Private Restrictions on Real Estate
Private restrictions limit the use
of real property. Covenants, Conditions and Restrictions limit the way the land
is utilized by the property owners. The original developer or a subsequent
association of owners of individual lots or units agree to establish rules
governing all present and future owners' use of property in the development.
An extremely interesting case related to private restriction on
real estate is Shelly vs. Kraemer.
In 1945, Shelley (a black family) purchased a house in St. Louis
Missouri. However, they failed to realize that there was a restrictive covenant
on the property that barred a “Negro” from occupying the house. A neighbour Kraemer
sued Shelley from taking possession of the property; and therefore, the case
went to the Supreme Court. This was a crucial case and a realization that
restrictive covenants that were racially biased were invalid under the
Fourteenth Amendment. Although, private parties could voluntarily abide by the
terms of the restrictive covenant, the judicial courts could not enforce such
discriminatory actions since it violated the equal protection clause of the
Fourteenth Amendment. Below is the link for the details of the case.
Shelly vs. Kraemer (a detailed description of the facts of the case)
Public Restrictions on Real Estate
Public restrictions on real estate include the basic powers of the
government to limit use of private property and affect its value through either
taxation, power of escheat, eminent domain and police power. To further define
types of public restrictions:
- The property tax is an “ad valorem” tax, levied in proportion to the value of the property and utilized to finance the public services the government provides.
- Power of escheat: government’s right to acquire a property without a will or heir.
- Eminent domain: the right of government to take private property for public use by payment of just compensation.
- Police power used to regulate the use of private property to protect public health, safety, morals and general welfare.
A great example of a public restriction on real estate case, specifically eminent domain, where the government took a private property and transferred it to another private owner in order to economically develop the area was Kelo vs. City of New London.
Kelo was the first major eminent domain case heard at the Supreme Court
since 1984. The City of New London under eminent domain, believed that a
privately owned real property should be used for a comprehensive redevelopment plan; claiming that the property transferred to another private owner would serve
public use in the economic development of the area. Ultimately the state Supreme Court held that the use of eminent domain in Kelo vs. City of New
London did not violate the public use clause and an economic project of such
would create new jobs, increase tax dollars, and other city revenues. Since
this case, at the aftermath of Kelo vs. City of New London, many states have
changed their laws and limits on eminent domain ensuring that property owners have greater security in their home.
For a more detailed version and the most recent updates, please read
this wall street journal article below:
