Land Use and Government Power
The four government powers, zoning, and the environmental rules agents must know
PETE: the four government powers
Private ownership is never absolute. Government holds four inherent powers over land, and the exam expects you to know each one cold, including which ones require compensation and which do not. The mnemonic is PETE: Police power, Eminent domain, Taxation, and Escheat.
Police power is the government's authority to regulate property to protect public health, safety, and welfare. Zoning ordinances, building codes, and environmental regulations all flow from police power, and the owner receives no compensation for complying. Eminent domain is different: it is the power to take private property for public use, and the Constitution requires just compensation. The legal process of that taking is called condemnation.
Taxation gives government the power to levy property taxes, which become liens with priority over almost everything else, including a first mortgage. Escheat is the quiet one: when an owner dies with no will and no findable heirs, the property passes to the state. Escheat exists so land never sits ownerless.
Police power regulates and pays nothing. Eminent domain takes and must pay. If a regulation goes so far that it effectively takes all use of the property, the owner can sue in what is called inverse condemnation, arguing a taking occurred without payment.
Zoning, variances, and nonconforming uses
Zoning divides a community into districts and dictates use, density, height, and setbacks.
- Variance: permission to deviate from the ordinance, granted when strict enforcement would cause undue hardship because of something unique about the lot, like an odd shape that makes the setback impossible; the owner applies for it before building
- Nonconforming use: the opposite timeline; the use legally existed before the zoning changed, so it may continue as grandfathered, though it typically cannot be expanded and may lose protection if abandoned or destroyed
- Special use permit, sometimes called a conditional use permit: allows a use the ordinance names as acceptable with review, like a church or daycare in a residential zone
For the exam: the difference between a variance and a nonconforming use is timing. A variance asks permission for something new. A nonconforming use was already there before the rule changed. If the question says the business existed before the rezoning, it is nonconforming, not a variance.
Building codes and private restrictions
Building codes set minimum construction standards, enforced through permits and inspections. When construction passes final inspection, the municipality issues a certificate of occupancy, which certifies the building is fit for use and is required before anyone moves in. New construction sales routinely hinge on that certificate arriving before closing.
Deed restrictions, also called restrictive covenants or CC&Rs, are private limits written into deeds or recorded by subdivision developers, and they bind future owners. When a deed restriction and a zoning ordinance both apply and they conflict, the more restrictive of the two controls. If zoning allows four-unit buildings but the subdivision covenant limits lots to single-family homes, single-family wins.
Environmental basics agents are tested on
Federal law requires lead-based paint disclosure on the sale or lease of housing built before 1978. The seller must disclose known lead hazards, provide the Environmental Protection Agency (EPA) pamphlet, and give buyers a 10-day opportunity to conduct a lead inspection, which the buyer may waive. Agents share liability for making sure this happens.
Radon is a colorless, odorless radioactive gas that seeps from soil into basements and is the second leading cause of lung cancer; it is detected only by testing.
Asbestos, common in older insulation, is most dangerous when disturbed and friable, so encapsulation is often safer than removal.
The lead paint rule is federal law with real penalties, and the 1978 date is tested constantly. If the home was built before 1978, the disclosure, the pamphlet, and the 10-day inspection opportunity are mandatory. An agent who lets a seller skip it is personally exposed, not just the seller.
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the federal Superfund law, governs cleanup of contaminated sites. Its liability is strict, joint and several, and retroactive, meaning a current owner can be forced to pay for contamination caused decades earlier by someone else. That is why commercial buyers order environmental site assessments before closing: performing proper due diligence supports the innocent landowner defense.
Property taxes and special assessments
General property taxes are ad valorem, meaning based on assessed value, and they fund ongoing services like schools and fire protection. A special assessment is a one-time levy against only the properties that benefit from a specific improvement, like new sidewalks, curbs, or a sewer line on one street. Both create specific liens against the property, and unpaid taxes can lead to a tax sale.