An often-overlooked issue regarding real property is whether the lot or parcel being conveyed was legally created. Oftentimes a lot or parcel is sold multiple times, among multiple parties, leading everyone involved in the transaction, the buyer, the seller, and the title company, all to assume the lot was legally created.
Too often, however, the original sale of the lot or parcel did not involve obtaining the required land use approval for division and ultimate sale of a legal lot. Because real property is often sold multiple times before it is developed, the failure to obtain legal approval for the division and sale of the lot, does not come to light until someone seeks land use approval for development of the lot.
In many circumstances, the problem can be remedied. In others, there may be no remedy, and the current owner may have a piece of land that, for land use purposes, the regulating authorities contend does not exist and cannot be developed. Even when the problem can be fixed, the legalization process will result in significant costs and delays.
Although statutes prohibit sellers from selling lots not legally created, and provide buyers remedies against the sellers, too often after a sale is closed, the proceeds are in the wind, and a buyer is left with little remedy.
More and more, local jurisdictions are going back to the original creation of a parcel to determine if it was created in accordance with land use regulations. When it was not, those jurisdictions require a legalization process, which can result in significant additional costs, and delays. Accordingly, prudent purchasers will investigate whether appropriate land use approval was obtained to create the lot or parcel they are purchasing. A little bit of due diligence before closing can avoid significant problems down the road.