Owning real estate is challenging for most people. Few of us have all the financial, legal and handyman training that would make us top-notch property owners. In some jurisdictions, all the usual difficulties are compounded by unusual rules, procedures and customs. Let's take a look at seven of these factors.
TUTORIAL: Exploring Real Estate Investments
1. You Can't Own the Land
In some jurisdictions, it is possible to own property, but not the land on which the property is located. One such location is Vietnam, where all land is considered communal property. Similarly, in China, all land is owned by either the government or by a collective. Thailand prevents foreigners from owning land unless they do so in conjunction with a private limited company that is at least 51% Thai-owned. There are some communities in the United States where it is possible to buy property on leased land, but it is not the dominant U.S. ownership structure. (Learn more in Should You Buy Property On Leased Land?)
2. You Can Only Own One Home
In 2010, Shanghai and Beijing's municipal governments decided that families would only be allowed to own one home in those cities. The stated purpose of the law was to help slow the rapid price increases in the Chinese real estate market. At the time of enactment, no end date for the new rule was established. A seeming consequence of this law has been a decrease in new home sales.
3. You Can Own Corporate Shares, but Not the Actual Property
In cooperative housing arrangements such as New York City's co-ops, residents don't actually own the units they occupy. What they really own is a share in the corporation that owns the entire building or development, plus the right to occupy a given space. The corporation holds the title to the property.
This type of ownership structure is not unique to New York, though it is not as common in other U.S. cities. It also exists abroad. Belize is one country that offers a similar arrangement in some housing developments. (For related reading, see An Introduction To Buying A Condominium.)
4. You Have to Wait for Water Rights
Since 1986, Cambria, Calif., has had a waiting list to acquire water rights. Without these rights, a property cannot have any water or sewer hookups. What's more, the waiting list was closed in 1990. There are three waiting lists: one for single-family properties, one for multi-family properties and one for commercial properties. No new water permits have been issued since November, 2001 because of a lack of water supply, so the waiting lists are currently stagnant. The single-family wait list has 666 listings. Real estate listings for land in Cambria note the property's position on the water rights waiting list.
5. You May Have Difficulty Obtaining a Clear Title
In some countries, getting a free and clear title is not as simple as doing a title search and purchasing title insurance. Many traditional, older homes in Morocco do not have a formal title and have multiple owners. This makes it difficult for a buyer to acquire full and indisputable ownership of the property. Cypress is another country where it can be challenging to acquire a title. (For related reading, see Holding Titles On Real Property.)
6. Your Historic Home Can't Have a Modern Door
Properties located in official historic districts in the United States are often subject to numerous regulations when it comes to modifying the property. In the St. Louis neighborhood of Soulard, which is listed on the National Register of Historic Places, a combination of historic standards and city building codes determine how property owners maintain and modify their buildings. Here are a few of the district's codes governing doors:
- Doors shall be one of the following:
- The original wood door restored
- A new wood door which replicates the original
- A finished metal door of a style which replicates the original
- Based on a Model Example.
- The following types of doors are prohibited:
- Flush, hollow-core doors with or without applied moldings
- Flush doors of any material.
- Doors shall have one of the following finishes:
- When hardwood, a natural finish
7. You Should Sell Your Property at Auction.
In the United States, property auctions are only common among foreclosure and tax lien sales, and bidders are primarily professional real estate investors. In Australia, however, it's not unusual for the average person to buy or sell a property at auction. Sellers establish the minimum price they are willing to accept; if no bidder meets this price, one of the highest bidders may be able to negotiate a deal with the seller. Auction sales represent roughly 33% of sales in Melbourne, Canberra and Sydney. (The traditional real estate market isn't the only place to conduct your home search. For more, see Should You Buy A House At Auction?)
TUTORIAL: Types Of Real Estate
The Bottom Line
If you own property in a jurisdiction that is relatively free of unusual situations, consider yourself fortunate. Having water rights, a clear title and the freedom to own multiple properties aren't a given everywhere in the world.