If you own several lots OR homes in ONE neighborhood, you'd be wise to read this entire article.
Arizona has very strict laws regarding subdividing residential land, due to an overabundance of caution after Arizona became ill-reputed for land fraud in the 60's. That's the problem with law. It's often reactionary, and winds up doing more harm than good in the long run.
If you own or have owned more than 6 homes or lots in ONE subdivision, there is a very good chance you are breaking Arizona law.., .and probably aren’t even aware of it. That's the other problem with law, isn't it?
Back in the sixties, a fell by the name of Ned Warren, a developer/con-artist, bilked 1000’s of innocent real estate buyers by selling the same lot to multiple people, creating fake deeds, and representing river bottoms, or cliff-faces as buildable lots. In fact, many Northern Arizona communities have Ned Warren subdivisions, hence the lack of roads, paved streets, or utilities in some developments.
To prevent future scams, Arizona developed some of the Nation’s toughest laws regarding illegal subdividing. They help ensure that heavily developed areas will have proper access, utilities, drainage, and that consumers will have full disclosure regarding the land they are purchasing. This disclosure is provided through a disclosure affidavit or a Subdivision Public Report.
So, when a person purchases lots in a subdivision, at what point does the purchaser become a sub-divider and need a public report before selling the lots?
A.R.S. 32-2101 defines a sub-divider as "a person who offers for sale or lease six or more lots, parcels or fractional interest in a subdivision or who causes land to be subdivided".
A.R.S. 32-2183 states," A sub-divider shall not sell or lease or offer for sale or lease in this state any lots, parcels or fractional interest in a subdivision without first obtaining a public report from the commissioner except as provided….”
Scenario 1 You own or have an interest in, six or more lots in an approved subdivision. You must obtain public report before offering for sale, ANY of the lots.
Scenario 2 You buy and re-sell three lots in a subdivision in 2004. Then you purchase 2 more lots in that subdivision in 2005 and sell them. A public report is not required. But if you purchases one or more lots in this subdivision after the first 5 you sold, you are required to obtain a public report for the subsequent lots. There is no time limit over which the purchases occurred. If a person purchases 3 lots in 1979 and sells them and in 2006 purchases three or more lots, that person is required to obtain a public report before selling any of them, because they now have 6 or more lots and are considered sub-dividers under Arizona law.
Scenario 3 A subdivision was platted in 1957 and no improvements have been made. In 2004, a person purchased six lots. They will need to obtain a public report before offering any of the lots for sale.
Scenario 4 Mr. Jones purchases 4 lots in a subdivision in his personal name. Mr. Jones also owns Homes4U, LLC, which purchases 2 lots in the same subdivision. Public reports are required.
These scenarios have been taken from literature and articles put out by the real estate department over the years.
Although the law is designed to prevent those who are actively and purposefully engaging in illegal subdividing, the law is written in such a manner where innocent and casual property owners may get caught cross-hairs. Shared well agreements, utility easements, and road maintenance agreements between 6 or more parcels, are currently under heavy scrutiny by the department as potentially "acting in concert" with other parties to create illegal subdivisions.
For more information on subdivision laws in Arizona, we suggest you contact a land use/real estate attorney. If you call the Department of Real Estate, the staff will generally tell you that they "can't give you legal advice," on any laws they administer. How's that for irony?