There are many benefits to subdividing land -- whether these parcels exist on a rural, residential or commercial property. For instance, a residential property left to several family members in the will of someone who recently passed away can be subdivided. This subdivision allows each family member to own a parcel of land within that property -- to build on it as they wish. Subdividing land in any zone can result in higher sale prices for each individual parcel. It can also free up cash for other purchases and projects -- from renovations and builds to new investments. However, subdividing land in California can also be complicated. Both state and county governments have put in place numerous laws and regulations in place to prevent fraud and other misdeeds related to parceling. As such, property owners must complete a series of steps -- guided by their local government -- before dividing their land. Follow below to learn more about how to subdivide land in California -- along with the costs and benefits of doing so.
For those unfamiliar with this legal real estate term, subdividing land refers to how property owners parcel their land into separate lots. This land can be built or undeveloped, rural or commercial. Nitin Purswani explains in his article “Land Subdivision in California” for Design Everest. Purswani writes that property owners typically subdivide “into different lots with the purpose of selling, leasing or building development.” For instance, a subdivider might choose to break up a parcel of land into multiple parcels during a housing boom. A single or first time home buyer might not be interested in purchasing such a large parcel of land.
However, he or she might be interested in purchasing a smaller lot of the property. As such, “subdividing the property in multiple lots can increase the usage of land and the subdivider can gain additional profits.” Subdivision can become complicated when shared facilities exist on a single developed property that will soon be divided into multiple parcels or when there are co-owners. It can also become more complicated when a property is broke into more than four parcels or lots. Below, we explain how the filing and processing steps differ between parcel and tract maps.
In California, there are two basic types of subdivision based on the number of lots each property could be broken into. These include parcel maps and tract maps. Both must be submitted to the county for approval before commencing development. In simplest terms, a parcel map applies to a subdivision containing four or less than four parcels. A tract map applies to a subdivision with five or more. The LA County Department of Regional Planning “Land Division FAQ” page explains the differences in further detail. The brief explains that parcel maps are more common in single-owner residential properties, while tract maps are more common in commercial developments and planned communities. Tract maps are sometimes called final maps.
Parcel maps apply to parcels of less than twenty acres each or a single undivided property of less than forty acres. Larger properties divided into the same number of parcels may be filed under a Property Plot Map. In order to qualify for subdivision in this way, each parcel must have “approved access to a maintained public street or highway.” Some commercial projects might be classified under a parcel map even if it creates more than four lots. However, this type of subdivision will be considered “a Major Land Division for purposes of filing fees.”
A brief released by the Surveyor of Santa Barbara County notes that “the technical requirements to prepare a Parcel or Tract Map are almost identical, with the exception of a few differences.” Both parcel and tract maps are the same size and “the information required to be shown upon is the same.” Tract maps and parcel maps both “require preparation by a Licensed Land Surveyor or Registered Civil Engineer authorized to practice Land Surveying.”
There are really only two real differences between creating parcel and tract maps in California. One difference between parcel and tract maps is that “a Tract Map requires Board of Supervisor approval prior to recordation, while a Parcel Map normally does not.” The other is that parcel maps typically have a smoother and more streamlined process than tract maps. “Building in California: Your Statewide Guide for the California Building Codes” explains in which ways PMs are easier to process. First, parcel maps need only be signed by the City Surveyor -- not by both the City Engineer and Surveyor. Second, “PMs do not have public hearings at a City Council meeting after approval by the City Surveyor/ City Engineer.”
Alberto Esquivel and Jaime R. Alvayay explain in their “Residential Subdivision Buyer’s Guide” for CSU Sacramento and the California Department of Real Estate. Esquivel and Alvayay write that in a standard subdivision, “the homeowner has exclusive ownership of a particular lot or parcel with no additional ownership of any property or rights within the subdivision.” This excludes appurtenant easement rights, which the owner would hold. In a common interest development, the homeowner owns and controls their lot, but also has the right to use “certain areas or facilities” that others also have a right to.
CIDs include planned developments, condos, community apartments and stock co-ops. The last way in which residential property owners can control a subdivision in California is through an undivided interest subdivision. According to Esquivel and Alvayay, in this type of subdivision, the homeowner owns a residential property as co-owner and “an exclusive right to use a portion of the property (such as an apartment unit).”
Property owners choose to subdivide their land for a number of reasons. These reasons include investment, freeing up cash flow or assets, allowing family members to build on land they own, reducing their mortgage amount, downsizing or providing for the future. Below, we explain in further detail how property owners benefit from subdividing their land.
In her article “What Real Estate Investors Need to Know About Subdividing Land” for Fool.com, Tara Mastroeni explains that smaller lots are usually more marketable and have a greater potential for profit. She writes that if an owner plans to sell, “smaller plots of land are often more marketable than big, unwieldy lots.” Not only do they have lower price points -- “which will make them affordable for a larger percentage of buyers” -- but they require less marketing. Trying to sell a larger plot often requires “marketing to a specialty buyer who wants to have a lot of acreage at their disposal.” This might mean hiring an expensive, specialized marketer or agent to help you close a deal.
A larger lot does not always mean a higher sale price or more interest from buyers. Sometimes, it can just feel like a burden to prospective property owners -- particularly if the property is vacant or underdeveloped. In general -- writes Mastoreni -- “land division can be an efficient way to increase the value of a property.” In the process of reducing the size of a lot to make it more marketable, you end up with multiple small lots. It is likely that these “two or more smaller lots may sell for more money than one big parcel.” However -- whenever subdividing for profit --, property owners should consult an appraiser and real estate attorney before beginning the subdivision process to determine value of the land.
Most residentially zoned lots in California can legally accommodate both a regular-sized single family home and a smaller granny flat or ADU. However, it might not be legal to construct a second single-family home on a single lot. Parceling your can make constructing a second dwelling much easier. In his article “On my 10 acres I’d like to build a second home for family. How do I go about this?” for DailyRepublic.com, Tim Jones explains. Jones writes that in some cases, “you may be able to build the second home on the existing lot without dividing the lot into two lots.” This is much easier when considering the build of a smaller dwelling like an ADU.
However, “regulations in your area may not permit” construction of a second single-family home that “is over a certain size.” Local planning and zoning laws could affect whether or not you are able to build a second home on one plot of land. As such, owners should do their due diligence -- consulting the local planning board and referencing local zoning laws first. Owners should check for restrictions and consult real estate resources, local laws and deed restrictions before sinking tens of thousands of dollars into a build. More commonly, property owners and real estate investors will “divide the lot into two parcels, one containing the existing home and the other containing the new home.” For public policy reasons, “the city or county is more likely to find this approach appealing.” Learn more about compound living and ADU construction in Element Homes’ recent blog post “CAN I BUILD A SECOND HOUSE ON MY PROPERTY?”
The Poly Surveying post “Reasons to Subdivide Your Property” notes that property owners can also free up assets by subdividing their land. Poly Survey’s post explains that “by subdividing your property, you can make your existing assets more immediately accessible.” Subdividing your land will “sell off, lease or rent part of your property that you’re not utilizing as a residence or for your commercial interests.” This is useful both in the short-term and for the future -- when you might need increased cash flow for renovations or other reasons. Either way, obtaining a subdivision allows you to “more easily liquidate the capital you already own.” Freeing up that cash could allow you to build a second home -- as mentioned in the second reason on this list.
Subdividing your land could also result in reduced monthly payments on an existing mortgage. Jo Chivers explains in her article “Subdivision as a development strategy” for YourMortgage.com. Chivers writes that “subdivision gives you flexibility to sell off a newly created piece of land to reduce your loan, or to hold and add value to the property by registering the new lots and holding or further developing them.” When subdividing your land, you could also turn to renting as a second source of income. Renting the land itself -- for a trailer, tiny home or new build -- or renting an existing structure “could help offset” the monthly cost of your mortgage.
However, homeowners should research holding costs if they plan to subdivide and profit off that subdivided land. Chivers writes that “subdivision can take a long time and you need to have the ability to pay the holding costs, interest payments and council rates, whilst waiting for the subdivision to be completed.” We will delve further into the costs of subdividing land in California later in this post.
One of the reasons property owners frequently site for subdividing their land is to provide parceled space for different members of their family. Whether as part of an inheritance or for current use, subdividing land and offering each parcel to a different family member provides autonomy and limits complications that may arise from sharing land. The post “4 reasons to subdivide your property” from the real estate attorney group Snymans Incorporated notes that property owners often subdivide to divide up their assets.
Snymans Inc. explains that “a substantial property will be subdivided in order for the asset to be split equally between children or dependants as part of inheritance.” Specific terms of a will -- as well as legal restrictions within the county --, will determine “the size of each portion and what existing or new buildings are included in each.”
According to the LA County Department of Regional Planning, all subdivisions in the state of California “are subject to State and County statutes.” In Los Angeles, California, these statutes include the “Subdivision Map Act (Section 66410 of the California Government Code), the policies of the Los Angeles County General Plan as well any applicable area or community plans, and Los Angeles County Code (including Subdivision and Zoning Ordinances).” Nitin Purswani explains in his article “Land Subdivision in California” for Design Everest, that these statutes exist to protect future “community development,” ensure “improvement of the areas” that may be subdivided and “prevent fraud and exploitation.”
All regulations spelled out by the state of California and the county and city in which the land falls “must be followed before any land can be divided and sold.” In most cases -- before qualifying for subdivision -- an owner must develop a plat. A plat map is a preliminary map -- preceding the tract or parcel map -- “drawn to scale by a surveyor or initial map can be by an engineer.” This requirement falls under the California Subdivision Map Act.
The California Department of Real Estate (DRE) brief “Subdivisions and Other Public Controls” outlines the state’s two basic subdivision laws. These are the Subdivided Lands Law and Subdivision Map Act. DRE’s brief explains that the Subdivision Map Act “has two major objectives.” These objectives include coordinating the design of a subdivision so that it functions appropriately and safely. It also includes ensuring that the “subdivider will properly complete the areas dedicated for public purposes.” This prevents such areas from becoming what the state describes as “an undue burden upon the taxpayers of the community.”
In their report “Tips for Using the Subdivision Map Act to Fight Bad Development” for the Sierra Club, Winter King, et. al. explain the primary purpose of the Act. They write that “the purpose of this statutory requirement is to allow local governments to regulate their communities’ growth and ensure that necessary improvements are made before new developments are built.” The second of California’s two primary subdivision laws is the Subdivided Lands Law. This law is designed to protect “purchasers from fraud, misrepresentation, or deceit in the initial sale of subdivided property” by requiring the Commissioner to complete a sign off on a subdivision public report for each property.
The NOLO.com post “Want to Subdivide Your California Property? What's Legally Possible” explains how to check whether your land qualifies for subdivision. This post notes that all plans to subdivide land must consider “whether you bought the property subject to any existing restrictions.” Your plans must also take into consideration all “county and/or city rules and regulations regarding subdivisions, and all California state law requirements.” To determine whether your land might be divisible, NOLO.com recommends reviewing your title report first. Your land’s title report should spell out any applicable deed restrictions. The post notes that “if your property is subject to such restrictions, you will likely want to hire a real estate professional to research options for removing them.”
If you do not find any restrictions in the title report of your land, you should next research county or state improvement requirements. It is possible that your property might need to be altered somewhat to qualify for subdivision. For instance, you might need to add utility elements or roads, ensuring each parcel is accessible, safe and usable. However, your property might not be large enough or otherwise be able to meet the county’s demands for legal subdivision. Subdividing a larger plot of land requires additional steps related to requirements, so property owners should do their due diligence when examining their property and filing permits.
There are a number of costs and fees involved when you subdivide land. Costs begin before the permitting process with environmental testing, land surveying, property line surveying, soil testing and perc testing. In certain areas, land owners may be required to submit environmental impact reports and wetlands delineation reports. Permitting fees, application fees, zoning fees, environmental fees and legal fees may also come into play. According to ParkEnterpriseConstruction.com's post "6 Subdivision Building Costs: What to Know Before Buying & Developing," land survey costs typically ring in between "$300 to $1,200." Property line survey "costs range between $200 and $500" and perc test "costs range from $200 to $500 per lot." Property owners who want to subdivide might also incur additional costs related to planning, engineering and sewage system installation or renovation. The most significant costs related to a subdivision project are incurred when dealing with county and local officials. The SpendOnHome.com post "How Much Does it Cost to Subdivide a Land?" notes that on average, land owners should "prepare to spend $2,000 to $23,000 to cover just the subdivision fees to be paid to the local authorities."
Design-build firm Element Homes has years of experience with permitting for everything from ADUs to subdivision projects. Whether you plan to subdivide land to sell off parcels, build a second home or rent the land to someone else, Element Homes can guide you through the process. As California's premier design-build firm, Element Home's staff fully understands zoning and permitting requirements across the state. To learn more about how to subdivide land, stay tuned for our next post. We will lay out all the steps involved in subdividing a plot in California.
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