Dividing your land into two or more lots can be a good way to profit from your property. That said, doing so comes with risks and possible future complications. In Oregon, before you start selling any new lots, be sure to follow all applicable laws.
When you divide a piece of real property, you can increase its value by broadening its market appeal. After all, many buyers prefer smaller residential lots that are easier to maintain. You also might be able to come up with creative ways to get the most out of your property. For instance, if you live on the property, you might be able to break off and sell portions not in use, while keeping the portion upon which your house is located.
It would be a big disappointment if, after spending a lot of money on land development, you find there is no market for your new lots. Or if after spending thousands of dollars on the land use application, you were to discover an obvious legal barrier that prohibits dividing your land.
Limiting your risks before spending time and money is important. An experienced real estate agent, familiar with your real estate market, can help you analyze the demand for your prospective lots. And consulting an attorney early on can help identify legal obstacles you might encounter.
In Oregon, land divisions occur in one of two forms; either a "partition" or a "subdivision." The distinction is important, and often comes into play in the approval process.
When you partition land, you create three or fewer new units of land, called "parcels." When you subdivide land, you create four or more more new units out of it, called "lots." (See the full legal definitions at ORS 92.010.)
Partition requirements are, on the whole, less burdensome than subdivision requirements. As a result, receiving approval for land divisions resulting in two or three new parcels is often easier than for larger land divisions.
Even approval of smaller subdivisions, for example those ranging from four to ten new lots, can be easier than for larger subdivisions. As a general rule, the smaller the project, the easier it will be to get approval (and the less it will cost).
As an initial step, make sure there are no existing deed restrictions recorded against your property. For example, did a prior owner record a conservation easement prohibiting further development there? Or, is your property in a planned community with covenants, conditions, and restrictions that prohibit division of existing lots? Any existing restrictions can make the land division process too expensive to be worthwhile.
Examining your title history should help identify these potential restrictions. A title company can perform a title review. Review it carefully. If you have questions, contact a real estate attorney.
In Oregon, you cannot divide land except under state and local law. At the local level, a "subdivision ordinance" or "development code" will dictate the application process and include approval criteria for land division applications. It will also identify the standards that apply to any required infrastructure development, such as roads and water delivery systems.
Every local jurisdiction in Oregon requires at least a two-step process when approving land divisions. First, the applicant will need to apply for preliminary plan approval. Second, the applicant will need to apply for final plat approval. You might also encounter some required preliminary steps.
One common prerequisite is that you attend a pre-application conference with the planning department before submitting an application. You might also need to provide your neighbors a chance to comment on your land division proposal.
Although these preliminary steps can take time, they are usually helpful. A pre-application conference lets you learn about the partition or subdivision process. And, discussing the proposal with neighbors clues you in to their concerns and possible objections before you are deep into the process and facing potentially greater anger and even lawsuits.
The preliminary plan is the most burdensome step in the process. Applicants will need to submit an application to the local planning department with evidence that the proposal meets the approval criteria. The city or county staff will review this. If the application is for a partition then, depending on the city or county, planning department staff might have the authority to approve it (called an "administrative decision").
In many cases, subdivision applications will be decided by the local government only after holding a public hearing. The applicable subdivision ordinance should alert you to whether the public hearing will be in front of a hearings officer, planning commission, or possibly the city council or county commission.
Often, local governments approve a land division application but with reasonable conditions attached. For instance, before approving the final plat, which is a map containing specifications and information about the land division that is recorded in the public records, the local government might require that you construct public improvements (like roads) or reduce lot size.
The last step is final plat approval. Approval of the final plat is an administrative decision. This means it is made by government staff members with no public hearing. Assuming you have complied with the conditions of approval and applicable approval criteria, the final plat is usually rubber-stamped. Once approved, the final plat is signed by several people, including you, then recorded in the official county records.
When applying for a land division, the local government will review your application to make sure it demonstrates compliance with the applicable "approval criteria." Often these require you to provide evidence that:
In some but not all land divisions, public improvements might need to be installed. Whether you have to take this step, and what standards apply, will depend on different factors, including the size of your proposed land division. These standards are normally identified in the subdivision ordinance or development code.
If you sell a "new" lot that was not created through the Oregon land division process, you could find yourself in legal hot water.
As an example, after taking title to the property, the buyer might discover that building a house on the lot is not possible because the "new" lot is not a "legal lot of record." A legal lot of record cannot be created by an unlawful subdivision. If you sell a lot that was not lawfully created, the buyer can sue you, and if successful, recover attorney fees from you.
Hiring a team of professionals to help complete the process is a good idea. This team might include: