Arizona Subdivision Law: A Refresher

Recent foreclosure activity, distressed property sales and quick due diligence reviews conducted in association with fire sales have resulted in unintended violations of subdivision regulations for several properties in Arizona. Sometimes the discovery of such a violation isn't made until a building permit or other approval is requested from a jurisdiction. At that point, it may be too late to correct the violation in a cost effective manner. Thus, it seems a refresher course on Arizona subdivision regulations is in order.

Jurisdiction

Municipalities, counties and the state all regulate subdivisions. Thus, you must first determine which regulations are applicable to a particular parcel of land. If the parcel is located within a municipal jurisdiction, the municipality will regulate the subdivision or platting of the parcel pursuant to powers granted to the municipality by A.R.S. § 9-463, et. seq. If the parcel is located within a county, the county will regulate the subdivision or platting of the parcel pursuant to powers granted to the county by A.R.S. § 11-806, et. Seq. Finally, dependent on the number of lots created and the proposed use for those lots, the Arizona Department of Real Estate may regulate the sale of any subdivided property pursuant to A.R.S. § 32-2181.

Municipalities

Absent certain specific circumstances, a plat is required for land located within a municipality that is divided into four or more lots. Municipalities may also regulate lot splits if land 2.5 acres or less in size is divided into 2 or 3 lots. A.R.S. § 9-463.03 states it is unlawful to sell or lease any part of a subdivision located within a municipality. Failure to comply with municipal subdivision regulations could result in a requirement that the improvements on the property be removed or modified.

Counties

A plat is required for parcels located within a county that are divided into six or more lots. Unlike municipalities, lots or parcels 36 acres or more in area are generally excluded from county subdivision regulations. Counties also have limited review rights for lot splits consisting of land divided into five or fewer lots. Failure to comply with county subdivision regulations could also result in a requirement that the improvements be removed or modified.

Arizona Department of Real Estate

In addition to regulations enforced by local jurisdictions, the Sate of Arizona requires certain disclosure statements (for example, public reports) and adherence to other regulations for the sale of residential lots. Similar to county regulations, these state regulations apply if the subdivision contains six or more lots, parcels or fractional interests. If a developer fails to comply with the state regulations buyers of the developer's residential properties may be able to rescind sales of properties within three years of signing the purchase agreement and the developer may be exposed to penalties.

A Few Parting Thoughts

Don't forget new lot lines may be created when property is transferred to a new owner. These new lot lines may result in violations associated with building setbacks, signage, parking, lot coverage, access and required lot sizes. The creation of lot line can result in penalties, violations, rescinded transactions and costly retroactive compliance.

Due Diligence Land Mines: Incorrect Zoning Maps

The current real estate market is dominated by foreclosures, auctions and quick sales. There's little or no due diligence done on real estate "transactions" these days and, worse, many buyers (and bidders) rely on incorrect due diligence findings discovered during quick due diligence reviews. There are numerous due diligence traps, but one of the more common is to simply consult a local zoning map to determine zoning entitlements applicable to a property only to later discover the zoning map is incorrect.

Why zoning maps show incorrect zoning districts designations for properties

Some municipalities and counties are simply behind on updating their zoning maps. The maps still show old zoning districts for several properties. You must research the public records and zoning files to determine the correct, applicable zoning district for a property. Also, some municipalities and counties had, or have, policies that zoning maps are not updated or modified until all zoning stipulations of approval have been satisfied or until site plan approval has been obtained.

The importance of stipulations of approval

Stipulations are frequently attached to approvals to rezone property. Stipulations often require landscaping, screening and/or right of way exactions beyond that required by the local zoning code. Another very popular stipulation is to require that a site be built in conformance with an approved site plan. Typically, stipulations can only be modified or removed via a public hearing process.

Zoning verification letters

Zoning verification letters are often required by lenders, but developers are cautioned to not rely on these letters. Zoning verification letters often provide incorrect information or fail to include important information.