Purchasing only part of an existing tract of real estate or subdividing an existing tract of real estate into two or more parcels makes a typical real estate transaction much more complex.
The act of subdividing brings into play many legal issues you might otherwise ignore in a routine real estate transaction. It also raises issues about how the use of the subdivided parcels can be made compatible under different ownerships in the future.
Ignoring these issues is a big mistake, as they may come back to bite you in the future. Here is a short checklist of some of the most significant of those issues:
Land division: The Land Division Act limits your ability to subdivide an existing tract of land. Depending on the facts, you must navigate complex requirements to plat the property, seek municipal approval for the land division, sidestep the subdivision requirements by creating a development under the Condominium Act or take advantage of one of the limited exceptions found under the Land Division Act.
Addressing these issues will require hiring an experienced surveyor to prepare a survey of the subdivided parcels and possibly a plat or condominium subdivision plan. These issues also must be expressly addressed in the language of your deeds and other documents creating the subdivided parcels.
Zoning: You must make sure that each of the subdivided parcels complies with the provisions of the local zoning ordinance, such as parcel size and dimensions, road frontage, setbacks of structures from boundaries and others. This might require seeking rezoning or a zoning variance.
Existing restrictive covenants: Often real estate has existing restrictive covenants recorded against title. These might limit the right to subdivide a tract or the size of resulting parcels. Restrictions might include the same sort of requirements for road frontage, setbacks, easements and obtaining approval in advance of the subdivision as are found in a zoning or land division ordinance.
New restrictive covenants: To make sure the subdivided parcels are used for compatible purposes, you should consider imposing a common plan of development on them. This might take the form of a set of restrictive covenants administered by a property owners association or a condominium development administered by its association of co-owners. Limits on use, standards for construction and requirements for association approval of improvements to the parcels may help ensure the parcels are developed in a first-class and orderly manner.
Roadway access: Does each parcel created have roadway access? An existing driveway serving an existing structure may cross lands you are splitting and selling to others. You don’t want to cut off that existing access, and you might want to provide for shared access with a newly created parcel. Or you might want to construct a new road across one of the subdivided parcels to serve another.
This may require preparing, negotiating and recording an easement to provide roadway access. The easement will need to address issues such as shared costs of construction and maintenance, and any limits on the expansion of future use to more users. Private roadway easements may require municipal approval under a private road ordinance, which may impose construction and other standards and use limits for the roadway.
Utility access: How about utility access? Similar to existing driveways, utility lines serving existing structures may cross lands you are splitting and selling to others. You don’t want to cut off that existing utility access. Or you might want the ability to tie a new parcel into an existing utility line that isn’t located on that newly created parcel or to run a new utility line across one of the subdivided parcels to serve another. This may require preparing, negotiating and recording easements to provide access for utilities such as electric, gas, water, sewer and cable. This could require negotiations with utility providers and their approval of the easements.
Other issues: What about signage, mailboxes or other shared amenities, such as lakes, docks, parks, recreational facilities or parking? Such facilities might be located on one of the subdivided parcels, but used or shared by other parcels. Each of these might be addressed in standalone easements or in a common plan of development recorded as a declaration of easements and restrictive covenants, administered by an owners association.
Subdividing real estate creates many issues not found in a typical real estate transaction. Take care to identify those issues in advance and plan how to tackle them.
Bill Hall is a partner with the law firm of Warner Norcross and Judd, where he often assists in the planning and creation of industrial, commercial, residential and condominium developments. He can be reached at firstname.lastname@example.org.