functional obsolecence

Functional Obsolescence

Imagine owning a home you are pretty happy with. You have a beautiful two-story house, in a lovely fantastic neighborhood but…. Your home is a bit outdated. In fact, all the new homes in the neighborhood and market have at least two bathrooms and yours only has one.

This is an example of Functional Obsolescence.

What is a Functional Obsolescence?

Definition: Refers to the loss of property value due to an obsolete design feature.

-Such as an old house with one bathroom in a neighborhood filled with new homes featuring at least two bathrooms.

-Or maybe a neighborhood filled with two car garages but your garage only fits one.

Because the old house does not have what buyers in this market want, it is said to be functionally obsolete even if it is still in good condition and is perfectly livable.

Some common examples of Functional Obsolescence are:

  • Poor or outdated design
  • Too many or too few materials or features
  • Lack of utility (meaning features are not practical or desirable)
  • Overly costly operating expenses

 

Functional Obsolescence is a form of depreciation. It commonly shows up on the real estate license exam. To read about another form of depreciation read about Economic Obsolescence here.

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Emblements

Let’s pretend you and your family are renting a beautiful farm and live there for years. You grow lots of vegetables each season and start to become successful farmers. You sign a yearly lease and overall your relationship with your landlord is great because he’s also your best friend and neighbor. After a few more years of success, in a spur of the moment decision, your landlord sells his property to Walmart and decides to move to Florida!

What happens to your the crops? Are they yours? Or are they your new potential landlords?

If a tenant loses possession of the land on which the crops grow, he or she is legally entitled to finish raising the crops and harvesting them. That’s right. Legally entitled. These annual crops are called Emblements.

What are Emblements?

Definition: Emblements are annual crops cultivated by a tenant that is treated as the tenant’s personal property. They are considered “personal property.” Not REAL property but personal meaning they move with the tenant.

The key thing to understand is a tenant farmer has the right to his or her crops even when his or her lease ends before the end of the growing season.

This situation happens in a few different circumstances like the one we talked about before, or in the foreclosure of mortgages and other legal situations.

It also comes into play if the land passes to someone else because of the tenant’s death, the crops pass to the tenant’s heirs.

In all of these situations, the law guarantees the farmer’s right to reap and carry away the fruits of his or her labor even if he or she loses the title to the land on which they are grown.

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Easement

Imagine you’ve just fallen in love with a beautiful home but on the day of your home inspection, you notice your potentially new neighbor driving right through your property.

You do your research, ask around, and find the property records. It turns out; there’s an easement on your potential new property. Your neighbor needs to drive on your land to access theirs. After some additional research, you find they are entirely within their rights to do so.

What is an Easement?

Definition: An easement is a right held by one person to use the land of another for a specific purpose, such as driving through someone else’s property.

Now it’s important to note easements usually are for a specific purpose. For example, as we mentioned earlier, your new potential neighbor may have the right to drive through your property but does not have the right to build something on your property or use it for other purposes.

Legally speaking an easement has to be in writing. If you own the property usually its located on the deed, if you have yet to own or purchase the property, you can obtain a copy of the deed and easements located on it through county records.

How Do You Remove an Easement?

If you want an easement removed it almost always requires some sort of legal action. You’ll probably have to take the matter to court by filing a civil lawsuit. There are some ways around it like removing the issue itself or working something out with your neighbor, but it’s normally best to advise a lawyer before doing any of that.