Sher’s bill closes antiquated subdivision loopholes
Prevents landowners from inflating property values and passing along costs to taxpayers


by Lennie Roberts

There is a new twist on the very old game of making money by developing land. Traditionally, land speculators have reaped large windfall profits by subdividing property. Once the subdivision is granted, the owners can sell the land at a greatly increased price.

Today, developers must go through a rigorous process to subdivide land, involving Environmental Impact Reports, public hearings, conditions of approval to protect sensitive habitats, scenic areas, or other resources, and compliance with General Plan and Zoning requirements. Provision of access roads and other improvements are the financial responsibility of the subdivider; he either puts in the improvements prior to sale or guarantees their construction through a bond.

Up till now, most landowners wouldn’t go through the onerous process of subdividing land when they plan to sell it for park and open space purposes. Recently, several high-profile cases have focused public attention on a new and lucrative use of two loopholes in state law. Creative speculators have used these loopholes to reap huge financial windfalls at the expense of the public.

The Certificate of Compliance (COC) loophole
The practice of land subdivision has been regulated since 1893 in California by the State Subdivision Map Act. But many thousands of parcels were "created" prior to the Map Act. A provision in state law called Certificates of Compliance (COCs) allows landowners to dig up old property records that date back to ancient mining claims or federal patents in the 1850’s and 60’s and bypass the subdivision process entirely. In addition to old claims, early practices of deeding land to heirs or new owners by simply recording the grant are generally recognized as "legal" under the COC process.

The problem with these antique parcels is that they often have no legal access, ignore such things as topographic or geologic constraints, and are out of compliance with current zoning requirements.

On the San Mateo coast, the County has identified as many as 500 of these antique “illegal” parcels. Unfortunately, under state law, the County has very few tools to ensure that parcels carrying COC’s are in compliance with zoning standards. Development on many would be problematic.

The Lot Line Adjustment (LLA) loophole
And worse yet, through a second loophole in the law - Lot Line Adjustments (LLAs) - owners can move parcel boundaries to make properties more developable. Although LLA’s were conceived as a way to correct minor problems between two properties - such as a house or driveway that was built slightly over the property line - some developers have used LLA’s to move entire parcels to enhance their value.

A gold mine for developers financed by taxpayers
Does this all sound like a field of dreams? Consider the following cases. The 7,000 acre Coast Dairies property in northern Santa Cruz County was bought by a Las Vegas real estate speculator for $20 million. A year later, he sold it to Trust for Public Land for $43 million. The key to the windfall was 139 COC’s - no fuss, no muss with public review. The 1,065 acre Bear Creek Redwoods tract near Los Gatos recently purchased by Midpeninsula Regional Open Space District (MROSD) with significant private contributions as well as public dollars, escalated in cost from $20 million to $25 million after the owner produced 23 COC’s.

The latest highly controversial case involves the vast Hearst Ranch holdings in San Luis Obispo County. Hearst sought permits to develop some of its 80,000 acres; last year its proposal was denied by the Coastal Commission for the second time. Hearst then informed the Coastal Commission that it was creating 279 parcels through the COC process. Once the COC’s were issued, Hearst will likely use LLA’s to rearrange the parcels to maximize the land's development potential - ensuring that all parcels have ocean frontage, for example.

At least two national land conservation organizations are negotiating with Hearst to acquire conservation easements on the land, and of course, the value of these easements will reflect the entitlements that Hearst has on the property. Although entitlements present increasingly large problems for land preservation efforts throughout the state, the publicity Hearst, Coast Dairies, and Bear Creek Redwoods have received may provide a catalyst to achieve some long overdue reforms.

Closing the loopholes
Senator Byron Sher recently acted to close these loopholes, by crafting a set of revisions to the Certificate of Compliance and Lot Line Adjustment sections of the Subdivision Map Act. Sher's SB 497 squeaked through the legislature late this session, and the Governor signed the bill with just a day to spare.

There was tremendous pressure from real estate, development, and landowner interests on the Governor to veto the bill. Hearst Corporation even hired the Governor's chief fundraiser to lobby. What overcame the special interests was an outpouring of support from environmentalists all over the state, and a number of news stories and editorials.

Many thanks go to our local environmental hero, Senator Byron Sher, and to the organizing skills and persistent persuasion of the statewide organization League for Coastal Protection, for pulling this off.

Committee for Green Foothills urges you to thank Senator Sher for his persistence on this important issue.
Send your letters of thanks to:
Senator Byron Sher
State Capitol, Room 2082
Sacramento, CA 95814
Fax (916) 323-4529
Email senator.sher@sen.ca.gov