TYPES OF SUBDIVISIONS

TYPES OF SUBDIVISIONS

Standard

A standard subdivision is a subdivision with no common areas. Also, subdivisions that have reciprocal
easement rights appurtenant to the separate interests along with a homeowner’s association that can enforce an
assessment lien in accordance with Civil Code Section 1367 or 1367.1 would not be a standard subdivision.

Common Interest

Purchasers in a common interest subdivision own or lease a separate lot, unit, or interest, along with an
undivided interest or membership interest in at least a portion of the common area of the entire project.
Normally, an association of the owners manages the common area. Condominiums, planned developments,
stock cooperatives, and community apartment projects are the four types of common interest subdivisions.

A condominium consists of an undivided interest in common in a portion of real property coupled with a
separate interest in space called a unit, the boundaries of which are described on a recorded final map, parcel
map, or condominium plan in sufficient detail to locate all boundaries thereof. The area within these boundaries
may be filled with air, earth, or water, or any combination thereof, and need not be physically attached to land
except by easements for access and, if necessary, support. The description of the unit may refer to: (i)
boundaries described in the recorded final map, parcel map, or condominium plan; (ii) physical boundaries,
either in existence, or to be constructed, such as walls, floors, and ceilings of a structure or any portion thereof;
(iii) an entire structure containing one or more units; or (iv) any combination thereof. The portion or portions of
the real property held in undivided interest may be all of the real property, except for the separate interests, or
may include a particular three-dimensional portion thereof, the boundaries of which are described on a recorded
final map, parcel map, or condominium plan. The area within these boundaries may be filled with air, earth, or
water, or any combination thereof, and need not be physically attached to land except by easements for access
and, if necessary, support. An individual condominium may include, in addition, a separate interest in other
portions of the real property. A condominium may, with respect to the duration of its enjoyment, be (l) an estate
of inheritance or perpetual estate; (2) an estate for life; or (3) an estate for years, such as a leasehold or a
subleasehold.

Typically, an owner of a condominium owns in fee simple the air space in which the particular unit is situated
and an undivided interest in common in certain other defined portions of the whole property involved. An
association and its elected governing board perform the management functions.

A planned development is defined in Civil Code Section 1351 (b) and (k) as consisting of lots or parcels
owned separately and lots or areas owned in common and reserved for the use of some or all of the individual
lot owners. Generally, an owner’s association provides management, maintenance and control of the common
areas and has the power to levy assessments and enforce obligations which attach to the individual lots.

A stock cooperative is defined in Section 1351 (m) of the Civil Code as a corporation which is formed or
availed of primarily for the purpose of holding title to improved real property, either in fee simple or for a term
of years. All or substantially all of the shareholders receive a right of exclusive occupancy of a portion of the
real property, which right is transferable only concurrently with the transfer of the share(s) of stock.

Most stock cooperative projects are of the apartment house type, operated by a board of directors and including
community recreation facilities. The homeowners’ governing association is usually a nonprofit mutual benefit
corporation.

A limited equity housing cooperative is a corporation which meets the criteria of a stock cooperative and
complies with the requirements of Section 33007.5 of the Health and Safety Code. To assure that limited equity
housing cooperatives provide decent housing for low and moderate income families, the Health and Safety
Code mandates the following conditions:

1. The corporation holds title as a nonprofit public benefit corporation pursuant to the Corporations Code OR
the corporation holds title (or a leasehold of at least 20 years) subject to conditions which will result in
reversion to a public or charitable entity upon dissolution/termination.

2. Any resale of a unit shall not exceed the sum of the original consideration paid by the first occupant, the
value of any authorized improvement to the unit and an increment based upon an inflation factor, not to
exceed 10% per year.

3. The “corporate equity” can only be applied for the benefit of the corporation or a charitable purpose.

4. The management documents for the corporation can be amended only by a vote of at least 2/3 of the
owners.

Section 11003.4 (b) of the Code exempts a limited equity housing cooperative from the requirements of the
Subdivided Lands Law under the following conditions:

1. At least 50% of the development cost (or $100,000, whichever is less) is financed singly or in combination
by governmental agencies listed in Section 11003.4 (b)(1) OR the property was purchased from the
Department of Transportation for development of the cooperative and is subject to a regulatory agreement
approved by the Department of Housing and Community Development for the term of the permanent
financing, whatever the source of the financing.

2. No more than 20% of the total development cost of a limited equity mobilehome park (or 10% of any other
type of limited equity housing cooperative) is provided by purchasers.

3. A regulatory agreement provides for: (a) assurances of completion of common areas and facilities; (b)
governing instruments for the organization and operation of the cooperative by the members; (c) an
adequate budget for maintenance and management of the cooperative; (d) distribution of a report to any
prospective purchaser, detailing the financial status of the cooperative and the rights and obligations of
members.

4. The agency which signs the regulatory agreement is satisfied that the governing documents [as specified in
Section 11003.4 (b)(4)] provide adequate protection for the rights of cooperative members.

5. The attorney for the recipient of the financing or subsidy shall provide to the agency signing the regulatory
agreement a legal opinion that the cooperative meets the requirements of Section 817 of the Civil Code and
the conditions for exemption set forth in Section 11003.4 (b) of the Code.

Residents sometimes form a limited equity housing cooperative to purchase a mobilehome park.

In a community apartment project, as defined by Civil Code Section 1351 (d) a purchaser receives an
undivided interest in the land coupled with the right of exclusive occupancy of an apartment located thereon.
The owners elect a governing board which operates and maintains the project.

Undivided Interest

A partial/fractional interest in an entire parcel of land is called an undivided interest. The land itself has not
been divided, but its ownership has been divided.

The creation, for sale, lease, or financing, of five or more undivided interests in land, whether or not improved,
constitutes a subdivision and a public report is required prior to marketing the interests. Section 11000.1(b) of
the Code provides for several exemptions, including purchase of the undivided interests by people related by
blood or marriage or by ten or fewer persons who: are informed concerning the risks of ownership; are not
purchasing the property for resale; and waive the protections offered by the Subdivided Lands Law.