Builder-to-Builder Exemptions

A “subdivision” is defined as “improved or unimproved land” divided into five or more lots or parcels for the purpose of sale, lease, or financing…  Any person or entity who owns five or more lots in a subdivision is considered a “Subdivider.”  Subdividers must get a Final Public Report before offering subdivision lots for sale to the public.

There are several exemptions to this requirement, where the subdivision does not need to be reviewed by the Department of Real Estate:

  • lots in a standard subdivision (No Common Area Lettered Lots), for sale with completed residences, that are in an incorporated city
  • lots that are zoned for only commercial, professional, or industrial
  • public agencies such as a City, County or State agency, to name a few.

Another exemption, that applies to specific types of sales, within the industry, is commonly referred to as the “Builder-to-Builder exemption.”  To qualify for the exemption, the sale must consist of five or more lots in a subdivision, which are sold to any person who acquires the lots “for the purpose of engaging in the business of constructing residential buildings, or the purpose of resale of the lots” (paraphrased).  In these cases, the builder is exempt from DRE Review.

In other words, the sale of 5 or more lots from the first “builder/developer” to a second “builder” or “sophisticated buyer” who will build and sell homes on the lots does NOT have to go through the public report process.  However, the second “builder” will need to obtain a Final Subdivision Public report before selling to the public.

The Builder-to-Builder exemption applies if there is a purchase agreement in place with a take-down schedule, as long as the contract proposes to sell five or more lots.

Hi, I'm Scott
President

I'd love to learn more about your new development or project. Use the link below to request a proposal.

Latest

Stay up to date.

Sign up our newsletter for latest article and news.
Community Associations and Inflation

Community Associations and Inflation: Strategies for Resilience and Financial Stability

Inflation is a persistent issue that wreaks havoc on the financial health of community associations. From project delays to regular assessment increases and impact on reserve funds, the effects of inflation can be far-reaching and challenging to manage. Community association boards must be proactive in mitigating the impact of inflation to ensure that they can continue to provide necessary services to their members while also planning for future capital projects.

Read More »
Your Go-To for DRE Public Report Processing

Your Go-To for DRE Public Report Processing

If you are a real estate developer in California, obtaining a public report from the Department of Real Estate (DRE) is a crucial step in your project’s success. The public report discloses important information about the development to prospective buyers, such as an overview of the community, the developer’s financial stability, the project’s legal status, the association’s monthly assessments (if any), and the estimated completion date.

Read More »
Reserve Study Misconceptions: Debunked

Reserve Study Misconceptions: Debunked

As an owner or manager of a homeowner’s association or other planned community, it’s your responsibility to ensure that finances are properly managed. Reserve studies are vital for an association to maintain its financial health, as they are required to take place every three years in accordance with CA Civil Code 5550. However, there are several misconceptions about them. We’re going to divulge some of the most common myths about reserve studies and explain why they are untrue.

Read More »
Schedule a Call
Discuss your project or needs with someone from the California Builder Services team.