PPP Notes - Land and Building Regulation

(These notes are compiled from Spreiregen's ARE Exam Review)

CHAPTER TEN - LAND AND BUILDING REGULATION

INTRODUCTION

Ownership is the legal possession of property, such as land or buildings.  Ownership by an individual, group, or other entity may be brief, long-lasting, or even permanent, as in the case of a governmental building or public park.

The ownership of property carries with it the right to use the property as one sees fit, subject to certain restrictions imposed by society.  The uses to which property may be put are many and varied: housing, commerce, agriculture, manufacturing, education, etc.

Originally, the uses to which land and the buildings on the land were put were largely determined by nature.  Agriculture developed in fertile lands, where permanent settlements were established; cattle raising, on the other hand, developed at points of access to a hinterland region, at a major route crossing, or at a confluence of land and water transportation.  Providing for defense against enemies was as much a determinant of land use as were the forces of nature.  Such determinants were recognized through government, which gave or denied the rights of usage of property to its citizens.  In time such rights were codified into laws.  Thus, the laws and regulations governing property rights were both permissive and prohibitive.  An occupant, temporary or permanent, could do certain things on his property, but was prohibited from doing others.  One might be permitted to build a house within a town, but not to tan leather there; one might be permitted to tan leather outside of a town, but not to build a house there.  Property rights and constraints have always gone hand in hand, and have always been conceived with regard to what is deemed the larger social interest.

The purpose of property rights and prohibitions is to serve the interest of society as a whole.  Uses of land and property that are appropriate and productive are permitted, but it is equally in society's interest to prohibit those uses that would be inimical.  The two together, rights and prohibition, are broadly called regulation.

Regulation of property usage has several forms.  There is, first, the regulation of ownership, both of land and buildings.  A corollary aspect of the rights of ownership involves transfer, by sale or rental.  There is, second, regulation of land itself.  Land use regulation is codified in several forms, varying from federal codes to privately conveyed covenants to publicly administered zoning laws.  There is, third, regulation of the building of structures, including materials, fire safety, electrical and mechanical equipment, plumbing, etc.  All of these, together, are quite complex.  But their purpose is better understood when they are seen in the context of their origins and evolution, as well as their larger purpose.

The implication for architectural design are considerable.  Regulations form a large part of the context within which land is planned and buildings designed.  We will begin with the regulation of ownership and transfer, continue with the regulation of land, and conclude with a discussion of the regulation of the design of structures.  

TYPES OF OWNERS

Land or buildings may be owned or leased by individuals (singly or in groups), corporations, churches, government entities, or such legal entities as trusts and estates.

A widespread form of ownership, often used by husband and wife, but not restricted to people related by marriage or blood, is joint tenancy.  Two or more people may enter into this type of ownership.  Its distinguishing feature is that each of the joint tenants holds an undivided interest; that is the land is not physically separated into individual portions, but rather each joint tenant has a share in the ownership of the whole.  The interest of each joint tenant automatically passes to the survivor(s) upon his or her death.  The advantage of this type of ownership to a husband and wife is that if one dies, the survivor becomes the sole owner of the deceased's share.  If the property is sold, then both (or all) owners must sign the necessary legal papers.  However, one owner may sell his or her undivided interest independently, in which case the purchaser assumes the place of the seller in the joint tenancy.

If the owner is a partnership, the situation is similar.  The land is owned by the partnership as a group.  Upon the death of one of the partners, however, the partnership may be dissolved and the assets distributed among the surviving partners and the estate of the deceased partner.  The distribution is made according to the original agreement among the partners.

A corporation operates differently.  A corporation is a legal entity with rights and liabilities independent of those of its shareholders.  Thus, if a shareholder dies, his share of ownership of the corporation passes to his heirs, and the corporation itself continues unchanged.  A corporation is treated by the law as if it were an individual; it may own or lease property, or enter into any arrangement which is available to an individual.

Another type of owner is a trustee, who holds property in his own name for the benefit of another person or group for whom he acts.  Typically, this occurs when property ownership passes to someone who is unable to act in his own interest, such as a minor child or a person who is incompetent.  The trustee is charged by law to act on behalf of this person or group and protect his or her interests.  He may buy or sell property that he holds in trust, acting in good faith and in the best interest of the person or group fro whom he is responsible.

All government entities may own property.  These range from large areas, such as public lands, to small properties, such as a small post office.

Examples of the types of property owned by various governmental agencies include: fire and police stations, city halls, courthouses, legislative buildings, storage yards for state-owned vehicles, etc.  The federal government owns millions of acres of public land, much of which was acquired in the course of westward expansion, and which it continues to own.  Much of this land is administered by the U.S. Bureau of Land Management, and its uses are strictly controlled by that agency.  In urban areas, the public may typically own a third or more of the land, in the form of public streets, as well as the sites of public buildings.

TYPES OF OWNERSHIP

The most common form of ownership of land is called fee simple or fee absolute.  The owner has absolute title or ownership, which he can transfer by sale or bequest.  Other, more restricted forms of ownership include the condominium, the cooperative, the leasehold, and sale-and-leaseback.

The condominium is an old, but recently revived form of ownership in which a buyer obtains fee simple ownership of a portion of a structure.  Typically, this may be a residential apartment, but it may also be space in an industrial or office building.

Usually, one also owns a part of the shared service areas (hallways and garages), land and site improvements.  Ownership of the land and public services areas, however, is an "undivided interest," or tenancy in common.  The owner of a condominium has a marketable title to his property, which he may sell to another person, mortgage, lease, or bequeath to an heir.  In some cases, the seller must give first "right of refusal" to the other owners through a tenants' or owners' council.  This arrangement is intended to protect the other owners from an undesirable buyer.  If the other owner is free to sell it on the open market.  Each owner of a condominium pays his own property taxes and also a periodic fee for the maintenance of the service areas owned jointly.  This fee may be nominal, but if the condominium has extensive grounds, a pool, clubhouse, tennis courts and the like, such fees may be quite substantial.

A cooperative differs significantly from a condominium in that the owner of a cooperative does not legally own a specific piece of physical property.  He owns, instead, a share of stock in a corporation that, in turn, owns the land and the structure.  The owner of the share of stock is permitted to occupy some stated portion of the structure built upon the property.  But the entire structure is still owned by the corporation.  He can bequeath his share in the corporation to his heirs, but usually he must first obtain the approval of his fellow stockholders before he may sell his share.

In practice, therefore, a cooperative is less marketable than a condominium, because the "owner" cannot sell property directly.  Hence, the condominium form of ownership has become much more common.  A partial disadvantage of both, however, is that decisions relating to assessments for operating costs or repairs are not made by the individual, but by an owner's association.

A leaseback is an even more restricted form of real estate tenancy.  Here, the lessee, the person to whom the lease is granted, has the right to use a piece of property under certain conditions that are described in the lease.  Lease rights do not include the right to sell the property, although it is possible, if not prohibited by the terms of the lease, to sell the right to use to another.  This is a termed a "sublease."  A leasehold is usually paid for in cash, called rent.  It may also be paid for in the form of a share of crops raised on or minerals extracted from the land.  A leasehold, unlike the forms of ownership previously discussed, exists for a specific period of time.  That time may be the life of the landlord (lessor) or tenant (lessee), or it may be at the pleasure of the parties, which means that either party can terminate the lease upon appropriate notice to the other.  Usually, however, a lease is for a definite period of time, either with or without an option to renew.  In some cases, the lease period is as long as 99 years.  It is not unusual for the holder of a long-term lease to erect buildings on the land, even though the ownership of any structure erected on leased property reverts to the lessor upon expiration of the lease.

Sale-and-leaseback is a special form of leasehold, in which the owner of a piece of commercial or industrial property recovers the capital invested in the property, but at the same time retains the use of the property.  The owner sells the property to a second party and enters into a leasehold agreement with that party, so that he may use the property for the specified life of the lease.  The advantages to the seller are that he regains the use of his capital, and his lease payments (rent) become a tax-deductible expense.  The buyer, in turn, has made an investment, from which he will derive a profit through rent receipts.  If the property includes structures, the buyer also has a tax advantage in that he may depreciate the structures.  When the lease period is over, the buyer may lease to another tenant, or occupy and use the property himself.  Sale-and-leaseback agreements usually run for a number of years and may also have options for renewal and/or clauses to adjust the rent as some given index, such as the Consumer Price Index, fluctuates.  Sale-and-leaseback arrangements are often made between a large industrial or service corporation and a large investment company.  The corporation constructs the building to suit its needs, at the level of quality it desires, and under its complete control.  The buyer is usually a large investor, such as an insurance company or a pension fund.

METHODS OF TRANSFERRING TITLE TO PROPERTY

When property is sold, the seller of the property gives the buyer a deed, which is a document conveying property from one owner to another.  While the exact details vary from state to state, in general a deed must describe the property being transferred, it must be signed by the grantor (seller), and it must be delivered to the grantee (buyer).  Even after it has been delivered, however, it is not legally recognized until it has been recorded in the office of the recorder in the city or county in which the property is located.

There are two methods generally used to finance the purchase of property: the mortgage and the deed of trust.  The method used is determined by local practices and legal restrictions.  Some areas, especially the eastern United States, utilize mortgages; others, especially in the West, use the deed of trust.  

A mortgage is a contract by which a buyer of property (mortgagor) borrows money from a bank or other lender (mortgagee) with which to purchase the property, and pledges the property as security for the loan.  The lender transfers the money to the seller, who then gives the buyer a deed to the property.  The lender does not usually loan the full purchase price of the property, but only up to around 80 or 90 percent of it; the remaining 10 to 20 percent of the purchase price (the down payment) is paid by the buyer to the seller.

The mortgagor pays the principal and interest to the mortgagee over an extended period of time, generally 10 to 40 years.  If the mortgagor fails to make a payment (defaults), the mortgagee has the right to take possession of the property (foreclose) and sell it to recover its investment.  Any money from the sale in excess of the mortgagee's investment and costs is paid to the mortgagor.  Foreclosure does not occur very often, except during a recession or when a development project is economically unsound.

In most cases, the borrow (mortgagor) continues to make payments to the lender (mortgagee) until the property is sold or the loan is paid off.  When the loan is paid off, the lender cancels the mortgage, and the borrower then has clear title to the property; he owns it free of any debt.

The trust deed is similar to the mortgage, but differs in some respects.  As in a mortgage, the buyer borrows money from a lender, who transfers it to the seller who, in turn, gives a deed to the buyer.  The buyer, instead of giving a mortgage to the lender, transfers title to a fourth party, called the trustee, by means of the trust deed.  The buyer makes principal and interest payments to the lender, and when the loan is completely repaid, the trustee transfers title back to the buyer.

However, should the buyer default, foreclosure can be accomplished by trustee's sale under the power-or-sale clause, without any necessary court proceedings.  The relative simplicity of foreclosure has made the trust deed popular with lenders in those states where it is permitted by law, generally in the West and South.

Property may have more than one debt against it.  In addition to a first deed of trust or mortgage, it may carry a second trust deed or mortgage, which is subordinate to the first.  The general rule is that "first in time is first in right."  A second mortgage is generally at a higher interest rate, due to the greater difficulty the second lender will have in obtaining repayment, should the borrow default on one or both debts.  A "default in prior mortgage" clause is commonly used in second mortgages, which states that if the mortgagor defaults in payment on a prior mortgage, the second mortgagee may pay the amount, add it to his loan, and immediately institute foreclosure.  However, since the first mortgage is normally larger than the second, payment of such a sum may prove difficult for the holder of a second mortgage.

PROPERTY DESCRIPTIONS

The deed that an owner receives contains, among other things, a legal description of the property conveyed.  A legal description may take any of several forms, including metes and bounds, subdivisions of public land, and lot and block.  Rural land is often described by one of the first two methods, while urban land is usually defined by lot and block.  A statement of the calculated acreage is also generally included.

A description by metes and bounds is in the form of a narrative.  The property is described by beginning at a specific point on the property boundary and then describing the length and direction of the boundaries of the property, until the entire property is encompassed.  

A government survey authorized by Congress and begun in Ohio in 1785 is the basis for much of the legal description of areas outside the thirteen original states.  This survey established a grid of north-south lines (called meridians) and east-west lines (called parallels).  The lines are 24 miles apart in both directions.  The grid thus delineated contains 24-mile-square areas sometimes called checks, which in turn are divided into 16 townships, each township being six miles square.

Further subdivisions are as follows: townships are divided into 36 square sections, each containing one square miles; sections may be divided into quarters and quarter-quarters, or sixteenths.  Certain of the parallels are designated as base lines, and certain meridians are called principal meridians.  Townships are numbered, and designated as north or south of the base line, and east or west of the principal meridian.  Intermediate lines parallel to the meridians are range lines, and intermediate parallels are called township lines.  

Land within a city is usually described as a specific numbered lot in a particular subdivision, for which there exists an official map of record.

DEED TERMS AND RESTRICTIONS

Covenants came into use in large scale residential land development prior to the advent of zoning.  Their purpose was to maintain aesthetic harmony between buildings and prevent inimical land uses or structures, thus maintaining and even increasing the value of the development.  Unfortunately, they sometimes also contained discriminatory covenants, under which persons of a specified race, religion, or ethnic identity were excluded.  Such provisions have been determined to be illegal according to the Constitution and cannot be enforced.  Covenants can be more effective than zoning in achieving and maintaining aesthetic harmony and overall quality.  Legally, they are more difficult to alter than zoning.

Many deeds contain restrictive covenants.  Covenants are normally used to limit the height, size, or appearance of a building.  Restrictive covenants may require that a building have a certain minimum cost and floor area, and may specify the style, type of construction, and other such restrictions.  Design approval by an architectural review board may also be required.

Covenants must be legal and enforceable.  For example, if a property is subdivided and the deeds from the common grantor specify that all buildings must be located 25 feet back from the street, and if the restriction is commensurate with the quality and character of the land, then the restriction is enforceable.  Anyone wishing to enforce the setback restriction could obtain a court injunction against any person violating the covenant.

Still another restriction on a property owner's right to utilize his land as he wishes is the easement.  An easement is an acquired right of use, interest, or privilege by one party on the property of another, without the ownership of the portion of the property, and usually without compensation.  There may be compensation paid for an easement, if it is newly established.  Easements may also be temporary.  

A common example of an easement is the right of a public utility or governmental entity to use private land to gain access for the placement and maintenance of utility services, such as sewers, electricity, water, gas, telephone, etc.  Easements exist for other reasons, as well, such as to gain access through or across a parcel of land when there is no alternative method.

A party wall agreement is another common type of easement.  Such an easement is used in row housing, where a common or "party" wall is shared by two adjacent owners.  A party wall straddles the property line, half on each side.  Obviously, one owner owns the half of the wall on his side, and the other owns the half on his.  However, each has an easement of support in the other half of the wall.  If one owner wishes to build before the other, a party wall agreement is entered into under which the first owner builds and uses the wall.  When the second owner builds, he makes use of the party wall and pays the first owner half of the cost of construction.

Another common type of easement involves a driveway shared by two adjoining properties.  Two private owners share in the joint use of a strip of land between two houses, which has a property line running through its center.

Easements may be created may be created by condemnation when, for example, land is taken by condemnation for a street, highway, or railroad right-of-way, or for a telephone or electric power line.  The general practice is that the taker acquires only an easement, although some states require complete ownership of the land acquired.  

An easement that allows one person to traverse the land of another in order to reach his own property creates a private right-of-way.  A public right-of-way may come into existence simply by the long-established use of a pathway or roadway over private land whose owner fails to deter such use.  If the practice continues for a long period of time without being contested by the owner, a public right-of-way is created.

AIR AND SUBSURFACE RIGHTS

As pressures to intensify land use have increased, the practice of utilizing the development rights above it and below it have also increased.  Early common law held that "To whomsoever the soil belongs, he owns the sky and the depths."  Subsurface rights, such as oil and mineral rights, are commonly leased or sold.  This may have little effect on the usefulness of surface land if the terms of the conveyance (deed or lease) protect the surface use from interference.  However, the ownership of mineral rights by another party may pose problems if that party has the right to enter the land at will.  Subsurface rights may also involve pipe and cable lines, above or below ground.

Similarly, air rights can be sold or leased.  Madison Square Garden and Grant Central Station, both in New York City, offer examples of such an arrangement.  The leasing or sale of air rights is complicated and expensive and therefore feasible only in areas of extremely high land value.

OTHER RIGHTS AND RESTRICTIONS

There are several additional forms of rights and restrictions involving land use that have appeared in recent years.  Among these are solar rights, historic facade easements, and developmental rights.  

Solar rights refer to the right of a site or building to have access to solar radiation.  Obviously, a tall neighboring building can block solar radiation from a site, if the neighboring building is located east, south, or west of the site.  The problem is complicated by the fact that the solar radiation is needed in the winter months, when the sun is at a low angle.  An effective solar access arrangement would require buildings to be spaced far apart, which is not economical in urban or even suburban locations.  Or it might require, for rooftop solar collectors, that all buildings be the same height.  Attempts to formulate protective legislation have not been too successful, since they require highly restrictive site usage and building design arrangements.  Sustainable design planning encourages the architect to evaluate passive and active solar gains for all buildings.  It makes sense that the sustainable approach would preserve solar rights for all nearby structures.

Such arrangements are more feasible in hot, dry climates where buildings are no more than two stories high.

A historic facade easement may be established by a municipality to protect a historically valuable architectural facade in n area where redevelopment is occurring, and where the existence of the facade is threatened.  The municipality may declare the facade to be of historic value, and, consequently, be empowered to withhold a permit for its demolition or alteration.  The municipality does not compensate the owner to preserve the facade.  The owner may demolish the structure behind the facade, and build a new buildings in its place, while preserving and restoring the facade.  The owner may, in some cases, benefit from special federal tax advantages.

EMINENT DOMAIN

An owner may sometimes be required to relinquish his property to a government entity if the property is needed for a public project, such as a highway or school.  In such instances, the government may exercise its powers of eminent domain.  The Fifth Amendment of the Constitution requires that the owner receive just compensation when property is appropriated in this way.  Exercise of the power of eminent domain involves a condemnation proceeding, a legal process initiated by the public authority wishing to take the property in question.  The "just compensation" to which the owner is entitled is the fair market value of the land.  This value is determined by a jury, normally advised by an independent assessor.  Public utilities also possess and exercise a limited power of eminent domain in the form of an easement for access, so that they may construct power lines and other distribution systems.

In practice, governmental entities are reluctant to exercise the power of eminent domain unless it is absolutely necessary, since the legal proceedings are complex, and the government is anxious to avoid the attendant publicity.  Many projects, otherwise deemed necessary, have been abandoned for this reason.

DEVELOPING IMPACT FINANCING

In many municipalities, particularly those that have experienced rapid growth, the cost of providing and financing public services has outstripped their ability to pay for them.  This situation has become particularly acute in recent years, as the federal government has curtailed many programs which provide financial support to cities and suburbs, such as grants for schools, utilities, open space acquisition, waste treatment, etc.

The response has taken several directions.  Most severe have been "no growth" movements, in which a community attempts to prevent new development entirely.  "Slow growth" is similar.  The legality of such attempts is questionable, as is their advisability.  Limiting the growth of the housing market serves to elevate real estate prices where housing is needed, preventing people who need adequate housing near their work from obtaining it, and to divert investment into building forms which may not be as critical as housing.  Sustainable design planning encourages development called smart or sustainable growth.  The principles of this approach are found in several areas including USGBC and the Ahwahnee Principles (Local Government Commission's Center for Livable Communities).  In general these sustainable developments encourage attention to mass transit, urban infill, higher density design, and a sensitivity to environmental issues.

In response to this, some municipalities have adopted a system whereby development rights are negotiated.  The "exactions" from a developer typically include payments for the cost of schools, roads, utilities, etc.  They may include the donation of open spaces, and possibly provide for a certain amount of "moderate" income housing in a development.

In fact, these "exactions" simply pass added costs on to the new homeowners of a development, further restricting the market being served.  The traditional American method of community building and financing remains preferable: long term financing of shared facilities, paid for by all who benefit, that is, the whole community.

DEVELOPMENT RIGHTS TRANSFER

The community's interest in preserving historic buildings or sites in developing areas has led to the creation of still another type of public control of development.  Let's say that a private owner of a historic building wishes to demolish it in order to free the site for a profit-making new structure.  The community, on the other hand, may feel it has a right to assure that the historic structure or site is preserved as an asset to the community.

In response, the system of development rights transfer has been devised.  The owner of a historic property may "sell" the development rights to his property to the owner of another nearby property, allowing that owner to develop his property at a higher intensity.  Although considerable public examination is required, including public hearings, this method can serve to preserve historic property.  It has limited applicability, however.  

An alternative is to grant the owner of such a historically valuable property tax reduction or exemption, depending on the income-producing benefit of the property.  Another alternative is for the public to acquire and maintain the property.  Obviously, a community's limited financial resources are the chief obstacle to such a course.

In fact, tax exemption is already granted to schools, churches and other tax-exempt institutions, such as museums.  

SUMMARY

Understanding of the concepts of land and building regulation provides the groundwork for communities to develop and for architects to begin to shape.

From the types of property ownership to land descriptions and limitations, all legal documentation and restrictions established for a piece of property begin to affect the direction the architect is going to take when laying out his or her solution for its development.