Whether you are an individual or couple purchasing a home for your family, or whether you represent an entity purchasing a commercial property for a real estate opportunity, and everything in between, understanding the finer details of your target property are becoming increasingly more critical to make good decisions. In a real estate market that is at historical levels of competition, many buyers overlook (or even forgo) conducting any due diligence and research prior to purchasing property. However, time and again we have seen clients come to us with substantial issues regarding a property they purchased that easily could have been discovered through a reasonable inquiry into the applicable restrictions and characteristics of the property prior to purchase. The purpose of this article is to inform prospective buyers of three essential inquiries to make prior to entering into any sale contract for real estate. Those are:
1) an analysis into the relevant zoning issues and permissible uses under the local zoning code;
2) current encumbrances on the property (including environmental restrictions, easements, mortgages, etc.); and
3) the potential for any issues a property owner may have with the prospective property based on several other factors.
A prospective buyer should consult a land use attorney prior to agreeing to any terms of purchase as he/she can help you determine whether purchasing a particular piece of property is a smart investment or an economic loss.
Property and Zoning
Zoning is an extremely important consideration when determining whether a prospective property meets the needs of the buyer. In Rhode Island, zoning is controlled, established, and enforced by each municipality within the state, and serves to govern how each property may be used. Though all municipalities within the state derive their authority to enact zoning ordinances from state legislation, each municipality is vastly different in the intricacies of their code.
Zoning serves to restrict and allow two main controls, those being 1) the allowable use for the property in question; and 2) the dimensional allowance for each use established under a municipality’s code. As a general rule, each municipality will establish zoning districts within the municipality will control what type of use is allowed there, and more importantly, what uses are prohibited. Many times, municipalities will establish separate zoning districts for single family residential use, multifamily residential use, commercial use, industrial use, office use, etc. It is critical that a prospective purchaser understands the allowable use and dimensional restrictions for the zoning district in which the property is located.
Under each zoning district, a municipality will designate, via what is called its “use matrix”, what uses are allowed. Generally speaking, a municipality’s use matrix will have three main categories, those being: 1) uses permitted as a matter of right; 2) uses which are prohibited; and 3) uses which require a special use permit from the municipality’s zoning board of review prior to being permitted, also known as a “conditionally permitted use”.
It is especially important to determine what uses are prohibited in the zoning district within the municipality where you intend to purchase property. For example, if a homebuyer is purchasing a single family home with the intent of operating a daycare facility on the premises, it is critical that the prospective purchaser have a zoning analysis conducted to determine 1) if an accessory daycare facility is a permitted use in that zoning district; or 2) if it is not a permitted use, is it allowed by obtaining a special use permit? Many unsuspecting buyers purchase property without first conducting their due diligence to discover that they are prohibited from utilizing their property in the manner which they intended.
However, consulting a land use attorney to review the municipality’s zoning code can save a prospective purchaser the devastation of discovering bad news before signing. In the above referenced scenario, a prospective purchaser can discover exactly what permitted or prohibited uses are applicable to the property under consideration. Many times, if a purchaser discovers his/her desired use is prohibited only after purchase, the purchaser stands to incur lofty legal fees in attempting to petition the municipality for a zone change or attempting to permit the particular use within the existing district. Not to mention, these referenced actions could fail to succeed.
Encumbrances To Land
Encumbrances to land are commonly defined as any restriction on the land, whether recorded in the land evidence record, or existing based on certain conditions of the property which can serve to restrict the allowable use on the land, affect the value of the property, or allow a third-party certain rights in the land that otherwise would be prohibited without the property owner’s consent. Common encumbrances which a prospective purchaser may encounter are easements, restrictive covenants, mortgages, environmental land use restrictions (ELURs), zoning restrictions, and many more.
Depending on the type of encumbrance, it is important to know how encumbrances will affect the way a prospective purchaser wishes to use the property. For example, we have seen clients purchase property in a rural area with the intent of obtaining increased privacy. Keeping this goal in mind, our clients were very surprised and upset when the neighbor on the adjacent property was seen driving up their private driveway to reach his back field located on his own property. Upon review of the land evidence records, it was clear that the neighbor had the right to utilize their private driveway for access purposes through the grant of an easement recorded 10 years prior to their purchase of the property. Since easements are encumbrances that run with the land, there was little our clients could do to prevent the neighbor from accessing his property through our client’s private driveway. This situation could have been prevented through a simple search of land evidence records. Had this been done, the buyer could have decided whether they could live with the neighbor’s right to utilize the access driveway, or perhaps negotiate with the seller in reducing the price of the property based on the encumbrance. The buyer also could have set a condition precedent that the deal would not close until the seller remedies the encumbrance, or request other accommodations to remediate any issues.
Other Potential Issues
There are several issues we encounter on a regular basis that are outside of the realm of zoning or encumbrances which can have a very detrimental impact on a prospective purchaser’s future use and enjoyment of the land. These are issues that may not be readily identifiable like encumbrances or zoning issues, and instead require an in-depth look into the nature of the property, the surrounding area, and the historic uses of the property, and its surrounding area. The major issues we see involve claims of adverse possession, claims of prescriptive easements, issues involving wetlands, and issues involving coastal resources restrictions.
In turning to claims for adverse possession and/or prescriptive easements, it is important to understand what they mean and how they work. Adverse possession is a common law doctrine in which a person who does not have any title to the property can obtain either the whole property, or portions of the property if they can show they have been using the property openly and notoriously, adversely to the intent of the true owner, in an exclusive manner, and continuously for a period of time required by law (in Rhode Island, the period for satisfaction of a claim for adverse possession is 10 years, whereas Massachusetts is 20 years. If a claimant satisfies the elements for adverse possession, they can petition the Superior Court to establish title to the land in their name, and effectively obtain the property without purchasing any interest in it. A claim for adverse possession is not restricted to the time in which a claimant utilizes the property under the buyer’s ownership. Meaning, a claimant can “tack on” the years in which they were engaged in the continuous use of the property prior to the buyer obtaining ownership in the property.
A prescriptive easement operates in the same manner as adverse possession, with the distinction being that 1) the element of “exclusive” use is not required to satisfy a claim for prescriptive easement rights; and 2) the adverse claimant does not obtain title in the property, but instead obtains an easement on the property to continue the use which they have engaged in for the statutory period.
We often see the same scenarios with adverse possession and prescriptive easements that our clients encounter. For adverse possession, the most common scenario is where a neighbor encroaches onto the client’s property in some form (they construct a fence which extends into the client’s property, or they construct some structure such as a shed which extends onto the client’s property). The vast majority of these adverse possession claims are claims which our client (and often times the neighbor making the claim) do not even know that the neighbor’s encroachment is actually on their property. These cases tend to be costly to defend, and often create unnecessary and avoidable frustration for the client. A simple remedy to these matters is to have a survey conducted prior to the purchase of the property. Many times, if the encroachment is discovered through conducting a survey, and the period of the neighbor’s encroachment is less than the statutory required period, we can assist the client in ending the neighbor’s claim period by issuing a notice of intent to dispute, which stops the time clock for a claim to adverse possession.
For prescriptive easements, the most common case we encounter is where there is some form of access which either several individuals have used, or the public at large has used for a long period of time without the express permission of the property owner, but with no objection from the property owner. These cases carry with them the same frustration and cost as a claim for adverse possession and can be discovered by an inquiry to the surrounding area and the historic use for the area prior to the purchase of the property.
Several other issues that a buyer must consider include wetlands and coastal restrictions. In recent years, state agencies have increased the level of restrictions on freshwater wetlands and coastal wetlands which can lead to very expensive remediation issues for an unsuspecting buyer. These issues tend to be the hardest restrictions for a buyer to stomach, because they are issues which a buyer can be liable for, even where the seller created the issues.
Many times, the state agency in charge of enforcement will require full remediation to their satisfaction, leading to the buyer incurring significant expense in doing so. Several of our clients have come to us in situations where the seller created the issues that are being enforced against them, and because the issues were not discovered until the buyer took ownership of the property, the buyer is left with the cost of remediation and the restrictions placed on the property in the form of violations which prevent them from selling the property at the cost which they paid for it.
However, an inquiry into the layout of the property, and research into what work was conducted on the property and whether the proper permits were obtained for that work can save the prospective purchaser an enormous sum of money, time, and frustration.
In conclusion, there are many different restrictions, encumbrances and issues on property which can affect the marketability of title and cause a buyer unnecessary and avoidable cost and aggravation. However, a buyer can avoid all of these issues by consulting with an experienced land use attorney prior to their purchase. In the northeastern United States, these issues are becoming more prevalent as available stock of land shrinks, and government regulation increases. That is why it is essential to consult with an experienced land use attorney to avoid problems before they become your own. Our team at DarrowEverett is well-equipped to handle with such matters, and we can be reached at 401-453-1200.