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