merely transferring ownership from one group of private individuals to another (wealthier) group with no real public purpose.

14. Holding The majority decision in a 5-4 vote upheld the legality of the taking, finding there was a sufficient “public purpose” to satisfy the public use requirement in the Fifth Amendment.

15. Reaction to the Kelo decision Approximately 30 states have enacted legislation of some sort that restricts or prohibits the State’s right to use eminent domain for private use.

16. Just Compensation Two elements need to be determined • Scope of property rights to be taken • Fair Market Value of those rights

17. Scope of Property Rights • Fee Simple - the land on which the highway is to constructed. • Easement in perpetuity - Drainage easement for water run-off • Temporary Easement – Extra land needed for construction only.

18. Valuation If the parties cannot agree on the fair market value, the court or jury must decide. Each side presents evidence (“the Battle of the Appraisers”)

19. Court Order The final decision of the Court will set forth a specific finding of necessity, identify what real property is to be taken and the value to be paid. This Court Order will be recorded in the land records.

20. Voluntary Takings Most Eminent Domain cases do not go to trial. It is expensive and time consuming for the Government and they will make every possible effort to reach an agreeable purchase price with the private land owners.

21. State Government State Governments and municipal governments also have condemnation powers. The procedures and safeguards are very similar.

22. Hinesburg Sand & Gravel Condemnation proceeding going on in Williston Vermont for the taking of Sand pit in order to construct a regional solid waste facility. Litigation started in the early 1992.

24. Voluntary Dedication Private land owners give or dedicate land to the town or state. Example: Roads in a subdivision. The Town will require that the roads be constructed to meet certain standards.

25. Criminal and Civil Forfeiture The legal taking of private property by the government without paying compensation. • Property used in the commission of the crime. • Property obtained with illegally obtained funds.

26. Enforcement of Government Liens A foreclosure process whereby the government enforces a lien on real property. It almost always results in a sale or auction of the property, but the property owner is entitled to all the due process requirements they would have in a foreclosure.

27. Voluntary Liens given to Government Property owners may be willing to forego development of their land in exchange for tax benefits. They agree to pay a penalty (secured by a lien on the property) in the event they develop the property in the future.

28. Land Use Regulations

29. Glossary terms Exclusionary zoning Injunctive relief Nuisance Police Power Regulatory taking Subdivision control Zoning

30. Nuisance The unlawful or unreasonable use of land by its owner causing injury or interference of the rights of another property owner or the public.

31. Examples of Nuisance • Pig farm in a residential neighborhood. • Spite fence (provided it was motivated solely by malice) • Operation of a cement factory • Water run-off with manure.

32. Enforcement options • Money Damages • Self Help • Injunctive relief

33. Injunctive relief A form of control over land of another through a civil action. The effect of an injunction is to place a servitude (similar to a restrictive covenant) on the adjoining property.

34. Zoning The regulation of the use and occupancy of real estate by a municipality created by dividing the municipality into different sections and designating permitted uses and building restrictions for each section or zone

35. Authority Exercise of police power (the power and authority of a government to enforce laws enacted to protect the health, safety morals and general welfare of the public). Authority is set forth in the Enabling Statutes.

36. Zoning Map The official map implemented by the municipality that sets forth the different zoning sections or divisions.

37. Authorized Uses Those uses that are specifically and unconditionally allowed within a certain zone.

38. Conditional use Uses that are allowed within a certain zoning district, but which the municipality is permitted to place reasonable limitations and restrictions.

39. Variance A legal authorization that permits deviation (non-conformance) from zoning regulations. A variance is often granted in order to avoid an unnecessary hardship.

40. 4 Elements for a variance • Applicant must show an unnecessary hardship exists • A variance is needed for the reasonable use of the property • No adverse affect on adjacent lands or the neighborhood • Least intrusive solution

41. Exclusionary zoning A zoning ordinance that excludes or prohibits a certain type of business or use of the property. (example – No industrial manufacturing in Zone “A”)