Chapter 25 - Subdivisions

A few miles off the road is the site of a
planned community dating from the nineteen-sixties.
It was to have wide streets and a fountained square,
but construction was delayed and then indefinitely postponed.
Ghostless ghost town, it had been named Neptune City.
John McPhee
Basin and Range

Land subdivisions

Rural land subdivisions are typically very large acreages purchased by corporations and then subdivided into parcels, usually from one-half acre to ten acres in size. During the 1960s and ’70s, thousands of subdivisions were created on poor mountain, desert or swamp land in Florida, California, Nevada and other states. Land companies used slick advertising and powerful sales methods to sell the parcels to naive city people longing for a piece of country. The lots were priced at only a few thousand dollars and liberal terms were part of the sales appeal. With few exceptions these lots were essentially useless.

I just got wonderful news from my real estate agent in Florida.
They found land on my property.
Milton Berle

The Rockefeller Brothers Fund released a report in 1973 on The Use of the Land. It revealed: “In 1971 an estimated 625,000 recreational lots were sold by over 10,000 subdividers. . . . For the nation as a whole, at least six recreational lots were sold in 1971 for each second home constructed. . . . In California, between 50,000 and 100,000 acres of rural land were subdivided annually in the late 1960s and early 1970s by recreational lot sellers. By 1971, however, houses had been built on only 3 percent of the lots sold in the previous decade.”;

The pitch was: “You’re getting in on the ground floor—this area is going to boom—in a few years you’ll make a killing!” Promised roads, utilities, services and escalating values almost always failed to materialize. The lots, sold with enticingly low down payments and modest monthly payments (those of us in legitimate real estate at the time scoffed: “Five dollars down and fifty dollars a month—forever!”), often were abandoned and sat vacant, available to anyone who paid the back taxes. As soon as the development company had taken the easy money, and before spending any of it on improvements, it either declared bankruptcy or simply disappeared. Today some of these rip-off developments can be seen from interstate highways in the western desert—they’re the ones with big faded signs, barely discernible dirt roads, sometimes one or two small houses far out in the sagebrush.

Well, the feds received complaints—whew, did they ever!—and it is now more difficult for unscrupulous developers to make a dishonest buck. That is not to say that some aren’t trying to relive their lucrative wayward youth. If you are tempted to buy land in an undeveloped subdivision, do twice the amount of checking as for any other property. Beware of slick promotional material with “artist’s rendition” clubhouses, lakes, marinas, golf courses. And just don’t believe sales claims that values are going to rise substantially and soon.

Consumer protection

The Department of Housing and Urban Development (HUD) enacted legislation to protect subdivision property buyers from misrepresentation, fraud and deceit. Many states have similar statutes. The federal law requires that purchasers of certain properties must receive a property report disclosing such items as availability of utilities, soil problems, distance to schools and firehouses, restrictive covenants, oil and mineral rights, special assessments for roads or other improvements, and payment terms. Properties that are usually exempt from this law include lots with buildings, subdivisions with fewer than 100 lots, and lots of 20 acres or larger.

Please note that the property report is not an indication of government approval of the project, it simply reveals pertinent information supplied by the developer. If you are interested in this kind of property be certain to read the property report carefully. The law requires that a purchaser sign a statement that he has received the report and it gives a seven-day cooling-off period during which the buyer may cancel the purchase agreement (in writing) and receive his deposit back. This law could change; verify the length of the cooling-off period on the papers provided at the sales office.

There is a solid reason for the right-to-cancel-law. Real estate salespeople in subdivisions know they will probably only get one shot at buyers, so they are trained and conditioned to be very aggressive—to make the sale today. Do not be persuaded by the glib “You have a seven-day right to cancel; make your decision today while it’s convenient; you can always change your mind later.” Other pressing matters may interfere, and later often comes too late.

Housing subdivisions, retirement and recreational developments

Many people think of retirement communities
as large compounds of the elderly
living among themselves with little contact or interest
in the native population around them,
the kind of places found in Arizona or Florida.
In the Ozarks and other regions where elderly people go to live,
the retirees are likely to be segregated by neighborhoods,
but so pervasive are the natural surroundings and the native culture
that their influence cannot be escaped in the low-density settings
which have sprung up in recent years.
John Herbers
The New Heartland

There are many housing subdivisions that may be attractive to country home seekers. Retirement communities are sometimes found in small subdivisions of homes on large lots or small acreages surrounded by forests and hills. Ski resorts, fishing lakes and man-made facilities center many new communities that can exist only because of transfer payments such as retirement checks. These areas are often far removed from urban centers, so they offer year-round service employment for younger people. The names of such places often indicate what was dispossessed to create them: Pheasant Run, Quail Meadow, Grizzly Crossing.

When considering any subdivision, which may also be called a development, project, retirement community, planned unit development or destination resort (new sobriquets appear yearly), be sure to receive and carefully read a copy of the Covenants, Conditions, and Restrictions (CC&Rs). This is not the same thing as the property report. CC&Rs frequently are spelled out in a thick packet of pages with small print. It’s tough reading—great stuff for insomniacs—but you do not want to miss details such as, for instance, requirements that resales must be made through the development company, that you must build a house of at least a certain square footage, or that you must paint your house every two years—the exact color that the architectural review board dictates. You also need to find out what fees owners must pay for common area maintenance, insurance, accounting, security, etc.

Some subdivisions, especially condominiums and planned unit developments, are aimed at retirees and second-home buyers. Many of these places end up with a substantial number of renters—who will not share owners’ attitudes. While it is impossible to predict how new developments will go, local property management people or real estate agents will be able to tell you what the score is with a project more than a year old.

Yet another type of development has been dreamed up—developing old towns. Pity tiny Rico, population 150, the last undeveloped town in the San Juan Mountains of southwestern Colorado. A high-powered tax shelter lawyer from Manhattan and his investor buddies bought up nearly all of Rico. As he and his partners envision hundreds of new homes in the hills, he claims to be concerned: “How is it that we can prevent ourselves from spoiling any of this beauty?” Well, Jack, duh, don’t start the bulldozer. I think we need a 12-step program for the greed impaired.

Shadow governments

When considering any planned community beware of the power of shadow governments. Usually spelled out in the CC&Rs, homeowner associations may control most aspects of life within their jurisdiction, down to the color of the curtains in the windows fronting a street. These shadow governments have the power to levy taxes (assessments), legislate (create rules and regulations), and enforce (police power to force homeowners to obey their edicts). And the officers are often elected by votes with a dollar basis, rather than the democratic one-person-equals-one-vote concept.

Shadow governments regulate the nature of landscaping. They decide how many pets are allowed and what size. They decide the age of inhabitants. Many forbid anyone younger than 45; if your adult child and spouse die, you may be prohibited from taking in your grandchild. In some places shadow governments have become virtual dictatorships. Owners who sue them usually find that courts uphold their actions.

If you purchase property in a planned-unit or condominium development, about the only way you can have any real effect on how things are run is to become active in homeowner association affairs. If you like politics and meetings you’ll fit right in.

Tax sales

If you feel you would like to acquire tax sale property, visit the county courthouse and ask to see the delinquent tax list. Subdivision lots are listed most frequently. If you feel that these lots are a good investment you can often buy them for the back taxes. Be aware that even after a tax sale, within a specified time period the previous owners can come forward, pay the back taxes, interest and expenses, and regain title. Ask the tax collector what the laws are in that county.

Resources

If a subdivision is promoted in interstate commerce, it must be registered with the following agency. Ask for the free booklet HUD183H(10), Before Buying Land . . Get the Facts. Request a list of other available materials regarding buying land.
U.S. Department of Housing and Urban Development
Interstate Lands Sales Registration Division
451 Seventh Street, S.W., Washington, DC 20410
202-708-1422 Ext. 5
Fax: 202-708-2313

State real estate commissioners have information on subdivisions within their jurisdictions. Planning commissions and real estate boards will have appropriate addresses and phone numbers.


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