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.

Solar Energy: So Much Potential, So Many Obstacles

We've all been reading a lot about solar energy power plants in Arizona for several months. It's an exciting industry with a lot of potential. Several companies have shown an interest in developing solar energy power plants in the sunny state of Arizona and the future looks bright for this industry. So, why haven't we seen many solar project completions in Arizona? Well, it seems solar projects have to address several development issues that can delay or kill solar projects, particularly projects designed to put energy on the existing grid. Some of the issues (and obstacles) facing solar power plants include:

If you produce it, they will buy? Some solar companies fail to address the most basic of issues facing solar power plants: finding a buyer of their energy production. Arizona essentially has two realistic purchasers of significant megawatts: Arizona Public Service (APS) and Salt River Project (SRP). Of course, some solar projects will be developed in Arizona and sell power to Southern California Edison (SCE) or Pacific Gas and Electric (PG&E) but SCE and PG&E seem to have all the solar power they want to purchase for sometime. If a solar company hasn't first talked to APS, SRP, SCE or PG&E and secured a reasonable assurance of an agreement to purchase power, it's unlikely the solar project will be successful. Several solar companies have learned the hard way that you need to secure a purchase agreement, or reasonable assurances of a purchase agreement, from APS or SRP prior to expending any significant effort on the development issues associated with a solar power plant.

Location, location, location. It's the golden rule of real estate, yet several solar projects have failed to consider one of the most important location decisions relevant to a solar plant: the power plant must be located a reasonable (i.e. economical) distance from a power delivery point. If a substation is located miles from the solar facility or the nearest substation is at capacity and doesn't have room (or the ability) to expand, an otherwise perfect location for the development of a solar project becomes unworkable. It's prudent to place this issue at the top of the list of required criteria for selection of a development site.Where's the money? We are all waiting for our friendly bankers to open the coffers for even the most well established developments and proposed developments. Solar projects face especially high financing hurdles in this market. A lack of financing kills several solar projects. Although the promise of stimulus funds and government loan guarantees to obtain construction financing is enticing, these funds and guarantees are often very slow to come and funds and guarantees are not so easily obtained. The most successful solar project developers have managed to find significant funds from private investors.

The Great Land Grab. Solar projects tend to require a lot of land. In bad economic times, it's been relatively easy for solar companies to tie up private land for several months while the solar company conducts its due diligence. But there's only so much private land that is workable and available for solar projects and hopefully the market will soon turn and private land owners won't be so willing to enter into agreements with long due diligence periods. Thus, solar companies have to consider alternative owners for their potential development sites. These owners include the Bureau of Land Management (BLM), the Arizona State Land Department (ASLD) and Indian reservations. Indian reservations, ASLD and BLM all provide excellent opportunities for long term leases of large expansions of land offering excellent development opportunities. However, very few solar companies (or law firms) have any significant experience working with the BLM, ASLD or Indian reservations. It is very important to include as a member of the solar development team a person with a lot of experience dealing with these jurisdictions or the development process will be long and painful.

Simon, may I? If a solar project manages to get past the initial hurdles of development discussed above and a particular site seems to meet development needs (adequate water, access to sunlight, adequate vehicular access, etc.), then the project managers can turn to permitting issues. A solar power plant will require various environmental, utility and zoning and land use approvals prior to construction and operation. The good news is these approvals seem to be easier and easier to obtain, but they still require a lot of time and it's critical to have a team that knows which approvals make the most sense for the project and the best approach to obtain those approvals.

Incentives and Competition. Of course one of the biggest contributing factors to the lack of solar projects in Arizona is the lack of incentives available to solar projects within the state. Other states (New Mexico, in particular) offer great financial and other incentives for solar projects. The incentives offered by surrounding, competing states can make it very difficult for Arizona to compete for new solar projects.

This entry addresses some of the bigger picture issues facing solar companies. There's also plenty of good news for the solar industry. The future looks very bright for solar power and with some patience and the right team, a solar project can be quite successful and have a great impact on the future of our planet.