October 2009

What You Never Wanted to Know About Arizona Subdivisions

If you own 6 or more properties in the same plat of land at any point in time and you offer any for sale then you are required to obtain a public report. This can be a situation where a person or entity obtains properties over a period of time and does not require the purchase or sale to occur at one point in time. Meaning if 2 properties were purchased every 2 years for 6 years and then 1 property was listed for sale then a public report aka Subdivision Disclosure Report would be required.

As a result of this Arizona statue any bank that ends up owning 6 or more properties in one subdivision will be held liable for obtaining a public report. If they don’t then the buyer of the property will maintain certain rights, such as rescission for up to 3 years. It is likely that many banks will ignore or overlook this as it is a unique law.

Another potential blunder is for the real estate investor who buys several properties in the same area. Many investors utilize individual LLCs for each property they purchase; however, this will not eliminate the necessity of a public report. As long as the person is an equitable member of each LLC it is more than likely that this law will apply.

Since this particular law is not well understood by many it is important to obtain competent legal advice on this issue based on your circumstances. Additionally, if you are a Arizona real estate agent representing banks on REO properties, I would recommend spending some time understanding this law. Of course legal advice should not be provided, but a recommendation to obtain some would be appropriate.