1. Small Lot Subdivisions do not have common ownership of property and qualify for exception to requirement of DRE Public Report, so long as within a City’s jurisdiction.

 

2. Small Lot Subdivisions are not “common-interest” developments and not subject to Davis-Sterling Act.

 

3. “Maintenance Association” is required under L.A.’s SLO – what type to form?

Type of Structure/Entity Incorporated Association Unincorporated Association “Committee” of owners No Association/No Committee
Registration with State Yes Yes No No Association
Compliance with Corporations Code (the “Code”) Strict compliance (officers, directors, annual meetings, keeping of minutes) Less regulated entity under Code No No
Limitation on liability of officers/directors and members Yes – Code explicitly provides protection Limited (Code is not explicit – it says liability if not acting in scope of duties) Personal liability – no individual shield Personal liability – no individual shield
Right to sue other entities Association can do this as one entity Association can do this as one entity Owners have to sue as individuals Owners have to sue as individuals
Right to manage property Yes per Code, but should be spelled out in CC&Rs Yes per Code, but should be spelled out in CC&Rs Only as provided for in CC&Rs No
Voting Rights of Members Yes per Code Yes per Code Only as provided for in CC&Rs No

 

4. Differences between Small Lot Subdivision and Condo Projects

  Condo Project Small Lot Subdivision
Common Interest (common ownership of land) YES NO
Davis Sterling YES NO
DRE YES NO
HOA YES “Maintenance Association”
Maintenance Association NO YES
CC&Rs YES YES
Lien Rights YES NO
Reciprocal Easements for access, drainage, utilities YES YES
Developer can reserve Rights YES YES
Budget Required by DRE Not Required but may be advisable
Standard of Maintenance Required by DRE Advisable
Architectural control Advisable Advisable
Use Restrictions Advisable Advisable
Dispute Resolution Advisable Advisable
Incorporate special conditions Advisable Advisable

 

5. Overview of potential strategies for limiting Developer’s liabilities on reciprocal easement/shared areas

  1. Require individual insurance and proof of same and require “maintenance association” to obtain on shared areas
  2. Disclose to buyers nature of property – there is NO common ownership
  3. Require “maintenance association” to regularly inspect areas of shared areas
  4. Create maintenance manual

 

The information is for educational purposes only and not intended to constitute legal advice. Every project and property is unique. Please seek legal counsel for advice specific for your project.