Introduction to Appraisal PDF

Introduction to 1 Appraisal Learning Objectives After completing this lesson, students should be able to... Define the terms “appraisal,” “appraisal practice,” and “appraisal report” Describe services that an ap...

Introduction to 1 Appraisal Learning Objectives After completing this lesson, students should be able to... Define the terms “appraisal,” “appraisal practice,” and “appraisal report” Describe services that an appraiser provides Distinguish between the purpose and the use of an appraisal Define “real estate” and “real property,” as those terms are used in the appraisal field Understand the major tests for distinguishing real property from personal property Describe the different types of estates a person may hold in real property List the types of encumbrances that may exist in real property Explain the powers of government that restrict property rights Suggested Lesson Plan 1. Provide a brief overview of Chapter 1, “Introduction to Appraisal,” and review the learning objectives for the chapter. 2. Give students Exercise 1.1 to generate interest in the topic and check their baseline under­ standing of the issues. © 2018 Rockwell Publishing  Real Estate Appraisal Instructor Materials 3. Present lesson content: Appraisal – Definition of appraisal – Appraisal practice – History of appraisal – Purpose and use of an appraisal – Staff appraisers and fee appraisers Real Estate Financing Industry – Primary and secondary markets EXERCISE 1.2 Purpose and use of an appraisal Real Estate – Definition of real estate – Distinguishing real estate from personal property – Fixture tests – Trade fixtures EXERCISE 1.3 Real estate vs. personal property Real Property – Bundle of rights Estates – Freehold estates – Leasehold estates Encumbrances – Financial encumbrances – Nonfinancial encumbrances Government Restrictions on Property Rights – Eminent domain – Taxation – Police power EXERCISE 1.4 Estates, encumbrances, and government restrictions 4. End lesson with Chapter 1 Quiz. 2  Chapter 1: Introduction to Appraisal Chapter 1 Outline: Introduction to Appraisal I. Appraisal A. Appraisal is an opinion of value, which relies significantly on the appraiser’s judgment and expertise B. Appraisal practice includes appraisal and appraisal review C. History of appraisal profession 1. First professional standards for appraisals appeared in 1929 2. Profession grew in response to appraisal requirements from the FHA, the VA, and Fannie Mae 3. Savings and loan crisis (1980s) led to government regulation, licensing requirements, and uniform standards (USPAP) D. The purpose of an appraisal is to estimate a type of value; the intended use of an ap­ praisal is the reason the client wants to know the information E. Appraisers may be staff appraisers for a business or a government agency, or independent fee appraisers F. Real estate financing industry 1. Depository institutions are chartered by federal or state government 2. Primary market: Lenders make loans to home buyers 3. Secondary market: Loans sold as investments, often after being packaged as mort­ gage-backed securities by Fannie Mae or Freddie Mac EXERCISE 1.2 Purpose and use of an appraisal II. Real Estate A. Real estate is defined as “an identified parcel or tract of land, including improvements, if any” (USPAP) 1. Land includes surface, subsurface, and airspace above 2. Improvements are also called fixtures B. Distinguishing real estate from personal property 1. Personal property is defined as “all tangible property that is not real estate” (US­ PAP) 2. Personal property is usually excluded from a real estate appraisal 3. Tests: method of attachment; adaptation; intention of interested parties 4. Trade fixtures (installed by a tenant in connection with a business) are not considered part of the real estate EXERCISE 1.3 Real estate vs. personal property 3  Real Estate Appraisal Instructor Materials III. Real Property A. Appraisers sometimes distinguish between real estate (land and improvements) and real property (interests, benefits, and rights inherent in ownership of real estate), although the two terms are usually used interchangeably 1. Bundle of basic ownership rights: right to use, lease, enjoy, encumber, will, sell, or do nothing 2. Appurtenant rights: easements, mineral rights, water rights, etc. B. Possessory interests in real property are estates, while nonpossessory interests are en­ cumbrances C. Estates (possessory interests) 1. A freehold estate is an estate that includes title a. Fee simple estate includes entire bundle of rights and is potentially perpetual b. Life estate terminates automatically upon a designated person’s death 2. A leasehold estate gives possessory rights to a tenant for a period of time a. Tenancy for years: a lease that will terminate on a specific date b. Periodic tenancy: a lease that automatically renews itself until one party gives notice to terminate it c. Tenancy at will: a lease where the tenant has possession for an indefinite period of time d. Tenancy at sufferance: when a holdover tenant remains in possession without the landlord’s permission e. Leased fee: ownership rights retained by landlord during tenancy D. Encumbrances (nonpossessory interests) 1. A financial encumbrance (a lien) does not affect the use of real estate; it gives a creditor the right to foreclose to collect a debt a. Voluntary liens (mortgages or deeds of trust) are created by the debtor; invol­ untary liens, such as a tax lien, are created by operation of law b. General liens (such as a judgment lien) attach to all property owned by the debtor; specific liens (such as a mortgage) attach only to specified property 2. A nonfinancial encumbrance affects the use of real estate a. Easement: a nonexclusive right to use someone else’s property for a specific pur­ pose, such as accessing your own property; may be appurtenant or in gross b. Profit: the right to enter a property and take away something of value, such as timber c. Private restriction: a form of land use regulation, usually created by deed, in which a prior owner limits the future use of a property E. Government also has the power to restrict property rights 1. Power of eminent domain: allows governmental body to take private property for a public use in exchange for just compensation 4  Chapter 1: Introduction to Appraisal 2. Power to tax property: general property taxes (ad valorem taxes) and special assess­ ments 3. Police power: allows governmental body to enact regulations to protect the public health, safety, and welfare EXERCISE 1.4 Estates, encumbrances, and government restrictions Exercises EXERCISE 1.1 Preliminary discussion Discussion Questions: 1. What is an appraisal? 2. What’s the difference between an appraisal and a competitive market analysis? 3. What’s the role of an appraisal in a typical real estate transaction? 4. Who might request an appraisal, and why? Answers: 1. An appraisal is an estimate of a property’s value. 2. An appraisal is performed by a professional appraiser and is more rigorous; a competitive market analysis can be performed by a real estate agent and is re- garded as more of a rough estimate. 3. An appraisal is most commonly used to assure the lender who’s financing the transaction that the property being purchased will provide adequate security for the loan. 4. Appraisals are requested not only by lenders (to evaluate property offered as col- lateral), but also by owners or prospective buyers (to make investment decisions), by government agencies (for tax assessment purposes or a condemnation award), by insurance companies (to determine replacement value), and in connection with court proceedings (such as divorce or probate). EXERCISE 1.2 Purpose and use of an appraisal Discussion Prompt: In each scenario, who is the client? What is the purpose of the ap- praisal? What is the intended use of the appraisal? Scenario 1: Tim is buying a house, and he applies for financing through Valley Bank. Valley Bank orders an appraisal of the property before making the loan. 5  Real Estate Appraisal Instructor Materials Scenario 2: After living in the house for several years, Tim wonders if it would make financial sense to tear down the house and build a small apartment build- ing on the land instead. He asks an appraiser to determine what the value of the property would be if he went through with the plan. Analysis: Scenario 1: Valley Bank is the client. The purpose is to estimate the current market value of the property. The intended use is to evaluate whether the property will be adequate security (collateral) for the proposed loan. Scenario 2: Tim is the client. The purpose is to estimate the property’s future value if improvements were made. The intended use is to help Tim decide whether to build new improvements. EXERCISE 1.3 Real estate vs. personal property Discussion Prompt: In each of the following scenarios, is the installed item real estate or personal property? Why? Scenario 1: A homeowner installs a new built-in bookshelf that is bolted to the walls of her house. Scenario 2: A buyer and a seller state in the purchase agreement that the seller will remove a stained glass window from the front hall and take it with him. Scenario 3: The owner of an ice cream shop, who rents a storefront, installs a new freezer for displaying ice cream flavors. Analysis: Scenario 1: The bookshelf would be considered part of the real estate, unless otherwise agreed. It is permanently attached and has become immovable. It’s also significant that the bookshelf was installed by a homeowner, as opposed to a tenant. Courts presume that a property owner attaches items with the intention of permanently improving the property. Scenario 2: The buyer and the seller have agreed that the window will be considered personal property. A written agreement expresses the intention of the interested parties, allowing an item that would ordinarily be considered real estate to be treated as personal property and removed. Scenario 3: Because the ice cream freezer was installed by a commercial tenant, it’s a trade fixture, which means that it’s the tenant’s personal property and can be removed at the end of the tenancy. 6  Chapter 1: Introduction to Appraisal EXERCISE 1.4 Estates, encumbrances, and government restrictions Discussion Prompt: For each of the following scenarios, answer the following questions about estates, encumbrances, or government actions. Scenario 1: Al grants title to his property to Barbara for the remainder of Barbara’s life, at which point it will revert back to Al or his heirs. Is this a freehold estate or a leasehold estate? Is it a fee simple estate or a life estate? Scenario 2: Cameron rents a beach house for the summer. His tenancy will begin on June 1 and end on August 31. Is this a freehold estate or a leasehold estate? Is it a tenancy for years or a periodic tenancy? Scenario 3: The loan Dara took out to buy her house is secured by a mortgage against the house. Is this an estate or an encumbrance? Is it a voluntary lien or an involuntary lien? Is it a general lien or a specific lien? Scenario 4: Ed has the right to use Frieda’s driveway to access his landlocked property. Is this an estate or an encumbrance? Is it a type of lien? Is it appurtenant or in gross? Scenario 5: The government takes possession of Gus’s property in order to build a freeway on-ramp. Is this legal? Is it an exercise of the power of eminent domain or the police power? Analysis: Scenario 1: Barbara has a life estate, since it’s only for her lifetime. A life estate is a freehold estate. Scenario 2: Cameron has a leasehold estate. Because it’s for a fixed period of time, with a termination date specified in advance, it’s called a tenancy for years, even though the rental term is less than one year. Scenario 3: Dara’s mortgage is a financial encumbrance, or lien. A mortgage is a voluntary, specific lien. It’s voluntary because it’s voluntarily created by the property owner in exchange for a loan. It’s specific because it applies only to a specified piece of property, rather than to everything the debtor owns. Scenario 4: Ed’s right to use Frieda’s property is an easement, which is a type of encumbrance rather than an estate. Because it is a use right and not financial in nature, it is not a lien. Because it involves two adjacent properties, it is an appur- tenant easement. Scenario 5: The government is exercising the power of eminent domain. This is legal as long as Gus is paid just compensation, because the property is being taken for a public use. 7  Real Estate Appraisal Instructor Materials Chapter 1 Quiz 1. An investor or property owner might consult 6. What happens to the lease agreement in a peri­ with an appraiser when: odic tenancy at the end of the tenancy period? A. deciding how to use or market a property A. It automatically terminates unless one of the B. studying the feasibility of developing a parties decides to renew and gives notice property to the other party C. reviewing the work of another appraiser B. It automatically terminates unless the par­ D. All of the above ties renegotiate the lease C. It automatically renews itself unless one of the parties decides to terminate and gives 2. A fee appraiser: notice to the other party A. is an employee of a financial institution D. It automatically renews itself unless both B. is hired by a third party outside the trans­ parties agree to terminate action C. works only for one client D. will normally charge separately for each 7. A holdover tenant: appraisal assignment A. has a tenancy at sufferance B. does not have a legal right to possess the property 3. The primary market for real estate financing C. has a periodic tenancy consists of: D. Both A and B A. individual borrowers and lenders B. lenders and investors C. lenders and government-sponsored enter­ 8. Which of the following is a voluntary lien? prises A. Mortgage D. individual borrowers and government- B. Construction lien sponsored enterprises C. Judgment D. Tax lien 4. Which of the following would most likely NOT be considered a fixture? 9. A general lien attaches to: A. Movable patio furniture A. property for which the taxes have not been B. A fence paid C. An attached shed B. all of the real estate owned by the debtor D. The keys to a house C. only one specific property D. all of the land in a subdivision 5. An estate that lasts for any fixed term is a/an: A. life estate 10. Which of the following are NOT non-financial B. periodic estate encumbrances? C. estate at sufferance A. Judgments D. estate for years B. Profits C. Private restrictions D. Easements 8  Chapter 1: Introduction to Appraisal 11. From the point of view of an easement holder, the easement is a/an: A. encumbrance on the holder’s title to the property B. nonpossessory interest in property C. lien on the property D. exclusive right to use property 12. The land that receives the benefit of an appur­ tenant easement is called the: A. dominant tenement B. servient tenement C. dominant tenant D. servient tenant 13. Private restrictions are placed on property by: A. the county recorder B. the local planning commission C. the owner D. neighboring property owners 14. Eminent domain is the government power to: A. sell public property to private individuals B. transfer property from one individual to another C. require compensation from private property owners D. take private property for public use 15. Which of the following government powers is the basis for zoning regulations? A. Taxation B. Police power C. Private restriction D. Eminent domain 9  Real Estate Appraisal Instructor Materials Answer Key 1. D. Investors and property owners may 10. A. Easements, profits, and private restric­ consult with an appraiser on a great tions are all examples of non-financial variety of issues, including all of the encumbrances. ones listed here. 11. B. The holder of an easement has a non­ 2. D. Fee appraisers perform appraisals for possessory interest in the property many different clients, and normally burdened by the easement. charge a separate fee for each appraisal assignment. 12. A. The dominant tenement is the parcel that benefits from an appurtenant 3. A. The primary market for real estate easement. financing is made up of individual bor­ rowers and lenders. 13. C. Private restrictions are placed by the property owner, and serve primarily 4. A. Items that are movable and not fixed to restrict subsequent owners of the or adapted to the property are not nor­ property. mally considered fixtures. 14. D. Eminent domain is the power to take 5. D. An estate for years is an estate that private property for public use. The lasts for any fixed term, even if it is government must pay compensation to less than a year. the property owner. 6. C. In a periodic tenancy, the lease auto­ 15. B. The police power is the basis for zon­ matically renews itself unless one of ing and other land use regulations. the parties decides to terminate the lease and notifies the other party. 7. D. A tenant at sufferance is sometimes called a holdover tenant. The tenant does not have a legal right to possess the property, but evicting the tenant may be costly and time-consuming. 8. A. Voluntary liens, such as mortgages and deeds of trust, are voluntarily granted to a creditor by the property owner. 9. B. General liens attach to all of the real estate owned by the debtor. 10  Chapter 1: Introduction to Appraisal PowerPoint Thumbnails Use the following thumbnails of our PowerPoint presentation to make your lecture notes. Real Estate Appraisal Lesson 1: Introduction to Residential Appraisal © 2018 Rockwell Publishing Introduction Appraisal: Act or process of estimating the value of property; an opinion of value. Appraiser services:  estimating the value of property  reviewing work of other appraisers © 2018 Rockwell Publishing Appraisal Practice Purpose vs. use Distinguish between the purpose of an appraisal and the use of an appraisal.  Purpose = information client wants (type of value estimate needed)  Use = how client will use provided information © 2018 Rockwell Publishing 11  Real Estate Appraisal Instructor Materials Appraisal Practice Lender’s use Lenders qualify both borrower and property when deciding whether to make a mortgage loan.  Appraisal assists lender in qualifying the property  Tells lender how much property can be sold for if foreclosure becomes necessary © 2018 Rockwell Publishing Appraisal Practice Types of employment Staff appraisers: Employed by organization to perform appraisal services related to organization’s business. Fee appraisers: Employed by many different clients; lenders may hire fee appraisers through an appraisal management company. © 2018 Rockwell Publishing Real Estate Financing Industry Primary market Industry is divided into primary market and secondary market.  Primary market: Individual borrowers and lenders.  Most residential real estate financing is provided by depository financial institutions: organizations that accept deposits from account holders.  Examples: banks, credit unions, savings institutions. © 2018 Rockwell Publishing 12  Chapter 1: Introduction to Appraisal Real Estate Financing Industry Secondary market Secondary market: Loans are treated as investments, like stocks or bonds.  Primary market lenders sell loans to government-sponsored entities, who package loans into mortgage-backed securities.  Mortgage-backed securities are then sold to investors. © 2018 Rockwell Publishing Real Estate Financing Industry Government-sponsored enterprises Government-sponsored enterprises: Established by the federal government:  Federal National Mortgage Association (Fannie Mae)  Federal Home Loan Mortgage Corporation (Freddie Mac) © 2018 Rockwell Publishing Summary Appraisal Practice – Purpose of an appraisal – Use of an appraisal – Real estate financing industry – Depository institution – Appraisal – Government-sponsored enterprise © 2018 Rockwell Publishing 13  Real Estate Appraisal Instructor Materials Real Estate Definitions Property: Anything that can be owned (real or personal property). Real estate: Defined in the Uniform Standards of Professional Appraisal Practice as: “an identified parcel or tract of land, including improvements, if any.”  A parcel or tract of land is identified by a legal description. © 2018 Rockwell Publishing Real Estate Inverted pyramid Imagine a parcel of land as an inverted pyramid. Ownership of land includes everything above and below the surface. © 2018 Rockwell Publishing Real Estate Improvements and fixtures Improvement: Something that has been added to/becomes part of land in some way.  Many improvements referred to as fixtures. Fixtures: Man-made attachments to real property.  Items that were once personal property.  Now attached to or connected with real property in such a way that they have become part of real property. © 2018 Rockwell Publishing 14  Chapter 1: Introduction to Appraisal Real Estate Fixture tests Four common tests to distinguish a fixture from personal property: 1. method of attachment 2. adaptation of the item 3. intention of the parties 4. relationship of the parties © 2018 Rockwell Publishing Real Estate Fixture tests Method of attachment:  Is the item attached to the realty?  Is the item movable? Adaptation of the item:  Is item specially adapted/designed to realty in some way? © 2018 Rockwell Publishing Real Estate Fixture tests Intention of the parties:  Did person who installed item intend it to become part of real estate? Relationship of the parties: Did person who installed item own the property, or was she just tenant?  Installed by tenant: personal property.  Installed by owner: real property. © 2018 Rockwell Publishing 15  Real Estate Appraisal Instructor Materials Real Estate Fixture tests Trade fixtures: Items installed by tenant in connection with business operated on leased property.  Considered property of tenant.  May be removed when lease expires. © 2018 Rockwell Publishing Summary Appraisal of Real Estate – Property – Real estate – Improvement – Fixture – Trade fixture © 2018 Rockwell Publishing Real Property Interests Real property: Defined in Uniform Standards of Professional Appraisal Practice as: “the interests, benefits, and rights inherent in the ownership of real estate.” Real estate refers to land itself (plus improvements). © 2018 Rockwell Publishing 16  Chapter 1: Introduction to Appraisal Real Property Interests Bundle of rights Complete bundle of rights in real property:  right to possess  right to use  right to enjoy  right to encumber  right to will  right to sell or transfer © 2018 Rockwell Publishing Real Property Interests Appurtenances Appurtenance: Something that goes along with ownership of the land.  Examples: air and water rights, some types of easements. © 2018 Rockwell Publishing Real Property Interests Types of interests Two main categories of interests in land.  Estate: Real property interest that includes possession.  Encumbrance: Real property interest that doesn’t include possession. © 2018 Rockwell Publishing 17  Real Estate Appraisal Instructor Materials Types of Estates Freehold estates Two categories of estates.  Freehold estates: Include title to property.  Leasehold estates: Estate holder is tenant. Two categories of freehold estates:  fee simple estates  life estates © 2018 Rockwell Publishing Freehold Estates Fee simple Fee simple estate is most commonly appraised interest.  Includes entire bundle of rights.  May last forever.  All partial/fractional interests are created from this estate. © 2018 Rockwell Publishing Freehold Estates Life estate Life estate lasts only as long as a particular person is alive.  Life tenant: The holder of the life estate.  Measuring life: The life upon which a life estate depends.  Future interest: The ownership interest that will begin when the life estate ends. © 2018 Rockwell Publishing 18  Chapter 1: Introduction to Appraisal Freehold Estates Life estate Example: James donates his farm to Children’s Aid Society, retaining life estate for himself in the farm.  Life tenant?  Measuring life?  Holder of future interest? © 2018 Rockwell Publishing Freehold Estates Future interests Future interest may be classified as either:  Estate in reversion: A future interest held by grantor or her heirs.  Estate in remainder: A future interest held by someone other than grantor or her heirs. © 2018 Rockwell Publishing Summary Freehold Estates – Freehold estate – Fee simple – Life estate – Future interest © 2018 Rockwell Publishing 19  Real Estate Appraisal Instructor Materials Types of Estates Leasehold estates Leasehold estate: Interest held by tenant under lease agreement. Four types:  tenancy for years  periodic tenancy  tenancy at will  tenancy at sufferance © 2018 Rockwell Publishing Leasehold Estates Tenancy for years Tenancy for years: Leasehold estate that lasts for any fixed term.  Term may be a specified number of years, months, weeks, or days.  Tenant’s interest ends at end of lease term.  Also called estate for years or term tenancy. © 2018 Rockwell Publishing Leasehold Estates Periodic tenancy Periodic tenancy: Lease automatically renews itself at end of rental period until either person gives notice to terminate.  Example: month-to-month lease. © 2018 Rockwell Publishing 20  Chapter 1: Introduction to Appraisal Leasehold Estates Tenancy at will Tenancy at will: Tenancy with no specified termination date and no regular rental period.  Does not have to involve rent at all. © 2018 Rockwell Publishing Leasehold Estates Tenancy at sufferance Tenancy at sufferance: Arises when tenant stays on property after tenancy has expired.  Not true estate; tenant has no legal right to possess property. © 2018 Rockwell Publishing Appraisal of Leaseholds Leased fee During lease term, property owner retains title and has right to use and possess property when lease ends.  This interest is called a leased fee. © 2018 Rockwell Publishing 21  Real Estate Appraisal Instructor Materials Summary Leasehold Estates – Leasehold estate – Tenancy for years – Periodic estate – Estate at will – Tenancy at sufferance – Leased fee © 2018 Rockwell Publishing Real Property Interests Encumbrances Encumbrance: Nonpossessory interest in real estate.  Encumbrance holder has claim to property, but no exclusive right to use or occupy. Two categories:  financial (liens)  nonfinancial (easements and private restrictions) © 2018 Rockwell Publishing Lien Classifications Voluntary vs. involuntary Voluntary lien: Granted by property owner. Involuntary lien: Arises through operation of law. © 2018 Rockwell Publishing 22  Chapter 1: Introduction to Appraisal Lien Classifications General vs. specific General lien: Attaches to all real estate owned by debtor. Specific lien: Attaches only to specific piece of debtor’s property. © 2018 Rockwell Publishing Nonfinancial Encumbrances Nonfinancial encumbrances affect both title and use:  easements  profits  private restrictions © 2018 Rockwell Publishing Nonfinancial Encumbrances Easements Easement: Nonexclusive right to use someone else’s land for particular purpose.  Easement holder has nonpossessory interest.  Burdens owner’s title. Two types of easements:  easement appurtenant  easement in gross © 2018 Rockwell Publishing 23  Real Estate Appraisal Instructor Materials Easements Easements appurtenant Easement appurtenant: Burdens one piece of land for benefit of another piece of land. Dominant tenement: Land benefited by easement. Servient tenement: Land burdened by easement.  Runs with the land.  Cannot be severed from the land.  Involves two tenements. © 2018 Rockwell Publishing Types of Easements Easements in gross Easement in gross: Benefits particular individual/organization rather than parcel of land.  Personal right.  Not tied to ownership of land.  No dominant tenement. © 2018 Rockwell Publishing Nonfinancial Encumbrances Profits Profit: Property interest that allows holder to use someone else’s real estate.  Includes right to take something away from land.  Usually involves renewable resources. © 2018 Rockwell Publishing 24  Chapter 1: Introduction to Appraisal Summary Liens, Easements, and Profits – Encumbrance – Lien – Easement – Easement appurtenant – Easement in gross – Profit © 2018 Rockwell Publishing Nonfinancial Encumbrances Private restrictions Private restrictions restrict how owner may use her own property. May include:  size/style of buildings/additions  landscaping  parking  certain activities on property © 2018 Rockwell Publishing Private Restrictions CC&Rs Covenants, conditions, and restrictions: Restrictions created and recorded by residential subdivision developer.  All subsequent buyers/owners of subdivision lots bound by CC&Rs.  Other owners in subdivision or homeowners association can sue to enforce. © 2018 Rockwell Publishing 25  Real Estate Appraisal Instructor Materials Government Restrictions Government may affect private ownership through:  eminent domain  taxation  police power © 2018 Rockwell Publishing Government Restrictions Eminent domain Eminent domain: Power to take private property for public use.  Government must pay property owner just compensation. © 2018 Rockwell Publishing Government Restrictions Taxation Common taxes that affect real estate are general property taxes and special assessments.  General property taxes: Apply to all real estate; based on value of real estate.  Special assessments: Apply to properties within assessment or improvement district; used to pay for public improvements. © 2018 Rockwell Publishing 26  Chapter 1: Introduction to Appraisal Government Restrictions Police power Police power: Government’s power to make and enforce regulations for protection of public health, safety, and welfare.  Basis for zoning and land use regulations.  Examples:  building codes  environmental protection laws © 2018 Rockwell Publishing Summary Public and Private Restrictions – Private restrictions – CC&Rs – Eminent domain – Taxation – Police power © 2018 Rockwell Publishing 27