Developers Go Antique Subdivision Shopping to Locate Hidden Treasures
Everybody knows there are lots of lots in California. And there's always been lots of controversy about what you can do with your lots. But now there's lots of controversy about the more basic question of what is a lot and what is not.
Jurisdictions all over the state are dealing with the question of how to handle old parcels that don't meet current standards. Increasingly, however, localities are facing big property owners who are asserting something a little different – the idea that big chunks of land they have always owned in a block were really subdivided in the 19th century.
The so-called "magic subdivision" issue has been around for the past decade or so, but it's heated up again in the last couple of months, as the Hearst Corp. has moved forward with an effort to assert that the famous 80,000-acre Hearst Ranch in San Luis Obispo County is actually made up of 279 lots that were subdivided in 1852.
Hearst isn't interested in developing the new lots; the company's development proposal is concentrated on a tiny portion of the ranch along the ocean at San Simeon Point. But by legally affirming the existence of the lots by obtaining a "certificate of compliance," the company will be able to get more money from land trusts and government agencies that might buy either conservation easements or the property itself.
Nevertheless, the Hearst gambit has galvanized environmentalists and local governments – especially on the Central Coast – in a renewed effort to prevent the validation of newfound subdivisions, which cannot only increase the value of property but also allow landowners to evade the Subdivision Map Act under some circumstances. Many land speculators who acquire property and obtain post-hoc validation of a subdivision then maximize property value by using a lot-line adjustment – which is exempt from the Map Act so long as the number of number of lots does not increase.
Hearst has not tried the lot-line adjustment idea yet. But the high-profile nature of the case has led environmentalists and local governments to attack the magic subdivision issue in Sacramento – even attempting to put some kind of brake on the process in this legislative session.
The Hearst scheme is the latest twist on a very old game in California – and, indeed, in the United States: If you want to make money easily, buy some land, subdivide it, and sell it off. This is a pretty basic rule of land economics, especially in a desirable place like California. As a commodity, lots are no different than oranges. You can sell one at a higher per-unit cost than you can sell a dozen. So land speculators have always been highly motivated to subdivide their property into smaller lots in order to make money.
Thus, it is not surprising that subdividing property has been a basic planning policy question in California for many decades. The question used to be: What do we do with old, substandard lots – those dating from 1910s or 1920s — that don't meet today's requirements for community-building? Now the question is: Do very old lots – those dating from the 19th century — even exist?
This is a fundamental question for the future of California planning because there is a big difference between the people who own tiny, substandard lots they can't use and the people who own large pieces of property which they now assert were subdivided long ago. The first group of property owners is not very powerful – they are generally unsophisticated "little guys" unlikely to put much pressure on counties or the state to create change. But the second group of property owners is powerful. They're not all Hearsts, but they are generally old-line property owners with enough resources to make their case in court.
At the center of this whole controversy is that complicated and often arcane law, the Subdivision Map Act – a law that requires every local government in the state to regulate the subdivision of land by private property owners. The Map Act is one of planners' biggest sticks in dealing with developers. It gives local governments power over what the law calls the "design" of subdivisions and the "improvements" associated with those subdivisions. In practical terms, it gives local government planners leverage to demand exactions from developers.
But that was not the intent of the Map Act. Originally, the Map Act was designed as a consumer protection ordinance so that unsuspecting lot purchasers would be sure to wind up with property they could actually access and build on.
All through the late 19th and early 20th Century, land speculators would simply subdivide property into small lots and sell it off – without setting aside property for roads or any other necessities of urban development. Often, neither subdivider nor buyer had ever seen the property before it was cut up and sold. If you want to see what this type of subdivision looks like on the ground, go to Clear Lake sometime. It's a vacation area where houses and lots are scattered willy-nilly across the landscape, often connected by informal, unpaved roads that technically trespass across somebody's property. It's often impossible to discern a logical pattern of subdivision.
To the extent that the question of subdivided lots has been a policy issue in California, it has dealt with the question of antiquated lots and what to do about them. Some years ago, a report to the Senate Local Government Committee concluded that there were somewhere between 400,000 and 1 million "antiquated" lots in California that were undeveloped.
The Hearst gambit, however, reminds us that there's another angle to the question of old subdivided lots – and that has to do with the question of whether subdivisions created before the Subdivision Map Act was first adopted in 1893 exist at all.
Under the Subdivision Map Act, property owners can request local governments to issue "certificates of compliance" verifying that parcels met the legal requirements in place at the time the lot was created. Of course, it is still fuzzy what pre-1893 process for subdividing land should be considered legal. In many cases, property owners have argued that simply recording a plat map with the county is sufficient. Better still appears to be a federal patent establishing the lots. It is a federal patent from 1852 on which the Hearst Corp. is relying in attempting to split its ranch in 279 parcels. And once a property owner produces this kind of evidence, it is hard for the local government – or the Coastal Commission, in the case of coastal property such as Hearst Ranch – to say no. According to one recent Coastal Commission staff report, San Luis Obispo County has issued 363 certificates of compliance in the county's coastal zone during the last 20 years, and the Coastal Commission has a hard time simply tracking them all, much less reviewing them and putting restrictions on them.
The Hearst Corp. appears to be using the "magic subdivision" approach as a way of establishing the highest possible property value. The company is negotiating with two national conservation groups about selling the conservation easements to them. For the conservation groups to buy the land, the land has to have a value – and that value is related to development potential, which, in turn, is related to the number of lots.
Once the certificates of compliance are issued, Hearst Corp. will have an opportunity to employ yet another gambit to increase its property value by using the lot-line adjustment loophole in the Subdivision Map Act. Once it has established that its ranch is really 279 separate parcels, Hearst then could rearrange those parcels however it likes on the map – ensuring that they all have frontage along Highway 1 or the ocean, for example – to maximize their theoretical value. That would jack up the price that the conservation groups would eventually have to pay.
It often seems as if we are in an "end game" situation in rural California. Large landowners who have held property for decades – sometimes centuries – are finally moving to dispose of their land, either into urban development or permanent conservation. Environmentalists and slow-growth activists often complain that big landowners sometimes feign a proposed development project (or, in the case of Hearst, development "potential") even when they intend all along to sell to the government or land conservancies. The result of this process obviously costs Californians a lot of money.
This issue will move front and center in land conservation and development in California in the years ahead. Property owners have rights. Those include the right to get certificates of compliance, lot-line adjustments, and other legal means relating to subdivisions.