The Importance & Availability of Subdivision Public Reports

By Roy Tanney, ADRE Subdivision Division Director and K. Michelle Lind, AAR General Counsel

Posted: October 2005 ~ Reviewed: March 2012

The Arizona Department of Real Estate (“ADRE”) and the Arizona Association of REALTORS® (“AAR”) often receive questions about subdivisions. Some of the most frequently asked questions have been: “What is a Public Report?” “When is it required?” and “What does the report contain?” Additionally, the recent publicity regarding fissures in the east valley of Maricopa County and elsewhere in the state have raised questions about whether such disclosures are made in a Public Report. In a spirit of cooperation, ADRE and AAR are working together to ensure that both the general public and real estate professionals are informed about these issues so that they can protect their interests.

Arizona law regulates the sale or lease of subdivided land, which is defined as land divided or proposed to be divided for sale or lease into six or more lots or parcels. A.R.S. §32-2181 et seq. A subdivider may not sell or lease or offer for sale or lease any lots, parcels or fractional interests in a subdivision without first obtaining a Public Report from the ADRE. A.R.S. §32-2183(F). A "subdivider" is anyone who offers for sale or lease six or more lots, parcels or fractional interests in a subdivision or who causes land to be subdivided into a subdivision for the subdivider or for others, or who undertakes to develop a subdivision. A.R.S. §32-2101(54).

A subdivider must give a prospective new home buyer a copy of the Public Report and an opportunity to read and review it before the prospective buyer signs a contract to purchase a home in the subdivision. A buyer should carefully review the Public Report because the Report contains important information, such as:

• The identity of the subdivider/developer
• The physical characteristics of the subdivision; e.g., level, hilly, rocky, loose soil, washes, arroyos, canyons
• Disclosure of conditions or provisions that may limit the use or occupancy of the home
• Homeowner’s association information
• Whether the subdivision is subject to any known flooding or drainage problems
• Existing and proposed adjacent land use, including any unusual safety factors and uses that may cause a nuisance or adversely affect home owners within or near the subdivision (the ADRE recommends that the subdivider research within two miles of the subdivision for unusual safety factors and five miles for factors that may cause a nuisance or adversely affect lot owners)
• Gas pipelines within the boundaries of the subdivision or within 500 feet of the subdivision boundary
• Environmental factors, including whether the subdivision is within a federal superfund or state WQARF site
• Whether any portion of the subdivision is located in territory in the vicinity of a military or public airport
• The availability of utilities
• Street and road maintenance
• Flood protection or drainage facilities
• Documents demonstrating acceptable arrangements have been made for completion of all facilities
• Locations and availability of schools, shopping facilities, public transportation, medical facilities, ambulance service, and police service.

It is now easier for a buyer to obtain a copy of the subdivision Public Report. Effective September 1, 2005, the public has access to the ADRE’s Subdivision Database on its website, www.re.state.az.us. Navigate to the Subdivision Section of the Public Database and enter appropriate search criteria. If a subdivision record exists, certain information will be provided including whether a Public Report is available for download. If a Public Report is not available, follow the instructions given and ADRE staff will check the records to see if the Public Report can be made available. Any Public Report issued prior to January 1, 1997, is likely to be unavailable unless it was amended at a later date. Always remember that given the age of some of the Public Reports, some of the disclosure information may be outdated and no longer accurate. If the Public Report is less than 20 years old, a hard copy of the report may still be available by contacting the ADRE.

Subsequent buyers may also benefit from reviewing the Public Report. Therefore, at the Commissioner’s request, a notice to buyers about the availability of a Public Report will be added to AAR’s Residential Seller’s Property Disclosure Statement (“SPDS”) at the next printing. The Buyer Advisory has also been updated to include a link to the ADRE website where the copies of Public Reports may be obtained. However, resale buyers must understand that even though the information in the Public Report may have been accurate when the subdivision was approved (which may have been some time prior to when the home was built), the information could be outdated or inaccurate and should be verified.

The purpose of the Public Report is to protect the public by disclosing material information about a subdivision and the adjacent property to a prospective home buyer. Now that access to Public Reports issued after January 1, 1997, is immediately available, prospective home buyers of both new and resale properties are encouraged take advantage of this information source when conducting their due diligence inspections and investigations.

Avoid Violations of the Subdivision Statutes
Avoid becoming involved in transactions that may involve the illegal subdividing of property. In a recent article, attorney Mike Denious set forth factors that the ADRE may deem “Red Flags” of illegal subdividing, which appear to be geared toward indications of “acting in concert,” such as:

• Monies paid out of escrow
• Double escrows
• Seller financing (“carrybacks”)
• Extended time for repayment on notes
• Unusually low downpayments
• Lot release provisions
• Several splits in a short period of time involving one “mother” parcel
• Short time between transactions
• Unrecorded conveyance documents (i.e., agreements for sale)
• Same last names of participants (or other family relationships)
• Same parties in numerous transactions
• Transfers from individuals to entities to individuals
• Same notary in several transactions
• Same surveyor for various splits
• Same real estate agent for various sales
• No escrow
• Cooperation in creating easements, well-share agreements, septic approvals, etc.
• CC&Rs or deed restrictions common to all lots involved

K. Michelle Lind, Esq. is General Counsel/Assistant CEO to the Arizona Association of REALTORS® (AAR). She serves as the primary legal advisor to the association. Michelle oversees AAR’s Risk Management Committee, which includes professional standards administration for twenty of the state’s local REALTOR® associations, and the development of standard real estate forms. She is the author of Arizona Real Estate: A Professional’s Guide to Law & Practice and a regular contributor to the Arizona REALTOR® Magazine and the Arizona Journal of Real Estate & Business.
Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.