The large vacant lot you bought in California 20 years ago is now sitting in the middle of a real estate boom. That’s a lot of dollars you can make from its sale. However, the lot may be too large to sell, even in today’s hot market. That’s why you’ll need to subdivide it before making any money.
You can subdivide land yourself in some counties, but you have to follow a few steps, also known as the DRE approval process. Read more regarding this topic below:
The biggest advantage of subdividing your large property into multiple lots is that it potentially increases its uses and income streams. The land’s marketability might increase as you attract more potential buyers who may not have been interested in a large land area or (if you plan to build before selling) unimproved land.
Simply stated, by subdividing, you create more real estate that can be sold or rented to different people. However, every landowner would have done it if it were that easy.
California’s Subdivision Laws
Almost any time a landowner or realtor subdivides a large California property—whether the land is improved (has buildings or structures) or unimproved and even if the owner intends to sell or lease the resulting partitions—it is considered a subdivision. Thus, it must comply with applicable laws regarding the DRE approval process, particularly these laws:
However, much of what these laws set forth is a delegation of authority to local governments, which will thus play an essential role in evaluating your project and issuing needed permits. A common form of a subdivision is a condominium project.
The Subdivision Market: Does It Exist?
Before you go too far with your plan to subdivide your land, make sure there is a waiting pool of people looking for lots to buy. Try contacting qualified local realtors and construction companies to know whether the market wants your subdivided plots.
You may also consider selling the vacant subdivided property to a construction company that can do the building for you.
The Usual Restrictions on Subdividing Californian Property
Before going through the DRE approval process, it’s essential to consider the following:
- If you bought the property subject to any existing rules, regulations, and restrictions regarding subdivisions.
- Whether you fell under any restrictions regarding residential areas.
- Conditions, Covenants, and Restrictions (CC&Rs) or clauses in your Deed of Trust (if you have a loan secured against your property) that could restrict your subdivision plans. If your property is legally subject to those stipulations, you must hire a real estate professional to research options for removing them.
- If your location has specific requirements that your property will need to conform to qualify for a subdivision project, you should find out what those requirements are.
You will want to know if your property needs to comply with the county’s general plan (goals, policies, and programs for managing future growth and land), whether it can be subdivided into parcels that comply with local zoning regulations, and whether all of the parcels meet the minimum acreage requirements for subdividing.
Visit Cal. Business and Professions Code §§ 11018 for more information on the above considerations.
We hope you remember this list when the time comes. Due diligence is required for a smoother DRE approval process or efficiency in time and effort. First, it ensures you’re following state law and are moving according to compliance. Second, and most important, it prevents you from wasting energy and money in illegally subdividing your property and paying for it through fines and sanctions.
Should you need help with a DRE approval process in California, reach out to California Builder Services today! We specialize in processing DRE reports, HOA budgeting, and reserve studies. Request your proposal today!