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Annexation in Real Estate: Definition, Methods & Laws

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  • 0:04 Annexation in Real Estate
  • 0:34 Definitions
  • 2:06 Applicable Case Rule
  • 4:00 Lesson Summary
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Lesson Transcript
Instructor: Tisha Collins Batis

Tisha is a licensed real estate agent in Texas. She holds bachelor's in legal studies and a master's degree in criminal justice.

This lesson will define annexation in real estate, including both land annexation and chattel annexation. Additionally, the methods of annexation and laws regulating it will be discussed.

Annexation in Real Estate

Darrell just built his dream home on five acres just outside of town. He loves the peace and quiet, as well as the lower taxes. Right now, he doesn't have to pay city property taxes. Unfortunately, he received a letter in the mail explaining that his property is located in an area that the city will be annexing. Darrell doesn't want this to happen because he will have to pay more in property taxes. How is it even legal for the city to do this? This is just one type of annexation involving real property.

Definitions

There are a couple of different types of annexation in real estate. One type involves the government annexing land. The other involves chattel being attached to real estate. The two are different and one should avoid confusion between each type.

Remember Darrell and his dream home? He built it outside of the city limits just so he would have some peace and quiet along with lower taxes. The city actually annexed the land later on and Darrell was out of luck. Annexation involving land will occur when a city or local government expands its original jurisdiction to cover more territory. Perhaps a small neighborhood was developed just outside of the city limits, with $1 million and up price tags on the homes. These homes would generate an enormous increase in tax revenue for the city. In order to tap into that revenue, the city might expand their jurisdiction to include the area that the new development is in.

Annexation involving chattel simply involves attaching personal property to real property. This can be something as simple as installing a ceiling fan in a home. When the ceiling fan was simply sitting in a box on the floor it was still separate from the home. It wasn't considered part of the home. Once it was installed, it became part of the home. Consider someone trying to buy a home. They may look at several listings and notice that one of them has a notation that the antique chandelier in the dining room is excluded from the sale. The sellers have to indicate that they intend to retain the chandelier as personal property because while installed in the ceiling of the home, it's considered part of the real property.

Applicable Case Law

The Dillon Rule became influential in how annexation occurs in the United States. It involves what powers the municipalities have. There are three basic points made in the Dillon Rule:

  1. Municipalities' powers are those granted to them by their state's legislature
  2. Municipalities also have implied powers that are born from the necessity created by the powers granted previously
  3. Municipalities also have the powers that they need to exist and function

The U.S. Supreme Court brought the Dillon Rule into consideration when deciding on the case of Hunter v. Pittsburgh. In this case, they found that the state of Pennsylvania did have the power to annex the city of Allegheny into the city of Pittsburgh. Many of the residents of Allegheny were against the annexation. However, the annexation still occurred.

Simply put, local municipalities have some powers that allow them to expand jurisdiction and annex nearby land. Additionally, state governments have the power to annex land as well. This could involve annexing entire municipalities into other, larger municipalities.

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