HOW TO CREATE AN ADDITIONAL LOT FROM 3 EXISTING

[coupleofacres]

Got 3 existing adjoining parcels described separately in one “part of” type deed description i.e. “the sw’ly 200 feet of the nw’ly 300 feet of lot 1……

The combined area of the parcels would allow for 4 parcels, but the largest of the 3 parcels does not have the area to simply subdivide into 2.

Would you merge all 3 and subdivide?

Adjust the three parcels allowing the area of one of parcels large enough to subdivide into two and the other two meeting local standards for a legal parcel and then subdivide the larger parcel?

The later case would consist of 3 certificates of compliances, parcel map (2 parcels), and record of survey.

The first case is one certificate of compliance and parcel map (4 parcels).

Can you see any advantage or disadvantage with either approach that would ultimately have the same results?

[E_Page]

You're going to do a PM either way, so I don't see an advantage to doing an LLA first unless you are looking at a fee structure issue.

[Ian Wilson]

There is no need to merge any of the parcels prior to a subdivision action.

Please read SMA §66499.20-1/2 for the discussion.

"The filing of the final map or parcel map shall constitute legal merging of the separate parcels into one parcel and the resubdivision of such parcel, and the real property shall thereafter be shown with the new lot or parcel boundaries on the assessment roll."

The proper "case" is...parcel map. No certificates of compliance needed. No Lot Line Adjustments needed. No Record of Survey needed. No additional work, fees or time necessary.

[rpost]

I'm with Ian. One step. One solution. Done deal.

[Anthony Maffia]

If all parcels are owned by a development company that has no intention of keeping any of the resulting parcels, then I agree one PM is the best solution.

However, a Parcel Map resets the Prop 13 base property valuation, so a review of the property taxes is required to ensure greatest value and lowest project cost. Filing a PM requires pre-payment of property taxes, which increases the up-front project cost. So if the parcels are under different ownership....

Prior to 2008, property values were going up, and the PM process results in increased property taxes. Then I'd generally recommend a LLA to make one of the parcels the required size, to exclude the smaller two lots from adverse tax consequences.

Presently, the choice between a LLA & PM or just a PM over all three parcels depends on the direction of property values and the county tax assessor's policies.

A simple way to make the choice, and sell it to the client, is to create a budget showing fees & tax effects for the first two years. If the county is already lowering taxes properly to track declining valuations, then a single PM is the way to go.

If the county assessor is trying to keep assessed values above market, or if the market is increasing, then as above, LLA then PM.

I believe the correct choice could save the client $10k, and make you a hero.



Ian - Fees depend on the jurisdiction, and taxes on the local market.
(LLA+PM+Taxes) could very possibly be lower than (PM+Taxes).

[Ian Wilson]

Anthony:

"(LLA+PM+Taxes) could very possibly be lower than (PM+Taxes)."

Check your math. For the same jurisdiction, LLA + PM + Taxes HAS to be greater than PM + Taxes...unless the LLA fees are zero or negative.

The PM route is cleaner and will cause fewer headaches in the future. Remember that the LLA is a paper function and monuments are not required. When monuments are set to mark the new property corners, an ROS will be mandated, adding additional cost...now or later.

[Anthony Maffia]

No it doesn't have to be, because the tax consequences are variable.

Prop 13 creates extreme differences in taxable property values between similar, neighboring properties.

Example: Three residential narrow 1/4 acre parcels purchased in different years. Tax rate is 2%, and current market rate in the area is $400k per property.

Parcel A has a smaller house off to one side, with the possibility to create a driveway to the rear of the parcels. Purchased in 2006 for $650k, max tax rate under Prop 13 is $650k*1.02^5=717k. 2012 taxes are $400k*0.02=8000.

Parcel B was purchased in 1990 for $350k. Max tax rate is $350k*1.02^11=435k. 2012 taxes again are $400k*0.02=8000.

Parcel C (my parent's house) was purchased in 1976 for $36k. Max tax rate is $36k*1.02^35=72k. 2012 taxes are $72k*0.02=1444.

Total 2012 taxes = $17,444

Now we're going to create a fourth lot as discussed by the OP, across the rear of all three parcels. Zoning conforms, and the current owners expect to remain in their homes.

They do so, split the proceeds, .....

Option 1: Parcel Map
Parcel C gets a new tax valuation because a parcel map was filed, creating new lots. Its 2012 taxes are $8,000. *****

Total 2012 taxes = $24,000.

Option 2: LLA & Parcel Map
The LLA has no tax consequences on parcels B & C.
Parcel C 2012 taxes remain the same.
Total 2012 taxes = $17,444

Each year, Parcel C pays $6500 less than Parcel A or the newly created Parcel D.

My Point Is... Taxes, Fees & Professional Fees all go into the cost analysis of a project, and a proper analysis could save a lot.

The savings obviously are much larger on commercial properties. Why do you think LLAs are so popular, besides the lower fees?

***** Caveat - I don't fully understand the workings of tax policies. This represents my current knowledge on the subject.

I hope this shows, at least, that it should be looked at and not dismissed because a one document solution is cleaner.

[Propst]

Are you looking for cost savings, time savings, or do you want to minimize the local agencies ability to impose costs on the project?
By doing the LLA first, you can limit the local agencies ability to impose exactions or conditions to those allowed by 66412(d). That could be a big advantage to the developer. Of course the subsequent PM would be open to those additional conditions.
Have you asked the local agency about a PM waiver?
Its really hard to tell which is "Best", they all get you there.
Eventually.

[LS_8750]

Well, that tax stuff sounds interesting.

I would guess that new lot configurations will require everything on each parcel will be demolished anyway, and all new construction will be re-assessed.

PM. Clean.

[Anthony Maffia]

Oh yeah, the city could require the construction of a new sidewalk, curb & gutter and repave half the road in front of the parcel map. An LLA first might limit these costs as well.

I like development questions.

[PLS7393]

One parcel map and be done with it.

To even attempt to nickle and dime your way through any jurisdiction (attempting to save a few bucks) has always proven to cost more money in the long run.