ARCH 159
Practice and Governance IV: Finance, Taxation, Civics and Land Reform for Architects
First Long Exam Coverage
MODULE 1 o FEE SIMPLE SUBJECT TO
EXECUTORY LIMITATION
Land Use and Land Valuation
“to grantee and his heirs,
grantee’s interest to commence
The Value of Real Estate five years from the date of the
deed”
REAL ESTATE/REALTY to begin in future, at a
Land including additions permanently attached to it, subsequent time
from the surface, and certain air rights - FEE TAIL: pass title from grantee to heirs/intent
of grantor to keep the property in the grantee’s
line of issue
TYPES OF ESTATES: SUBTYPES
o “the heirs of his body on Ann, his now
FREEHOLD ESTATE: Exclusive right to enjoy the wife, to be begotten”
possession and use of a parcel of land or other - LIFE ESTATE: one held for the duration of the
asset for an indefinite period life of the grantee
- FEE SIMPLE o “the grantee is thereby given an estate
o FEE SIMPLE ABSOLUTE for the life span of A”
“to grantee and his or her heirs”
NON-FREEHOLD ESTATE: interests in real
Most extensive interest in real
property without seisin and which are not
property. Limited completely to
inheritable.
the individual and his or her
- ESTATE FOR YEARS: of definite duration, it is
heirs and assigns forever
required to have a definite beginning and a
Not subject to any limitations or
definite ending.
conditions
o “Transferor leases Blackacre to
o FEE SIMPLE DETERMINABLE
transferee for the period of January 1,
“to grantee and his or her heirs
1998 to January 1, 2003, a period of five
so long as it is used for school
years”
purposes”
- ESTATE FOR YEAR TO YEAR: of indefinite
Base/qualified fee
duration. Notice of termination is an important
Continues until the occurrence
component of this type of periodic tenancy.
of a specified event, by which it
- TENANCY AT WILL: a rental relationship
then terminates automatically by
between two parties that is of indefinite duration,
law
since either may end the relationship at any
o FEE SIMPLE SUBJECT TO A
time.
CONDITION SUBSEQUENT
- TENANCY AT SUFFERANCE: an estate that
“To grantee and his or her heirs,
ordinarily arises when a tenant for years or a
but if the premises are used for
tenant from period to period retains possession
commercial purposes other than
of the premises without the landlord’s consent.
the sale of antiques, then the
-
grantor has the right to reenter
VALUATION
and repossess the property”
The technique of estimation or determining
terminates only upon the
the fair price or the value of a property
exercise of the power of
termination, or right of reentry,
APPRAISAL
for the violation of a particular
an analysis, opinion, or conclusion relating to the nature,
condition
quality, value, or utility of specified interest in, or aspects
of, a specific piece of real estate or real property.
ARCH 159
Practice and Governance IV: Finance, Taxation, Civics and Land Reform for Architects
First Long Exam Coverage
- Land DECLARATION OF
- Original Certificate of Title REAL PROPERTY
- Transfer Certificate of Title (Tax Declaration)
- Tax Declaration A property record;
- Cadastral Map traditional assessment
- Tax Map document maintained by
Sheet A-1 the provincial, city or
municipal assessors,
showing, among others
the market and assessed
values of the property as
the basis for the
collection of real
property tax.
THE PRESENT VALUE OF PROPERTY
may be decided by its:
- Selling price
- Income or the rent it may fetch
depends on its:
- Structure
- Life
- Maintenance
- Location
- Bank interest
BUYING OR SELLING PROPERTY: when it is required to
buy or sell property, its valuation is required.
TAXATION: To assess the tax of property be it municipal
tax, property tax, etc.
RENT FIXATION: In order to determine the rent of a
property, valuation is required. Rent is usually fixed on a
NATIONAL
certain percentage of valuation.
MAPPING AND
RESOURCE SECURITY OF LOANS OR MORTGAGE: when the loans
INFORMATION are taken against the security of the property, its valuation
AUTHORITY is required.
Cadastral surveys
document the COMPULSORY ACQUISITION: whenever a property is
boundaries of land acquired by law, compensation is paid to the owner.
ownership, by the
production of INSURANCE
documents, diagrams, sketches, plans, charts, and
maps. They were originally used to ensure reliable facts
for land valuation and taxation.
ARCH 159
Practice and Governance IV: Finance, Taxation, Civics and Land Reform for Architects
First Long Exam Coverage
CHARACTERISTICS OF REAL ESTATE - INDESTRUCTIBILITY: the concept that it can’t
Value characteristics: amount of goods or services be destroyed. Thus, real estate is said to always
offered in the marketplace in exchange for have some minimum value by virtue of its
existence. Land is not consumed, nor does it wear
something else
out like other goods. But the actual and perceived
utility of land can be affected by the marketplace
- DEMAND: The need or desire for a specific good
or other forces. Land always has the potential to
or service, and is an essential ingredient in
be useful, but its usefulness, and hence its value,
creating value. Without demand, any amount of
can change over time.
supply is meaningless.
o EFFECTIVE DEMAND: One final element
However, the land itself can move or change
of demand is to consider a person’s
shape by natural forces, for example:
ability to pay for an item. Effective
o EROSION, which is the wearing away of
demand, or purchase ability means a
soil due to the action of wind, water, or
prospective buyer has enough
other forces
disposable income available to satisfy
o ACCRETION, which is the addition to
his/her needs or desires
land, such as through deposits by water
of sand or silt
- UTILITY: ability of a good or service to satisfy
human wants, needs, or desires. The degree of
PROPERTY-SPECIFIC FACTORS AFFECTING REAL
usefulness to prospective users
ESTATE VALUE
- HIGHEST AND BEST USE: the use that is
- SCARCITY: perceived supply of a good or
physically possible, legally permissible, most
service relative to the demand for the item. If
economically feasible, and maximally profitable or
there’s an unlimited supply of something, then
productive.
it is perceived to have little value.
o PHYSICALLY POSSIBLE means that any
-
potential use must conform to the size,
“People generally perceive land to be valuable
because there’s a limited supply of it. This notion of
topography, shape, and other physical
scarcity feeds the anticipation of real estate buyers who characteristics of the subject property
feel they’re buying property as an investment that will o LEGALLY PERMISSIBLE refers to uses
increase in value. that are not forbidden by zoning or other
government regulations as well as uses
- TRANSFERABILITY: ability to freely buy, sell, that are not prohibited by any deed
encumber, or dispose of property in any way restrictions or other covenants.
that the owner sees fit. o ECONOMICALLY FEASIBLE refers to
o PROPERTY VALUE is derived from the the ability to get the best financial return
freedom to transfer title readily from one out of the property without overspending
person to another. on acquisition and improvements.
Physical characteristics: - LOCATION: the exact position of a piece of real
- UNIQUENESS: each piece of land, each building estate. Location can be talked about with respect
and each house is said to be a different piece of to a given neighborhood, and even with the
real estate. neighborhood itself.
o EFFECT OF SURROUNDING HOMES:
- IMMOBILITY: it can’t be moved from place to An important corollary to the concept of
another. This is an equal benefit or detriment to location is the effect of surrounding
all parcels of real estate in the same general area. homes on valuation. The theory is that
the value of the “worst” home in a
ARCH 159
Practice and Governance IV: Finance, Taxation, Civics and Land Reform for Architects
First Long Exam Coverage
given area is increased by the other - DEPRECIATION: loss in value to property for
homes in the area. Conversely, the value any reason.
of the best home in a given area is o Curable or incurable
decreased by the other homes in the CAUSES
area. Physical deterioration:
Actual wear and tear due to
- SUBSTITUTION: an informed buyer will not age, the elements, unrepaired
pay more for a home than a comparable damage, or other forces.
substitute. Although each home is said to be Functional obsolescence:
unique, there’s a price point beyond which a Describes a building that is less
buyer won’t select a particular home. desirable because of something
inherent in the structure itself,
- CONFORMITY: a particular home achieves its such as a house with an outdated
maximum value when surrounded by homes of style, inadequate fixtures,
similar style and function impractical floor plan, etc. This
too may be curable or incurable.
- CONTRIBUTION: a particular item or feature of a External/economic
home is only worth what it actually contributes in obsolescence: occurs when
value to that piece of property. something outside the control of
o “The value of an item is only equal to the property makes it less
what a prospective buyer is willing to pay desirable. Some examples are
for it, not what it actually cost the owner the general decline of a
to install or construct it.” neighborhood, loss of an area’s
o LAW OF DECREASING RETURNS – economic base, a nearby landfill,
beyond a certain point, the added value or the construction of a new
of an additional feature, addition, repair, highway that creates noise or re-
etc. is less than the actual cost of that routes traffic.
item.
o LAW OF INCREASING RETURNS – the - SUPPLY AND DEMAND: the value of a property
added value of an additional feature, will increase if the supply decreases and the
addition, repair, etc. is more than the demand either increases or remains constant and
actual cost of that item. vice versa.
- ANTICIPATION: value can increase or decrease
in anticipation of some future benefit or detriment
affecting the property.
o PROGRESSION AND REGRESSION:
between dissimilar properties, the worth
of the better property is adversely
affected by the presence of the lesser-
quality property is known as regression.
Conversely, the principal of progression
states that the worth of a lesser property
tends to increase if it is located among
better properties.
ARCH 159
Practice and Governance IV: Finance, Taxation, Civics and Land Reform for Architects
First Long Exam Coverage
- PLOTTAGE: the merging or consolidation of
adjacent lots held by separate land owners into
one larger lot under a single land use tends to
produce a higher total land value than the sum of
the two sites valued separately.
o ASSEMBLAGE: combining two or more
parcels of land into one larger parcel.
This is typically done to increase the
usefulness of the land
o SUBDIVIDING: To divide (a plot, tract of
land, etc.) into building lots
- COMPETITION: excess profits tend to attract
competition.
- CHANGE: No physical or economic condition
remains constant. Real estate is subject to
natural phenomena, such as tornadoes, fires, and
routine wear and tear of the elements. The real
estate business is also subject to the demands of
its market, just as is any business.
o VALUE OF FRONTAGE:
FRONTAGE – the dimension across the
access side of a property.
When giving the size of a lot,
frontage is expected to be the
first number.
Adding more frontage makes
land more valuable than adding
more depth even if the total
amount of land is the same.