Complexity In A Real Estate Contract = Unfair Burden


Note: This podcast is no longer available, but please see below for the transcript of the podcast.

In 15 years of practice, I have become dismayed with the amount of time, energy, and expense the property owners have to go through to get anything done. It is always smart to do one’s due diligence before purchasing property. Many people only buy two or three properties in their entire lives, and so due diligence is critical, but also not a much-practiced skill. If one is buying rural land, then survey of the property is recommended within the inspection period of the purchase and sale agreement. One should look into whether the dirt will perk and be amenable to a drain field, unless a hook up to a community or city sewer is available. A purchaser will also want to ask the properties neighbors, or any local water authority whether a well can be drilled, or generally whether water may be available to serve the parcel. Some jurisdictions have specific requirements for these things. Due diligence is more difficult for rural land, but an investment in the purchase of real property should always include those due diligence activities prior to close of escrow. 

But that’s not really what concerns me. What concerns me is that if a property owner wants to do anything with their land, they have to undertake explicit and frequently time-consuming, expensive processes to gain government approval to do it. I’m not talking about the approval of a permit to build a house or barn, I’m talking about having to submit a plan down to every nail, piece of trim, type of roofing, and other architectural details for building. Even if one is not building a dwelling, even the construction of a pole barn will require a property owner to completely understand the different levels of approval required by city or county ordinances, state, and even federal law.

We always start with the dirt. The most fundamental thing when purchasing property is going to be the zoning, and what types of uses are allowed in the zone. The property owner cannot look up and thoroughly understand the zoning ordinance to figure out what will be allowed on the parcel, then there at a decided disadvantage. People have full time jobs creating these complex rules and a property owner may encounter them once maybe twice.  If the zoning ordinance allows a particular use, but it is not a use normally allowed in that zone soon, then the owner may have to procure a conditional use permit. A conditional use permit usually in every instance requires the approval of the neighbors, as well as the local governing authority. To figure out an application for a conditional use permit requires knowledge of a comprehensive plan, for the local jurisdiction, if one exists, and a thorough understanding of the zoning ordinance itself.

Therefore, with rural property, a potential property owner needs to be able to afford a surveyor and an attorney at a minimum, as well as an architect to create site plans and building plans that meet government requirements. A potential property owner may need to hire a civil engineer to design a drain field and septic system that meets government requirements, as well as a hydrologist to evaluate whether water may be available in an area, so the property owner can drill a well. Also, with rural property, and depending on the location’s proximity to railroads, and existing or former agricultural, manufacturing, or industrial uses, expensive additional experts may be necessary to generate environmental reports related to soil and water groundwater impacts of those uses. If a potential property owner finds pollution on the property, the seller may then be obligated to disclose information about the pollution, and the buyer and the seller may be saddled with very expensive remediation of the parcel.

Beyond these normal deterrents to the purchase of real property, there are usage problems that crop up for people who’ve owned their property for long time. Some existing uses may be “grandfathered,” and thus an existing use may be allowed to remain for decades as long as the use continuously occurs. On the other hand, an owner may change their use due to family circumstances and get caught up in government regulations. Some counties, such as Kootenai County in Idaho, actually advocate that neighbors inform the government when a neighbor is breaking a regulation. I admit this “informer culture” may be desirable if one looks out the window and sees their neighbor emptying radioactive drums into a stream. However, except in cases of extreme ignorance or willfulness, it is usually the case that property owners want to maintain their property in good condition and would not foul their own nest. 

Let me give an example.

Say that there are several abutting 20-acre parcels in Kootenai County. Those neighbors have gotten along for decades, but then one of them has a disagreement with another. Under the theories of the “Community Development” department in Kootenai County, the community is favorably developed if the neighbor with the disagreement can find some violation of the County Code and turn in that alleged violation by their neighbor to the government for fines or punishment.  I don’t call this community development, but that is literally the name of the department.

County codes for properties are primarily designed to prevent nuisances. In our example, a family has five boys who, as they grow, begin to be taught by their father how to repair vehicles. This accounts for five or 10 tires lying in a pile in the yard, an old driveshaft to a pickup leaning up against the garage, an old motorboat parked outside the barn with its motor removed, an old passenger bus with no seats and no windows sitting outside, and that old motorhome that grandpa used to own sitting up on blocks.

The neighbor who hates this family decides to develop his community by turning in his neighbor. These practices are frequently used in places like Communist China, who encourage neighbors to inform on other neighbors. But, here in the good old USA, this family, who is trying to school five boys about auto repair suddenly finds itself the subject of a citation from the County Code Enforcers with ever-mounting daily fines for noncompliance directly due to their neighbor claiming they are running an auto repair business, or, alternatively, creating a visual nuisance with all those vehicles. Now, the neighbor who turns in this poor family to the County has a design to have the County harm the family, and wants to use the bludgeon of the County Code to do it. A neighbor who hates a neighbor will characterize the other neighbor’s use however the County Code requires to get that neighbor in trouble.

Now the family has to hire an attorney. The attorney has to read the County Code. The attorney has to advise the family whether their vehicles may run afoul of the Code, and then make a recommendation for how to address the citation. In the meantime, the daily fines mount, as well as the attorney’s fees. In Kootenai County, with the land use code running to hundreds of pages, the attorney will be required to make several judgments about whether the language in the code expressly applies to the situation, or whether the code language is vague, or may not apply in all. The attorney must read through the Code to figure out the discretion available to the County Code Enforcers to try and determine whether the family may have a good argument based on the vague code language, or otherwise may have good defenses based on the reality that they are not running an auto repair business or creating a visual nuisance, but are simply trying to raise their children.

In this case, the complexity of the law equals an unfair burden, especially for existing owners who may because of circumstances change a minor use in the presence of a nasty neighbor. I think the law needs to be less complex. I think ordinary people should be able to read the Codes themselves and come to a clear conclusion about what they are allowed and are not allowed to do with their own property.

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