Most development projects involve the subdivision of land. Subdivision is the division of a large piece of land into smaller tracts. This piece of land can be used for selling, leasing, and financing. Subdividing land has many purposes; however, the main reasons usually involve the division of land for selling or leasing land as multiple parcels or for the subdivision of units. There are two laws which govern a landowner’s ability to plan, design construct and sale a subdivided land:
Subdivided lands law
Subdivision Map Act
Subdivided Lands Law
The primary purpose of the subdivided lands law is to protect consumers from the misrepresentation of real estate fraud or deceit in the sale or lease of property. The law protects consumers by making sellers of subdivided land disclose all information regarding the condition of the subject property to the real estate commissioner. This includes details of where the property begins and ends, what use the property serves (gas, natural resources, ranching, etc), and other details which assist the buyer in understanding the specifics of the property.
Once the details of the property have been submitted to the real estate commissioner, the real estate commissioner will prepare and issue a subdivision report for public records. Before issuing the report, the real estate commissioner will consider the financial standing of the property, in addition to changes that are going to be made (i.e. construction, renovation, drilling, etc.). The public records will indicate valuable information regarding the specifics of the property. Buyers can access this information to make better informed decisions regarding the purchase or leasing of the property.
There are three main types of subdivisions. They include:
Standard subdivision
Common interest subdivision
Undivided interest subdivision
Standard Subdivision
Standard subdivision is the most commonly used subdivision type. Under a standard subdivision, a large land tract is divided into two or smaller parcels of land and can be sold individually. The parcel can be sold simply as land or with a structure attached to the property. Standard subdivision is used when a landowner wants to sell a larger piece of land as multiple parcels to various people or if he or she wants to keep parts of the land for themselves while selling or renting the rest of the property to another buyer. The landowner can develop the land, or sell the land “as is.”
Any land that is divided into 160 or more acres is no longer considered subdivided land. In other words, properties must be below 160 acres to be considered subdivided land. The only exception to this general rule is if the land being sold contains oil and gas. Under this scenario, any size land is considered a subdivision.
Common Interest Subdivision
A common interest subdivision is an ownership scenario where individuals own a percentage of property-condominiums, planned communities, time-shares, and stock cooperative projects. The most common type of subdivision is a condominium unit in a residential building.
Under the most typical scenario, condominium owners govern decisions regarding the subdivided land through a homeowner’s association. The homeowner’s association helps make decisions in the interests of those who reside on the property. Members of the HHOA can influence policy; however, there is usually a board comprised of a few owners that decide on behalf of others regarding what the policy for the subdivision will be. The board typically makes decisions regarding safety, property improvements, and rules and regulations such as pool closure time and others.
In condominiums, individuals own their units while retaining the right to use common areas, such as hallways, the parking lot, recreation rooms, swimming pool area, rooftops and other habitable areas. Under a planned community, common areas may include the roads that lead to the buildings, parking lots, gym, swimming pool, lobbies and other areas where every resident has the right to occupy.
As of January 1, 2008, the Common Interest Development Open Meeting Act requires any decisions pertaining to the interests of common interest owners be discussed in a meeting. According to the act, the homeowner’s association’s board must provide an advance posted notice of at least four days prior to the meeting. This allows a suitable period for owners to attend or be prepared for the meeting.
Common Interest Subdivision Types
Condominium
Apartment
Planned Development
Stock Cooperative Project
Time-Share
Because decisions made regarding common interest subdivisions affect everyone in the subdivision, HOA meetings must be made available to all members of the subdivision and as indicated have an advanced notice to owners. Signs regarding the HOA meetings must specify what will be discussed in the meeting. Failure to provide advance warning regarding the nature of the meeting on the sign may result in decisions that cannot be put in effect. Non-agenda items cannot be discussed unless there is:
An emergency
A question posed by one of the attendants of the meeting
An announcement by one of the attendants of the meeting
Propositions cannot be voted on without written notice to all the residents of the property. Also, an attending member’s proposition cannot be voted on during the same meeting he or she originally brought forward the proposition. Warning to residents prior to voting must be announced. The topic of discussion posed by a board member that is not included on the agenda can be discussed but cannot be voted on. The only instance when decisions can be made without advanced warning is during an emergency. An emergency is anything considered reasonably unforeseen by the board that requires immediate attention without the time to provide proper notice.
Undivided Interest Subdivision
In an undivided interest subdivision, individual property owners share nonexclusive interests to the land. Usually undivided interest subdivisions are tenants in common. Each tenant holds the same rights to occupy space as the others. Examples of an undivided interest subdivision can include camp grounds or a recreational vehicle park which each tenant has the right to use.
Various Types of Common Interest Subdivisions
Community Apartment Project
A community apartment project is a type of common interest development whereby an undivided interest of land is held by an individual landowner with the right to exclusive occupancy of any apartment located on the property. All owners of a community apartment project are tenants in common. Because the property has one address, the property will receive only one property tax bill. Retaining financing requires a commitment by all property owners because the debt is considered the debt of all owners.
Condominium Project
A condominium project grants the landowner an undivided interest in common for a portion of land, while simultaneously giving the owner a separate interest of a unit. This type of ownership is typically held by owners of industrial space, apartments, retail stores, and office space.
Limited Equity Housing Cooperative
A limited equity housing cooperative is a form of ownership that provides significant benefits to owners by allowing multiple buyers to buy a co-op together. Although owners of the co-op have limited equity through the division of costs amongst owners, they also can significantly reduce the final cost of ownership for all owners.
The stock cooperative will be financed by the California Housing Finance Agency and give homeownership benefits to each owner. The main benefit is the division of costs between owners thereby allowing owners who would otherwise not have the necessary capital to buy property. This makes owning the property more affordable. Profit for the owners of a co-op is divided accordingly based on financial commitment amongst owners.
Planned Development
A planned development includes individually owned lots or parcels of land that share areas in common.
A commercial acre is a land measurement unit that describes a 36,000 square feet portion of land. The term is typically used to describe subdivided land.
Stock Cooperative
A stock cooperative is the shared ownership of a property, typically in the form of an ownership stake in an apartment building. Stock holders are essentially part owners of the property and hold an interest in the property. Their interest is dependent on their initial investment. Shareholders have the right of exclusive occupancy and can transfer their interest to collect rental income.
Subdivision Public Report
Prior to a real estate commissioner granting a public report, a landowner must meet the minimum requirements of the Subdivided Lands Law. The subdivision public statement is a disclosure that permits the sale or lease of individual lots, parcels, or units within a subdivision. Before a landowner can sell the property, the public report must be created to allow prospective buyers the ability to review the specifics of the property.
The minimum requirements include the need to fill out and submit an application indicating the specifics of the property. The real estate commissioner will then review the application and approve the request for a public report assuming everything is filled out accurately. In the event the real estate commissioner has created the public report and changes have been made to the property during that period, the landowner must inform the real estate commissioner of the changes. Changes include adjustments to the land, deed restrictions, drilling, and other potential alterations of the land.
Generally, the most difficult and time consuming of all the types of public records are common interest subdivisions. This is because common interest subdivisions affect many people and in turn the review process is typically very lengthy.
Common Interest Subdivision Landowner Disclosures
Property Address
Size
Process for payments, taxes and necessary assessments
Expenses related to the closing of the transaction
Permit Requirements
Environmental Issues (mold, oil, gas, mineral, etc.)
Conditions of Property
Restrictions of property
Easements, rights of way, and information pertaining to rights of ownership
A sale of subdivided property without a public report cannot take place, which means the real estate commissioner must issue a public report prior to the sale of land. This protects consumers from fraud and assists them in making better real estate decisions.
The Real Estate Commissioner and the Department of Real Estate have instituted a set of guidelines regarding the proper advertisement and promotion of a subdivision. Any advertising deemed misleading or false is prohibited and can potentially be brought forward with a legal suit by the purchaser of the land.
Public reports on subdivided land are usually valid for five years. If the individual divided parcels of land have not been sold within five years of the original report, the report must be renewed within that period.
Subdivision Map Act
Two Main Reasons for Subdivision Map Act:
To organize the layout of the city. This includes the direction of streets, the location of vital services (police department, fire department) and utilities (street lighting, stop signs, etc.).
To divide and organize land appointed for public and private use.
The subdivision map act establishes standard procedures relating to the sale of subdivided land. The act gives authority to local governments to make decisions regarding the design and improvement of common interest subdivisions and for subdivisions that require a tentative and final or parcel map. Furthermore, the act establishes basic guidelines by the state government and gives authority to local governments to create specific laws for such implementation.
The subdivision map act confers autonomy to the local government to make decisions regarding the subdivision of land including the design of property, sewer/drainage system, trash system, and other important aspects of a property that relate to the specifics of a city. This portion of the subdivision map act brings power to the local level, where local legislators are expected to know what is most important for their city.
Subdivision Map
Tentative Map- The first draft of a parcel map is called the tentative subdivision map. First drafts are similar to rough drafts and are in no way indicative of the final map. Although the map in no way is considered the final copy, the tentative map should include the following:
Legal description of property (i.e. property’s boundaries begin and end)
Streets which run through, counter, parallel, perpendicular of property
Existing drainage, sewer and utility areas
Proposed changes to the drainage, sewer and utility areas
Proposed property use
Water source
The sub-divider must divide the land based on the standards set forth by the city. When subdividing large land that runs through multiple streets, the sub-divider will usually make changes to the streets to allow for easy access to and from the property. After accounting for the streets, curbs, and public space which may run through the land, the developer if approved by the city, can subdivide the land. Land must be divided according to the standards set forth by both the state and local government.
Final Map
Prior to retaining a final map, all rules and regulations must be strictly followed according to the general plan. To check the specifics of your city or county, visit your city hall’s building of safety.
There are various rules that must be followed to obtain a final map. Each parcel that is going to be divided must be clearly labeled and divided, including the street and where each parcel begins and ends. To get a final map, the sub-divider must provide the building and safety office a copy of all reports relating to the property (soil report, environmental report). The subdivision shall include all proposed details of the divided land. The sub-divider shall also include information pertaining to the rights-of-way, easements and other interests which affect the public and potential buyers of subdivided land. Failure to provide all necessary items can lead to a lengthy process or even a denial of the proposed subdivided land.
Once all information is properly submitted, an engineer and surveyor must sign an application and certificate indicating that all the information relating to the subdivision of land is accurate.
Parcel Map
A parcel map helps the city and state keep track of individual parcels of real estate. The parcel map labels where a property begins and ends. It also provides accurate information to the public about real estate. By labeling each land, the government has the ability to accurately charge property taxes by having the accurate information regarding the size of a property.
There are various names to a parcel number that are used interchangeably. The various names include:
Assessor’s Identification Number
Property Identification Number
Property Account Number
Tax Account Number
Every parcel will have property boundaries included. The sub-divider will sign the application with the real estate commissioner indicating that the information is accurate to the best of his or her knowledge.
Process for Approval of Subdivision Map
The building of safety that is located at city hall is responsible for approving or denying requests for a subdivision map. Each city has its own individual guidelines which help dictate the subdivision process. Once the sub-divider goes to city and initiates the process, the city will inform the applicant of which department and point of contact will assist them in the subdivision process.
Approval of a subdivision requires a sub-divider to meet the standards of the city. Each city retains its own specific guidelines; however, each city’s basic guidelines require sub-dividers to conform to the standards of the general plan. In addition to meeting the minimum standards, the proposed subdivision of land must adhere to the proposed land use. For example, if a land is being subdivided for gas exploration, the proposed subdivision must meet the standards of use the sub-divider is requesting. Under this scenario, the proposed subdivision must be suitable for gas exploration and must also be verified to not pose health or environmental risks.
The final map must be submitted prior to the expiration of the tentative map. In order to be approved, the final map must comply with all the rules and regulations of local and state provisions relating to subdivision. Ultimately, the local government decides whether to approve or deny a request for subdivision.
There are instances in the subdivision approval process which may require additional items in order to be approved for the subdivision of land. They include:
Environmental impact report
Alquist-Priolo Earthquake Fault Zoning Act
Environmental Impact Report
In certain instances an Environmental Impact Report (EIR) must be submitted for the approval of a subdivision of land. The city and state will require environmental impact reports when the subdivision of land might pose a health or environmental risk. The subdivision of land may be denied if:
The subdivision of land poses a significant risk to the environment.
The subdivision of land poses a significant risk to wildlife (fish, grazing animals, etc.).
In instances where there is a possibility that subdivided land may pose a risk to the environment, it is recommended that prior to a tentative map being created, an environmental impact report is to be drafted. If it is believed that there is not a significant risk caused from the subdivision of land, the local government may issue a negative declaration.
A negative declaration in the case of a subdivision of land is a statement indicating that the local government does not believe that there will be a significant risk to the environment as a result of the subdivision of land. If the government issues a negative declaration, an environmental impact report may not be necessary; however, the presence of one drastically reduces the possibility of a denial.
Various Acts Which Relate to Subdivision and Safety
Rangeland, Grazing Land, and Grassland Protection Act
California Coastal Act
Alquist-Priolo Earthquake Fault Zoning Act
Seismic Hazards Mapping Act
Rangeland, Grazing Land, and Grassland Protection Act
To protect California’s wildlife, the state has passed the Rangeland, Grazing Land, and Grassland Protection Act. The act provides the necessary grants required to maintain designated lands for the purpose of protecting naturally roaming animal populations. The grants are used to protect land, restore already damaged lands, and improve lands for the purpose of maintaining a strong wildlife population.
California Coastal Act
With California’s beautiful vast coastal lands stretching from San Diego to the northern shores of San Francisco, California’s state legislature has passed the California Coastal Act to protect California’s beautiful shorelines. The Coastal Act allows local governments who reside by coastal waters to make policies relating to the conservation of coastal lands.
The California Coastal Act requires developers who are developing property within the coastal zones (defined as being within 1,000 yards of coastline) to be approved for permits to develop lands. The permitting process ensures that developers are developing real estate according to the standards set forth by the cities in which they are developing property.
Alquist-Priolo Earthquake Fault Zoning Act
The Alquist-Priolo Earthquake Fault Zoning Act regulates development that is taking place in areas on or nearing earthquake fault zones. The act considers potential dangers associated with structures nearing or on fault zones to prevent widespread loss of time. Furthermore, it helps regulate a city’s zoning laws and issues permitting the property’s development based on the relative risk associated with having a property in areas considered at risk.
An earthquake fault zone is considered an area that is within a quarter mile of an active fault. After the passage of the earthquake fault zoning act, landowners who are building or improving properties within the fault zone must provide a geologic report to their city or county building and safety office. Sellers and real estate agents of properties found near or on a fault zones must disclose the presence of the fault zone next to the property. This gives buyers the necessary information they need when deciding to purchase the property. Furthermore, this information gives buyers the ability to do their due diligence regarding how much it would cost to develop a property built within an earthquake fault zone.
Seismic Hazards Mapping Act
The Seismic Hazards Mapping Act requires that a seller of a property on or near a seismic hazard zone provides disclosures indicating that the property being sold is located in a seismic hazards zone. Seismic hazards include naturally-occurring earth motions and movements.
A planned unit development (PUD) is a zoning and regulatory process used for the development of a building; it is a community of singe family homes, townhomes, or condominiums that look very similar to one another. The zoning and regulatory processes usually involve the subdivision of land used as a communal area between properties. This may include common areas divided between multiple residential properties or common areas divided amongst residential and commercial property.
