3.1 Government Powers and Land Use

The Four Government Powers (PETE)

Every parcel of real estate is subject to four inherent powers of government. Memorize them with the acronym PETE: Police power, Eminent domain, Taxation, and Escheat. These are limitations on the otherwise private bundle of rights an owner holds.

The most heavily tested distinction is police power vs. eminent domain. Police power regulates property without paying the owner — a downzoning that reduces value triggers no payment. Eminent domain physically takes title or an easement and constitutionally requires just compensation, usually the fair market value of what is taken under the Fifth Amendment's "takings" clause. Inverse condemnation is a suit an owner brings when government action so destroys value that it amounts to a taking without formal condemnation.

The taking process is called condemnation, and "public use" has been read broadly — the U.S. Supreme Court in Kelo v. New London (2005) allowed a taking for private economic redevelopment, prompting many states to tighten their own rules. Taxation creates an ad valorem lien that takes priority over all other liens, including a first mortgage; unpaid taxes can lead to a tax sale. Escheat prevents land from becoming ownerless, returning it to the state when there is neither will nor heir.

Public Land-Use Controls

Zoning ordinances are the chief expression of police power. They divide a community into districts — residential, commercial, industrial, agricultural — and set rules for lot size, setbacks, height, and density. A comprehensive (master) plan is the long-range policy blueprint a locality adopts; zoning must conform to it, and the plan, not zoning alone, drives growth. Building codes set minimum construction standards; compliance is confirmed by a certificate of occupancy before a new or substantially altered building may be used.

When a strict zoning rule would impose unfair hardship, an owner may apply to a zoning board for relief:

• Variance — permission to deviate from a requirement (e.g., a setback) due to unique hardship; the use stays the same.
• Special-use (conditional-use) permit — allows a use the ordinance lists as conditionally permitted (a church or daycare in a residential zone).
• Nonconforming use — a use that lawfully existed before a zoning change. It is "grandfathered" and may continue, but typically cannot be enlarged, and if destroyed or abandoned it generally cannot be rebuilt to the old use.
• Spot zoning — illegally rezoning a single parcel inconsistent with the surrounding plan.

When raw land is developed, the owner records a subdivision plat map showing lots, blocks, streets, and easements; subdivision regulations govern lot layout and infrastructure dedication.

Private Controls and Environmental Issues

Land use is also limited privately. Deed restrictions (restrictive covenants) are conditions a grantor places in a deed — they "run with the land" and bind future owners. In planned communities a homeowners association (HOA) enforces CC&Rs (covenants, conditions, and restrictions). Private covenants are enforced by injunction, not by government, and may be stricter than zoning; the more restrictive of the two controls.

Federal environmental law adds duties the exam loves to test:

• Lead-based paint — for target housing built before 1978, the Residential Lead-Based Paint Hazard Reduction Act (Title X) requires sellers and landlords to give the EPA pamphlet "Protect Your Family from Lead," disclose known hazards, and offer buyers a 10-day period to inspect.
• Wetlands — regulated under the federal Clean Water Act; filling or draining requires a U.S. Army Corps of Engineers permit.
• CERCLA (Superfund) — imposes strict, joint-and-several, and retroactive liability for hazardous-substance cleanup; even an "innocent" owner can be liable, so buyers seek the innocent landowner defense via due-diligence (a Phase I environmental assessment).

Agents have a duty to disclose known material environmental defects (e.g., underground storage tanks, mold, radon, asbestos) regardless of who caused them.

Environmental Hazards Worth Knowing

The exam expects recognition of common hazards and where they appear:

• Radon — a naturally occurring radioactive gas that seeps from soil into basements and lower floors; the second-leading cause of lung cancer. Tested with a simple detector; mitigated with sub-slab ventilation.
• Asbestos — once used in insulation, pipe wrap, and floor tile; dangerous only when friable (crumbling) and airborne. Encapsulation is often preferred over removal.
• Underground storage tanks (USTs) — common on former gas-station or farm sites; leaks contaminate groundwater and trigger CERCLA cleanup duties.
• Mold — thrives where moisture intrudes; remediation requires fixing the water source first.
• Urea-formaldehyde — found in older foam insulation and pressed-wood products, off-gassing into indoor air.

A buyer's best protection is a Phase I Environmental Site Assessment — a records-and-inspection review that, if it finds nothing, helps establish the innocent-landowner defense. If contamination is suspected, a Phase II involves actual sampling. Licensees should never offer environmental opinions beyond their expertise; instead they recommend qualified experts and document the disclosure.