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What Is Real Estate Law?

Real estate attorneys may practice either residential law (relating to homes, apartments and condos) or commercial law (relating to office buildings, hotels and shopping centers). Federal, state and local laws regulate land and real estate use and sale. 

Real estate lawyers ensure compliance with land use, zoning, environmental and other requirements. Real estate law covers purchase and sale agreements, leases and construction contracts. Real estate lawyers negotiate with developers, land owners and financing institutions such as banks.

Real Estate Law and Eminent Domain

Eminent domain is the power of a government entity to take ownership of private property with the purpose of converting it into public use. However, just compensation to property owners must accompany any takeover. The most common examples of eminent domain are assuming control of land for easements for telephone lines, cable lines, and electric lines, sewer and water lines that cross private property.

The Fifth Amendment to the U.S. Constitution requires the federal government to provide due process before taking someone’s property under eminent domain laws. It can’t deprive anyone of their property for public use without just compensation. The Fourteenth Amendment ensures that the principle of just compensation applies to state and local governments, which have the power of eminent domain through legislation.

Some private entities, acting under government authority, may also use eminent domain powers. Examples include school districts, hospitals, power companies and railroads. Governments can’t use eminent domain to transfer property from one private owner to another, except for infrastructure such as roads and utilities.

Prohibited Uses of Eminent Domain

The Constitution limits the government’s power to take land for “public use” and in exchange for “just compensation.”  Landowners must be accorded due process. They must have appropriate notice, an opportunity to make their legal case to keep their land as well as receive a written decision from a neutral decision-maker.

Courts can review a land seizure under eminent domain in cases of fraud, bad faith or manifest abuse. When the government carries out a “taking” for public use, it relies on a broad legal interpretation to mean any purpose that benefits the general public. Critics have argued that governments historically used an overly broad interpretation of “public use” to target the property of racial and ethnic minorities.

Some lawyers fighting eminent domain cases argue that granting eminent domain to private companies, such as pipeline owners, doesn’t constitute “public use” under eminent domain because it doesn’t enrich the lives of people who reside and work in the area.

Real Estate Law and Short-Term Rentals

A short-term rental, or vacation rental, is a property, or portion of a unit, rented for a short period. Although no more than 30 days is a typical limitation, cities and counties differ in how they define “short-term.”

The short-term rental industry has boomed through home-sharing businesses such as Vrbo and Airbnb. Communities have acted to minimize their impact. Many municipalities require fees, operating licenses or permits and restrict them to be short-term rental properties or to specific areas of town. Other governments have occupancy requirements.

Some cities ban short-term rentals or ban advertising them on booking sites. However, property owners argue that any ban infringes on their property rights, possibly constituting a regulatory taking of private property without just compensation in violation of the Fifth and Fourteenth Amendments.

Condemnation vs. Eminent Domain

Condemnation is the process that occurs when a government decides to take property for public use. Inverse condemnation is a remedy available to a landowner who is not fairly compensated for property taken by eminent domain. When a government seizure causes injury to a property owner who is not fairly compensated, the landowner can sue the government.

Some situations invite inverse condemnation. An example is when damage to land occurs without proper eminent domain proceedings, such as when the government floods a farmer’s field or pollutes the land. After a wildfire, inverse condemnation is how victims of fires may recover their costs if a public utility caused the fire.

An inverse condemnation proceeding may also exist when a government regulation reduces a property’s value to the point it’s not useful for any purpose. An example is when a landowner can’t secure a local building or demolition permit, though the landowner needs more than a reduction in value to make a successful claim.

Please seek the advice of a qualified professional before making decisions about your health or finances.
Last Modified: July 14, 2023

13 Cited Research Articles

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  1. Internal Revenue Service. (2022, August 29). Topic No. 415 Renting Residential and Vacation Property. Retrieved from https://www.irs.gov/taxtopics/tc415
  2. U.S. Department of Justice. (2022, January 24). History of the Federal Use of Eminent Domain. Retrieved from https://www.justice.gov/enrd/history-federal-use-eminent-domain
  3. City of Orlando. (2021, August). Fact Sheet: Short-Term Rentals. Retrieved from https://www.orlando.gov/files/sharedassets/public/departments/edv/city-planning/factsheets_shorttermrentals.pdf
  4. Kowarski, I. (2021, April 29). What Real Estate Law Is and Reasons to Study It. Retrieved from https://www.usnews.com/education/best-graduate-schools/top-law-schools/articles/what-real-estate-law-is-and-reasons-to-study-it
  5. FindLaw. (2019, July 2). What is Real Estate and Real Property Law? Retrieved from https://www.findlaw.com/hirealawyer/choosing-the-right-lawyer/real-estate-and-real-property-law.html
  6. Singer, J. (2019, February 18). Short term rental use held not to violate covenant prohibiting “commercial activity”. Retrieved from https://scholar.harvard.edu/jsinger/blog/short-term-rental-use-held-not-violate-covenant-prohibiting-commercial-activity
  7. Hill, M. (2018, May 2). Property rights include the right to rent it out – even if others don’t like it. Retrieved from https://thehill.com/opinion/civil-rights/385877-property-rights-include-the-right-to-rent-it-out-even-if-others-dont/
  8. U.S. Commission on Civil Rights. (2014, June). The Civil Rights Implications of Eminent Domain Abuse. Retrieved from https://www.usccr.gov/files/pubs/docs/FINAL_FY14_Eminent-Domain-Report.pdf
  9. Jefferson-Jones, J. (n.d.) Can Short-Term Rental Arrangements Increase Home Values?: A Case for Airbnb and Other Home Sharing Arrangements. Retrieved from https://ecommons.cornell.edu/xmlui/bitstream/handle/1813/70756/Jefferson_Jones.pdf
  10. League of California Cities. (n.d.). Inverse Condemnation Fact Sheet. Retrieved from https://www.counties.org/sites/main/files/file-attachments/inverse_condemnation_fact_sheet_league__csac.pdf
  11. Cornell Law School Legal Information Institute. (n.d.). Inverse Condemnation. Retrieved from https://www.law.cornell.edu/wex/inverse_condemnation
  12. University of Notre Dame. (n.d.) Real Estate Law. Retrieved from https://law.nd.edu/academics/programs-of-study/real-estate-law/
  13. Cornell Law School Legal Information Institute. (n.d.) Eminent Domain. Retrieved from https://www.law.cornell.edu/wex/eminent_domain