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The ABCs of Land Ownership

Posted by: In: Newsletter 05 Sep 2011 Comments: 0

By Michael Ross

Senior Vice President, Entitlements

Profitable investment in raw land real estate requires more skill and knowledge than many people expect.  Some investors believe in a “buy, hold and hope it appreciates” strategy.  However, the best yield on the investment is achieved through a proactive entitlement process, ensuring each property in a portfolio is brought to market at its highest and best use.  Through a series of articles, I will explain the basics of land asset management, the entitlement process and preparing a property for development in Texas.    This article will focus on identifying the governmental stakeholders in land rights, land usage and land development.

Constantly changing regulations require landowners to be ever vigilant regarding their property rights.  Federal, state and local laws regarding development guidelines, water rights, mineral rights and environmental issues are always being amended.  In fact, statutory law doesn’t even have to change for a property owner to suffer a tangible loss in property value, case law is constantly redefining property owner rights.

Landowners must know the applicable agencies that regulate the surface and subsurface uses of their property.  Federal, state and local agencies form a tangled web of regulation many landowners overlook as they are considering purchases.

The primary federal agencies that impact the landowner are the Environmental Protection Agency (EPA), U.S. Army Corps of Engineers (Corps) and U.S. Fish and Wildlife Service (FWS).   The EPA and Corps have jurisdiction over water pollution in the U.S., via the 1971 Clean Water Act.  These agencies control both direct and indirect sources of water pollution, which almost always requires permitting from one or both agencies if a property is developed.   The 1973 Endangered Species Act charged the FWS with endangered species habitat protection.  These three agencies constitute the core regulators of land use and development in the U.S.

State-level agencies include the Texas Commission on Environmental Quality (TCEQ), Texas Railroad Commission (RRC) and Texas General Land Office (GLO). They regulate pollution, water rights, mineral exploration, state development guidelines, state lands and many other issues that affect property owners.

Local governments add another layer of control over land use and development.  County agencies are responsible for regional mobility programs, construction guidelines, development guidelines and infrastructure guidelines for areas outside of corporate city limits.  Each city develops its own ordinances for land use, some going so far as to develop zoning ordinances, dictating specific land uses within the city.  Most cities have development guidelines that dovetail with their zoning ordinances which dictate how a subdivision may be developed.  The influence of many cities in Texas is felt well beyond the city limit signs.  Extraterritorial Jurisdiction (ETJ) allows a city to designate areas outside its corporate limits and exert control over development guidelines and in some cases, zoning.

Despite Texas’ reputation as a “development-friendly” state, navigating these agencies requires knowledge and experience. Now that the agency levels have been introduced, the next article will elaborate on how an investor can enhance land value through proper navigation of the ABCs.

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