Improved or unimproved land, divided or proposed to be divided into five or more parcels for sale, lease or financing. It is important to note that these parcels can be created by a subdivision (tract/final) map; parcel map, and in some counties of California, through a record of survey or lot line adjustment. Subdivisions include planned developments, condominiums, tenancy-in-common, stock cooperatives, as well as single family developments. (some exemptions apply)
Any person who intends to offer subdivided lands for sale or lease. Depending upon the type of subdivision and offering, some exemptions may apply.
In the State of California, not all subdivisions fall under the jurisdiction of the Department of Real Estate. Business & Professions Code 11010.4 outlines the developments that are exempt from the requirements of the public report process. If your development does not meet the exemption criteria, a public report must be obtained. We welcome you to call our office and discuss your project with one of our Project Consultants. (Refer to B&P 11010.4)
Subdivisions creating four or fewer lots; subdivisions created by public agencies; subdivisions that are expressly zoned for commercial or industrial use; and single family, standard subdivisions that are located entirely within an incorporated city, wherein the subdivider intends to build homes on each and every lot prior to sales.
A “standard” subdivision is a development in which the offering includes a residential lot without any additional interests in common with other owners. It is a subdivision without any common area. Also, if there are reciprocal easements managed by a homeowners association, the association cannot enforce an assessment or lien the property in accordance with the California Civil Code.
A “common interest subdivision” is a subdivision in which the buyer receives title to a specified lot/unit, coupled with an interest in a common parcel, or a development that includes a homeowners association that has the right to impose a lien for non-payment of assessments, in which the potential buyers will receive a membership.
Before marketing new subdivisions in California, subdividers must obtain a public report from the CalDRE. Public reports contain information of vital importance to prospective buyers including covenant, conditions and restrictions which govern the use of property, costs and assessments for maintaining homeowners’ associations and common areas, and other material disclosures.
Public reports are a critical disclosure document issued by the Department of Real Estate, which should be read and understood by any home purchaser considering buying a home in a new subdivision prior to entering into a contract to purchase a home. Prior to the issuance of the public report, subdividers must file an application with the CalDRE and submit documents supporting the representations made in the application. If improvements to the subdivision are not complete at the time the application is filed, the subdivider must also submit evidence that adequate financial arrangements have been made for their completion.
So long as the subdivider (or successor subdivider) owns even one lot in the subdivision, a current and valid public report must be maintained. Once the subdivider conveys the last remaining lot/unit in the subdivision, the CalDRE’s oversight ends. In the case of a common interest subdivision, the board of directors of the homeowners association operates the subdivision from that point forward.
Every public report issued by the Department of Real Estate contains an expiration date. In most cases, the Final “White” Public Report is valid for five years. It is important that a current and valid Public Report be maintained during the advertising and sales phases of the development.
Yes, certain changes to the subdivision, called “Material Changes’,” will invalidate your Public Report, requiring you to file an Amendment application with the Department of Real Estate. These changes include a change ownership (including a name change or change in the principals), change in restrictions, change to Mineral Rights, Change in escrow depository, creation of an assessment district, and many others. Refer to the Real Estate Commissioners Code Section 2800.
The DRE recognizes the viability of a subdivision upon tentative map approval by the governing agency. Once evidence of approval is obtained, an application may be made to the DRE for a preliminary, conditional, or final public report. At CBS, we encourage submittal as early as possible to avoid delays in the sales program.
The documents needed for a complete DRE filing vary from project to project. Your DRE Coordinator will require copies of your Tentative or Recorded Map, Conditions of Approval, a preliminary title report and phasing schedule (if applicable) to get started. The Coordinator will then provide a list of other items needed for your submittal.
There are generally three “types” of Public Reports that may be obtained from the Department of Real Estate. The Final Public Report is the only Report required by law; all others are optional. Although there is an additional cost for Preliminary and Conditional Public Reports (See DRE Fees) the timing of your marketing and sales efforts may warrant the expense (What are the DRE timeframes?). The purpose of each report is as follows:
Preliminary Public Report a.k.a. “Pink” report – printed on pink paper. Allows the subdivider to advertise the project and to take reservations and deposits. No Purchase contracts may be signed under this report and all deposits are refundable. In the event of a renewal filing, the Preliminary Public Report is called an “Interim” Public Report. The Preliminary and Interim Public Reports are issued for a term of one year.
Conditional Public Report a.k.a “Yellow” report – printed on yellow paper. Allows the subdivider to enter into binding purchase contracts and to open escrows for the sale of the lots/units in the development prior to issuance of the Final Public Report. This Report is intended for the subdivider who has submitted a complete BRE filing but is delayed in obtaining the final documents required to complete the filing (such as the recordation of the map, approval of the budget by DRE, review and approval of the legal documents by DRE, etc.). The Conditional Public Report is issued for a term of 6* months and may be renewed. If you are unsure whether your application should include a Conditional Public Report, we welcome you to contact us, and let one of our Project Consultants discuss the merits of this type of filing.
Final Public Report a.k.a. “White” report – printed on white paper. This Report is the only Public Report that is actually required by law. The Final Public Report allows the subdivider to market the subdivision; to take deposits, and to open and close escrows. The Final Public Report is issued for a term of 5 years but may be amended without renewing for a full five-year term.
It is important to note that all purchase monies must be deposited into a neutral escrow depository acceptable to the DRE, until title can be conveyed free and clear of any blanket encumbrance, unless special arrangements have been made through submittal of a purchase money bond.
The timeframes for Standard and Common Interest subdivisions are listed below. These timeframes do not reflect the time required by the developer to gather the information DRE requires. Times start from the date the information is received in the DRE office.
Standard Subdivision: Approximately 30 days until the assigned Special Investigator reviews the file for the first time. If a deficiency notice is issued at that time, DRE has another 20 days to review the deficiency items. Once the file has been “perfected” and the Final Documents are submitted, the DRE has 10 days to issue the Public Report.
Common Interest: Approximately 70 days until the assigned Special Investigator at DRE reviews the file for the first time. If a deficiency notice is issued at that time, DRE has another 30 days to review the deficiency items. Once the file has been “perfected” and the Final Documents are submitted, the DRE has 15 days to issue the Public Report.
When estimating the timing of your project, it is safe to plan on six to eight months for a Common Interest project and three to four months for a Standard project, depending upon the status of recordation of the subdivision map and final documents, which are included in the final submittal package to the DRE.