I have a client who owns a piece of land, created by deed back in 1956. The owners who bought the land in 1956 decided to get a loan in 1961. A deed of trust was recorded that described just a small piece of the total parcel (the small piece is where the house was located). It is apparent that the house was the collateral for the loan. Several years later in the late 60's the loan was repayed and a reconveyance was recorded. Sometime later the overall piece of property was sold with no mention of the deed of trust. Fast forward to today and several owners later. I am doing a ROS of the parcel. I discover this deed of trust. I talk to another LS buddy of mine and he tells me that I've got two parcels of land. Even though the deed of trust came and went in the 1960's it was a subdivision of land that is a legal parcel if I can obtain a Certificate of Compliance. He tells me he's done it twice before, and I believe him. My question for you, do we have 2 parcels or just 1? Is this an accepted practice in your neck of the woods? I know that by definition a deed of trust is a subdivision of land since it is financing, but does the deed of trust remain a subdivision after reconveyance? Does the fact that all subsequent conveyances make no mention of a deed of trust or 2 parcels of land have any bearing on the argument? It just so happens that the owner has been fighting with the County to build another house on the property and if he actually has 2 legal parcels (once he gets a cert of compliance) he will be amazed.
My understanding is that the deed of trust was a subdivision, and unless the lands have been explicitly merged that there is in fact 2 separate parcels even though subsequent conveyances describe them only as one. Is that your understanding?
Does he have 2 parcels or just 1?
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Ian Wilson
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Hmmm…Great question!
The Deed of Trust is not really a subdivision of land. It is for purposes of defining the collateral for a loan. If the original loan had been defaulted on, the bank could have foreclosed on the property described in the Trust Deed, but not on the greater parcel. Back in the ‘60’s, this would have been fine as the subdivision predates the magical Subdivision Date of March 4, 1972.
It could be argued that, since the loan was paid off and the Trust Deed “parcel” was reconveyed, there is only one parcel. I’ve had a few cases where the deeds were drawn up and even recorded defining two or three parcels under the original ownership. The parcels were never sold individually. The new owner was denied the multiple lots based on the fact that they were never “created” by conveyance to another; they were merely described.
This same argument was used successfully in Sonoma County in determining that an ancient subdivision map under which none of the lots were ever conveyed does not meet the requirements for a modern subdivision. There is a lot more to this case, of course, but that’s the gist of the argument.
The same has been held in cases where aliquot parcels were patented to the same individual but never conveyed to anyone else other than as a whole. Even though the descriptions are valid, the parcel has been considered to be one parcel rather than the sum of the parts.
Now, if this was my client, I would argue that the Trust Deed “created” a second parcel out of the greater whole. If the local jurisdiction is willing to capitulate, in writing, you and your client win! It may well be worth a trial shot across the bow. You never know. If the local agency buy off, get it in writing and memorialize the action.
The Deed of Trust is not really a subdivision of land. It is for purposes of defining the collateral for a loan. If the original loan had been defaulted on, the bank could have foreclosed on the property described in the Trust Deed, but not on the greater parcel. Back in the ‘60’s, this would have been fine as the subdivision predates the magical Subdivision Date of March 4, 1972.
It could be argued that, since the loan was paid off and the Trust Deed “parcel” was reconveyed, there is only one parcel. I’ve had a few cases where the deeds were drawn up and even recorded defining two or three parcels under the original ownership. The parcels were never sold individually. The new owner was denied the multiple lots based on the fact that they were never “created” by conveyance to another; they were merely described.
This same argument was used successfully in Sonoma County in determining that an ancient subdivision map under which none of the lots were ever conveyed does not meet the requirements for a modern subdivision. There is a lot more to this case, of course, but that’s the gist of the argument.
The same has been held in cases where aliquot parcels were patented to the same individual but never conveyed to anyone else other than as a whole. Even though the descriptions are valid, the parcel has been considered to be one parcel rather than the sum of the parts.
Now, if this was my client, I would argue that the Trust Deed “created” a second parcel out of the greater whole. If the local jurisdiction is willing to capitulate, in writing, you and your client win! It may well be worth a trial shot across the bow. You never know. If the local agency buy off, get it in writing and memorialize the action.
Ian Wilson, P.L.S. (CA / NV / CO)
Alameda County Surveyor
Alameda County Surveyor
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PE_PLS
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Ian,
Thanks for the comments, I appreciate them.
Section 66424 reads:
"Subdivision" means the division, by any subdivider, of any
unit or units of improved or unimproved land, or any portion thereof,
shown on the latest equalized county assessment roll as a unit or as
contiguous units, for the purpose of sale, lease or FINANCING,
whether immediate or future......
It is my understanding that the deed of trust "subdivided" the land for financing purposes. A legal description was drawn up and recorded for financing purposes as a deed of trust. Now if there was a default on the loan, then of course we would have a subdivision because there would be a new owner.
Lets use reverse logic here...if I drew up a deed of trust today that was similar to this it would be illegal, it would violate the SMA, even if I didn't default on the loan, therefore, I argue that the subdivision takes place at the time the deed of trust entered into, even if there is never a default. The piece of land that was entered into a deed of trust was now legally under a different color than the land left around it.....at least this is my argument...any further comments?
Thanks for the comments, I appreciate them.
Section 66424 reads:
"Subdivision" means the division, by any subdivider, of any
unit or units of improved or unimproved land, or any portion thereof,
shown on the latest equalized county assessment roll as a unit or as
contiguous units, for the purpose of sale, lease or FINANCING,
whether immediate or future......
It is my understanding that the deed of trust "subdivided" the land for financing purposes. A legal description was drawn up and recorded for financing purposes as a deed of trust. Now if there was a default on the loan, then of course we would have a subdivision because there would be a new owner.
Lets use reverse logic here...if I drew up a deed of trust today that was similar to this it would be illegal, it would violate the SMA, even if I didn't default on the loan, therefore, I argue that the subdivision takes place at the time the deed of trust entered into, even if there is never a default. The piece of land that was entered into a deed of trust was now legally under a different color than the land left around it.....at least this is my argument...any further comments?
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goodgps
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the hmmmms have it
At the time the small parcel was described, could it be considered that there was indeed another party of vested interest ? If so, then unless the bank was a relative, this vested interest would not be arms length.
As Ian "the great" says, its worth a shot. In 1956, I believe parcels could be created by deed without local jurisdiction involved.
Could a point also be made as to the fact that AT that time, the owners wanted to isolate and protect their homesite from the farm. For many decades, we created homesites just for this reason.
Great question
"good"
As Ian "the great" says, its worth a shot. In 1956, I believe parcels could be created by deed without local jurisdiction involved.
Could a point also be made as to the fact that AT that time, the owners wanted to isolate and protect their homesite from the farm. For many decades, we created homesites just for this reason.
Great question
"good"
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Ian Wilson
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Dylan:
I'm with you all the way.
This is a question I could easily argue both ways.
In situations like this, of course, I always try the argument in favor of my client. Sometimes I win, sometimes I lose.
It’s best if you understand both sides and can argue both. That way, if the arguments against come up, you have a line of reasoning to counter.
Look at it this way: if you lose, you’re no better or worse off than you are now. If you win, your client gains big time and you look like the hero. Either way you come of looking like the expert.
Man up and go for it!
I'm with you all the way.
This is a question I could easily argue both ways.
In situations like this, of course, I always try the argument in favor of my client. Sometimes I win, sometimes I lose.
It’s best if you understand both sides and can argue both. That way, if the arguments against come up, you have a line of reasoning to counter.
Look at it this way: if you lose, you’re no better or worse off than you are now. If you win, your client gains big time and you look like the hero. Either way you come of looking like the expert.
Man up and go for it!
Ian Wilson, P.L.S. (CA / NV / CO)
Alameda County Surveyor
Alameda County Surveyor
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PE_PLS
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Sean,
Thanks for your input. Here's what I do not understand. The definition I gave from the SMA states that a subdivision is a division of land for financing purposes. Now I'll try my best to explain my lack of understanding: If I cut up land for financing, similar to the deed of trust, then I think I am creating a "subdivision" according to the SMA definition. Now if title is actually conveyed to someone as a result of default, its no longer a subdivision for financing because it doesn't stay in my name anymore, its conveyed to someone else. If a "subdivision" does NOT take place when the deed of trust is created for financing, then why does the SMA say that financing is a "subdivision"? I don't really understand this! Financing is a tool by which you don't convey the land! Its a catch-22. The SMA says financing is a "subdivision", but if title was conveyed the land would be SOLD, not FINANCED.??
In other words, financing, by its nature, does not convey title, but uses title as a collateral...how then can financing be under the definition of "subdivision" in the SMA? Any further insight?
Maybe somebody can shed light on why FINANCING is in the SMA under the "subdivision", even though FINANCING never causes a change in ownership?
The fellow at the county who deals with this is gone through next week, but after I meet with him I'll let you know how it goes...
Thanks for your input. Here's what I do not understand. The definition I gave from the SMA states that a subdivision is a division of land for financing purposes. Now I'll try my best to explain my lack of understanding: If I cut up land for financing, similar to the deed of trust, then I think I am creating a "subdivision" according to the SMA definition. Now if title is actually conveyed to someone as a result of default, its no longer a subdivision for financing because it doesn't stay in my name anymore, its conveyed to someone else. If a "subdivision" does NOT take place when the deed of trust is created for financing, then why does the SMA say that financing is a "subdivision"? I don't really understand this! Financing is a tool by which you don't convey the land! Its a catch-22. The SMA says financing is a "subdivision", but if title was conveyed the land would be SOLD, not FINANCED.??
In other words, financing, by its nature, does not convey title, but uses title as a collateral...how then can financing be under the definition of "subdivision" in the SMA? Any further insight?
Maybe somebody can shed light on why FINANCING is in the SMA under the "subdivision", even though FINANCING never causes a change in ownership?
The fellow at the county who deals with this is gone through next week, but after I meet with him I'll let you know how it goes...
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dmi
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Gromatici
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Deed of Trust
Since the Bank never foreclosed on the parcel, then it did not create a subdivision since they never took fee simple absolute but the land was retained by the owners. Once the terms of the Deed of Trust are violated, the bank can foreclose on the property described only in the Deed of Trust. Then, and only then, does it create a parcel.
Eric J Ackerman, PLS, RPLS, CFedS
Licenses: CA. AZ, ID, NV, CO,UT
Gromatici Land Surveying, Inc.
http://www.gromatici.com
proposals@gromatici.com
Licenses: CA. AZ, ID, NV, CO,UT
Gromatici Land Surveying, Inc.
http://www.gromatici.com
proposals@gromatici.com
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dmi
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As far as I know, the parcel has to be legally created (read comply with state and local laws rules and regulations) at the time (For SMA purposes prior to 1972) and the parcel has to have been CONVEYED. From what is stated there is no conveyence, as pointed out by Eric. There was an interst in land created by the deed of trust and a description to desribe the location of the interest. Its looks like parcel map time, but agian the local agency will decide.
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hellsangle
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Eric got it right!
ONLY when ownership changes . . . (and if it is in coincidence with SMA local Ordinances at the time)
Good question!
Phil-Sonoma
Good question!
Phil-Sonoma
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PE_PLS
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I see all of your points, and agree....
but why then is financing a portion of land considered a violation of the SMA since it falls under the definition of "subdivision"? Title is never conveyed by financing, and yet it falls under the definition of a "subdivision"....only in a default is title conveyed.....that's why I can't figure out why financing appears as part of the definition of "subdivision"
but why then is financing a portion of land considered a violation of the SMA since it falls under the definition of "subdivision"? Title is never conveyed by financing, and yet it falls under the definition of a "subdivision"....only in a default is title conveyed.....that's why I can't figure out why financing appears as part of the definition of "subdivision"
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PE_PLS
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Another thing I wanted to share: I posted this question on the POB website and Dave Karoly shared this about a deed of trust from Gordon's "California Real Estate Law, Page 265:
"Deed of Trust
The deed of trust is a three-party security device by which the owner of property (trustor) transfers title in trust to a third party (trustee) to hold as security for the repayment of a debt to the lender (beneficiary). The truste has the statutory and contractual power to sell the property at a private sale through an expedient summary procedure in the event of a default in the repayment of the note. (See Figure 15.2.)
The trustee is often named without agreeing to so serve. Many forms distributed by title companies and lenders have their names preprinted on the form. The beneficiary can change the trustee at any time and without the trustee's consent by recording a substitution of trustee."
I do not know much about this topic, but doesn't a deed of trust transfer title to this third party? How can this not be a subdivision?
Secondly, after the obligations of the loan are fulfilled a reconveyance is recorded...a reconveyance RE CONVEYS the land back to the owner. It seems that the word CONVEY in reconveyance means that title is changing hands...but again, this isn't something I really understand and I'm just trying to use some logic...but sometimes logic gets me into trouble...
"Deed of Trust
The deed of trust is a three-party security device by which the owner of property (trustor) transfers title in trust to a third party (trustee) to hold as security for the repayment of a debt to the lender (beneficiary). The truste has the statutory and contractual power to sell the property at a private sale through an expedient summary procedure in the event of a default in the repayment of the note. (See Figure 15.2.)
The trustee is often named without agreeing to so serve. Many forms distributed by title companies and lenders have their names preprinted on the form. The beneficiary can change the trustee at any time and without the trustee's consent by recording a substitution of trustee."
I do not know much about this topic, but doesn't a deed of trust transfer title to this third party? How can this not be a subdivision?
Secondly, after the obligations of the loan are fulfilled a reconveyance is recorded...a reconveyance RE CONVEYS the land back to the owner. It seems that the word CONVEY in reconveyance means that title is changing hands...but again, this isn't something I really understand and I'm just trying to use some logic...but sometimes logic gets me into trouble...
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dmi
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Dylan, I still do not buy your argument for the reasons I have stated and all the other reasons, as provided by practicioners who responded that have many years of land development experience under their belts. It is not us that you have to convince. The local AGENCY will make the determination. If you do not agree with their ruling you will have to avail your self of the regulator appeal process provided, unitl you have exhausted all avenues for a remedy to your difference of opinion with the local agency and then if you wish to pursue it futher you will have to file suit......
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PE_PLS
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I am not trying to convince you or anyone else here, just the local agency. Actually, I have practically zero experience in this. One of the main reasons I brought the question up here is my lack of understanding. I still do not understand the issue about financing being under the definition of subdivision, and I was hoping that someone with greater understanding of the SMA would be able to help me understand. Also, I don't have much understanding about deeds of trust. I don't understand how something can be transferred into a 3rd party trust, and then not be a conveyance. Again, its I that doesn't understand, and I was hoping you all could shed light on this.
I am not trying to play devils advocate for the sake of argument, rather I'm trying to understand these things and thats why I am asking the questions.
Thanks for your input.
I am not trying to play devils advocate for the sake of argument, rather I'm trying to understand these things and thats why I am asking the questions.
Thanks for your input.
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dmi
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My point was no matter what responders say, you still have to deal with the local agency. At some point you will have to provide a chain of title to support your claim that the parcel was created prior to 1972,legally. My understanding of created prior to, means that owership was transfered from one patry to another via a deed. The deed of trust just encumbers a particularly described portion of the property, THERE IS NO TRANSFER. The owner under the vesting deed is still the owner,even if they take out a loan.
What is reconveyed after the loan is paid off is the interest in the real property created by the deed of trust, not the real property itself. Because of this, I do not think the local agency is going to accept a deed of trust in the chain of title as evidence that a separate parcel had been legally created and conveyed(transfered to anothe party). Not all deeds create the same level of ownership interest.
Even if you wind up with a certificate of compliance, you still may not be abpe to biuld on the parcel. You will just have to go through the process to find out and the worst that can happen is that you have to do a parcel map.
What is reconveyed after the loan is paid off is the interest in the real property created by the deed of trust, not the real property itself. Because of this, I do not think the local agency is going to accept a deed of trust in the chain of title as evidence that a separate parcel had been legally created and conveyed(transfered to anothe party). Not all deeds create the same level of ownership interest.
Even if you wind up with a certificate of compliance, you still may not be abpe to biuld on the parcel. You will just have to go through the process to find out and the worst that can happen is that you have to do a parcel map.
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bruce hall
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This is kinda what I see.
........SHOWN ON the latest equalized county assessment roll as a unit or as
contiguous units, for the purpose of sale, lease or financing,
whether IMMEDIATE OR FUTURE......
It seems to me that what you have is something that is NOT SHOWN and is in the PAST.
But that just seems to simple.
GL
contiguous units, for the purpose of sale, lease or financing,
whether IMMEDIATE OR FUTURE......
It seems to me that what you have is something that is NOT SHOWN and is in the PAST.
But that just seems to simple.
GL
Bruce Hall Land Surveyor No. 4743
5732 Middlecoff Drive
Huntington Beach, Ca. 92649
714 840 4380
5732 Middlecoff Drive
Huntington Beach, Ca. 92649
714 840 4380
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Ian Wilson
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PE PLS wrote:
“but why then is financing a portion of land considered a violation of the SMA since it falls under the definition of "subdivision"? Title is never conveyed by financing, and yet it falls under the definition of a "subdivision"....only in a default is title conveyed.....that's why I can't figure out why financing appears as part of the definition of "subdivision"”
True…under normal conditions. However, IF the loan is foreclosed, the parcel would be divided. Today, that would be an illegal subdivision. The condition is in the SMA to prevent this possibility.
Just think. This would be a great way to subdivide. Work with a mortgage lender. Create a finance parcel around the parcel you want. Let the loan go into default. The mortgage holder takes the finance parcel, creating the lot. Bingo! Cool way around the SMA!
Don’t think certain mortgage companies are above such shenanigans? Two words: sub-prime loans.
“but why then is financing a portion of land considered a violation of the SMA since it falls under the definition of "subdivision"? Title is never conveyed by financing, and yet it falls under the definition of a "subdivision"....only in a default is title conveyed.....that's why I can't figure out why financing appears as part of the definition of "subdivision"”
True…under normal conditions. However, IF the loan is foreclosed, the parcel would be divided. Today, that would be an illegal subdivision. The condition is in the SMA to prevent this possibility.
Just think. This would be a great way to subdivide. Work with a mortgage lender. Create a finance parcel around the parcel you want. Let the loan go into default. The mortgage holder takes the finance parcel, creating the lot. Bingo! Cool way around the SMA!
Don’t think certain mortgage companies are above such shenanigans? Two words: sub-prime loans.
Ian Wilson, P.L.S. (CA / NV / CO)
Alameda County Surveyor
Alameda County Surveyor
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PE_PLS
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Thanks for all your input.
One more question: I tend to agree with you guys that this is a longshot and its up to the local agency....so, say the local agency does go for this and gives us a cert. of compliance and even lets us build on it, is there any way for them to go back on it if they come to the conclusion that there never was a valid subdivision? Could the neighbors complain and have the cert. of compliance somehow overturned? Or is a cert. of compliance in stone, and once given cannot be contested?
One more question: I tend to agree with you guys that this is a longshot and its up to the local agency....so, say the local agency does go for this and gives us a cert. of compliance and even lets us build on it, is there any way for them to go back on it if they come to the conclusion that there never was a valid subdivision? Could the neighbors complain and have the cert. of compliance somehow overturned? Or is a cert. of compliance in stone, and once given cannot be contested?
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dmi
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You are not immune from objection of the neighbors. Every jurisdiction is a little different, but there is probably some mechanism whereby the neighbors could protest the issuance of building permits. As far as I know there is no requirement for public noticing of certificates of compliance and therefore no opportunity for public comment. There may be a chance that public can protest the building permits. There could be EIR issues as well. But to address your question directly No, but there are other mechanism in place.
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Anthony Maffia
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PE_PLS said "... bought the land in 1956 decided to get a loan in 1961. A deed of trust was recorded that described just a small piece of the total parcel ... in the late 60's the loan was repayed ... later the overall piece of property was sold with no mention of the deed of trust."
Not only was it possible to do a subdivision by deed back in the day, but ALSO to merge parcels by deed. If the sale deed describes one parcel, then either no subdivision was ever intended, or if there were two possible parcels then they merged. Either way, one parcel.
Not only was it possible to do a subdivision by deed back in the day, but ALSO to merge parcels by deed. If the sale deed describes one parcel, then either no subdivision was ever intended, or if there were two possible parcels then they merged. Either way, one parcel.
- Anthony Maffia, LSIT
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land butcher
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In my past experiences with this - it all depends on the local agency.
In LA county the Surveyors office didnt care when or how it was created, if it shows as two parcels on the accessors map its 2 parcels.
In Riverside and Orange thats not the case - the title company has to prove it was subdivided prior to 1972 by deed.
Since all govt agencies are searching for $$$$$$$$$$ its their call unless you can get a lawyer to back them down.
In LA county the Surveyors office didnt care when or how it was created, if it shows as two parcels on the accessors map its 2 parcels.
In Riverside and Orange thats not the case - the title company has to prove it was subdivided prior to 1972 by deed.
Since all govt agencies are searching for $$$$$$$$$$ its their call unless you can get a lawyer to back them down.
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PE_PLS
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Results...
Well, we finally met with the local agency...The local agency would grant us the split if the lot described in the deed of trust conformed to the zoning regulations in effect at the time the deed of trust went into effect. The deed of trust was from the early 1960's and the zoning ordinance went into effect in the area in the 1950's and it did not conform to the zoning ordinance.
All this to say this was a huge learning experience and this jurisdiction would've allowed the split if the deed of trust had gone into effect before the zoning ordinance, or if it had met the requirements of the zoning ordinance in effect at the time. So while this one didn't work out, there are probably many times where this jurisdiction would allow a deed of trust to be used in justifying a subdivision of land.
Thanks all for your imput
All this to say this was a huge learning experience and this jurisdiction would've allowed the split if the deed of trust had gone into effect before the zoning ordinance, or if it had met the requirements of the zoning ordinance in effect at the time. So while this one didn't work out, there are probably many times where this jurisdiction would allow a deed of trust to be used in justifying a subdivision of land.
Thanks all for your imput