When you’ve determined that you want to move forward with subdivision and sale of your 6 or more lots, of course, you want to advertise, put a sign on the property to grab the attention of passers-by and even reach out to potential buyers through the internet and social media. But, wait: those subdivision laws are lurking out there, waiting for you to make a misstep.
The subdivision laws govern the act of “selling” subdivided lots or condos (I’ll combine those terms and just use “lots” for our purposes). Selling includes the offering for sale (or lease) one of those lots. So, it’s clear that any advertising constitutes offering the property for sale.
So, you can’t do any of that — much less reach agreement with a buyer for the sale — without a Public Report having been applied for and issued by the Arizona Department of Real Estate.
But, to try to get a buyer on your hook there are other ways to go about your pre-sales, just to retain the buyers interest and even just take contact information so you can reach out later, after the Public Report is secured.
First, if you are going to advertise or solicit sales, any printed material or advertisements must include a clear statement to the effect that “The Arizona Department of Real Estate has not issued its Subdivision Disclosure Report/Public Report for this subdivision.”
Even then, you’re not following the law because you are actually offering the property for sale without having a Public Report.
So, before you do any of that, read on.
Next, the only thing you can do before taking either of the steps below is maintain a “guest list” of sorts. Take the name and contact information of anyone expressing an interest in the property for later contact. You can’t talk sales price or terms or reach any sort of verbal agreement yet.
You have two options at this point:
Lot Reservations:
Requirements: File a Notice of Intent with DRE
Form of Sales Document: Use prescribed form of “Lot Reservation”
Cost: $0
Binding effect: No cancellation by Seller (You); Buyer can cancel at any time for any reason
Maximum Deposit: $5,000 (Held by a neutral escrow depository)
Conditional Sales Exemption:
Requirements:
Final plat (recorded or final form as approved by the local municipality.)
Final draft of proposed Public Report.
ADEQ or County Health Cert, or acceptable alternative.
File Petition for exemption with DRE for approval.
Form of Document: Standard purchase contract with “conditional only” addendum
Cost: $100 DRE filing fee for the Petition
Binding effect: No cancellation by Seller (You); Buyer can cancel at any time for any reason.
Maximum Deposit: $ Unlimited (Held by a neutral escrow depository)
Benefits: Unlimited deposit; You can arrive at a final sales price; Use your form of contract with all terms. Simply attach a conditional-sale addendum where Buyer has the opportunity to review and accept the Public Report or rescind the sale.
