The purchase of real estate is among the most important investments most Americans make in their lifetimes. According to ICLG, subdividers must comply with real estate laws when offering new properties for sale and abide by the terms of the agreement at the time of purchase. Therefore, before marketing any new subdivisions in any state, subdividers must obtain a public report from the governing body. For example, if you’re in California, you can obtain one from the Department of Real Estate (DRE).
Subdivision or public reports are essential disclosure documents every property or land buyer should read and understand before investing their money. More importantly, subdividers are required by law to legally obtain the document and provide a copy to all prospective buyers that request it.
In this post, we’ll share what a public report in real estate is so you know all the legal proceedings when investing in a subdivided property.
What are subdivision public reports?
By definition, a public report in real estate is a legally obtained disclosure statement for prospective property buyers and the public which permits the sale or lease of subdivided properties, such as units, parcels, or lots. It’s similar to the business law which states that publicly traded companies must obtain approval to issue or sell stocks.
Any individual, real estate agent, or company that wants to sell or lease units within a subdivision require public reports to legally sell properties that:
- Have more than five units.
- Are offered by public agencies.
- Are made for commercial or industrial purposes.
- Have no common area within a city’s boundaries.
For more specific examples, you can contact the Department of Real Estate in different states, such as Arizona, California, or Colorado, etc.
What information does a public report contain?
Typically, a public report includes general information, such as:
- Applicant’s first and last name
- Property location and size of unit or subdivision
- Utility bill copies
- Complete tax reports
- Maintenance and condition reports
- Operational costs and expenses
- Information on any unusual costs unit buyers will have to pay
- Information on easements or setback requirements
- Any specific restrictions placed by the seller on buyers
- Any special permits required for operations
Essentially, it includes any costs related to the property that buyers will be responsible for once they sign the agreement. However, every public report contains unique information catering to specific projects and locations, and the information they offer assists prospectus buyers in their decision-making. The information also offers buyers extra protection from misrepresentation, fraud, and deceit since the Department of Real Estate oversees the application and audits the property before finalizing the report.
Types of public reports offered by the department of real estate
To offer subdivided properties to potential buyers, owners must visit the DRE to produce subdivision reports. Here are the main types:
Preliminary public report (pink)
A preliminary or pink report legally permits property owners to advertise some of their units within a subdivision and while reserving others for a refundable deposit. However, an agreement made based on a pink report is not always binding, and therefore, it’s much easier to obtain than other public reports. Essentially, most owners use it to start the advertising process.
Conditional public report (yellow)
A conditional or yellow report legally permits subdividers to enter a binding contract with buyers for the sale of one or multiple units within their subdivision. However, this report only remains valid for up to six months after which subdividers must renew them if they want to close escrows based on them.
Final public report (white)
All property owners with subdivisions within the DRE jurisdiction must have a final or white public report which, unlike yellow reports, is valid for up to five years. Property buyers are legally required to provide this report to finalize the sale or lease of units or lots within their subdivision.
Amended public reports
These are reports that have been altered by the subdivider before expiry. To make changes or additions, subdividers must obtain another report before selling or leasing their altered units or lots. This report remains valid until the remainder of the original final public report.
Renewed public report
Following the term completion of a public report, subdividers can request for a renewal of both final or amended reports. Unless you require some changes to the document, the DRE doesn’t require any further information from any person.
Interim public report
An interim public report is a temporary report that provides the same authority as a final report but can only be offered to subdividers after the issuance of a final report. They are also printed on pink paper so make sure you read the fine print before making any decisions.
Limited-term public report
In many cases, the DRE does not grant the usual 5-year term to subdividers due to issues in paperwork, pending payments, or partial ownership. Even though it still has the same assurances and is legally binding, it usually expires within 2-3 years depending on the review process and subdivider’s resources.
Obtaining a public report in real estate isn’t necessarily a complicated task if you know what you’re doing. The process is quite straightforward, and depending on your paperwork, it can be complete in a matter of weeks. If there are any lackings, the DRE will provide a quantitative deficiency notice within 10 days so you can make amendments and resend.