Clustered zoning, paper streets, and unbuildable lots, oh, my!

Investing, Wholesaling on April 13th, 2016 Comments Off on Clustered zoning, paper streets, and unbuildable lots, oh, my!

Had a very interesting deal I worked on for a while, and figured I’d share for those young minds yearning for some lessons — enjoy!

LandforSaleSo, I was twiddling my thumbs one day (As if that ever happens!) when an AAwesome wholesaler I’ve successfully worked with in the past contacted me and offered what I thought was 5 acres of land with potential to build in Dracut.  Ok, I’ll bite — sounded good and I got it under agreement with a 4-month permitting contingency. It looked like a great lot with one issue — access from the main road. Whatever rehab or development was undertaken would require creating access from the main road, which I was hoping could be accomplished by a private driveway. From what I could tell, the sellers were in really tough straits and were looking for anyone who could do something with this land. Cue Super Nick to the rescue!

First step, Assessor.  I pulled the property card at the assessor’s office in the town hall, and discovered there were not one, but two property cards. Hmmmm, curious. Huh. I figured they must be family members, took copies of both property cards and proceeded to the next step. I checked in with the town’s building inspector to ask them who else they recommend I speak to, and they said “You need to see everybody — planning board, town engineer, board of health, conservation commission.” I love this ride around the offices, so I proceeded.

My next stop was the town engineer, which is where I first raised the question — “To create public access to the lot, can I put in a private driveway, or does it have to be a public road?” What’s the difference, you ask? A driveway is basically compacting dirt and stone and paving, whereas a road requires bringing in all utilities, granite curbing, sidewalks, etc.

So, the town engineer tells me there’s a 99% (He said 100%, but I heard 99% in my head.) chance that we would NOT be able to get away with a private driveway. He then directed me to the town planner. I put the conceptual plans in front of the town planner and asked her what she felt was the best use for this land that I could get support for. She suggested a clustered development, which reduces the lot sizes and frontage per lot, allowing for a smaller road, which was looming as the biggest cost to this project.  And in case you’ve never had a project that required installing a public road, the cost is roughly $400 per linear foot and this particular lot requires at least 500 linear feet, so we were looking at $200,000 right off the bat, before we even started building a single house.

This was the first time I’ve encountered clustered zoning (though I’d heard of it and sort of knew what it was), so it was good to learn about it. Certain towns allow it — you have to submit plans to the various town permitting boards to prove that you could build a standard subdivision meeting current requirements, and then submit a second time to show how the cluster development leaves more green space, taking a small piece from each lot to create a common open green space. Besides being environmentally friendly, it would save the developer (me) money on the road construction!

The conservation board was next, and then the board of health to address septic and sewer issues. Conservation is the one who told me that I’d have to bring the plans through twice, which was when I realized this was fast becoming a pricey engineering proposition. In the back of my head, I’m wondering “Is this even going to be worth it?” At this point I figured I’m learning a lot, so let’s keep going until I have to pay someone lots of money. Since the five acres met all the zoning requirements, I was spared a specific meeting with zoning.

While I continued poking at the town engineer to let me put in a driveway with a cul de sac instead of a road, I took all this information, went back to the office and wrote a long e-mail to my engineer. I gave him the lay of the land from each department and told him that if we have to put in a public road this kills the deal and asked him to draw up plans with a private driveway to see if it’s do-able. My engineer made a bunch of calls to the town and told me the town wouldn’t provide a definitive answer until it went through the boards at least one time.

So I spent another three weeks gathering bids from road contractors, who all came in between $200K – $300K for this dumb road.  By looking at those bids, it essentially killed the deal for me, especially since I was told by the town engineer and my engineers that there was little-to-no chance of getting this approved as a private driveway.

At this point, since I could no longer take this deal forward, I asked the wholesaler if I could assist him in a co-wholesale and I would take it to some of my developer contacts who may be able to do the road for less money than I can. He agreed, so I shared it with a few of my contacts in that area. And this is where the second part of the story begins…

One of developers I sent the deal to knew the abutting neighbor and forwarded all my details to him. And all of a sudden I had several voicemails at the office and an e-mail that read: “Nick, it appears you’re trying to sell my land as part of your deal, which is news to me. Please call me ASAP.” Before I called him back, I immediately called the wholesaler to see if he knew what this was about.

Wholesaler:  “Nick, that parcel is not part of this deal. I’ve only got the back 2.25 acres.”
Me: “Oh, CRAP.”

When I looked more closely, I saw that the caller’s last name matched the owner’s name on the property card I pulled at the beginning of this process, which now is a lot less odd than it was at the beginning. Turns out my five acres was never actually five acres, but rather it was 2.25. I’m not sure where I got the idea it was five acres — I have to take the hit on this one since I can’t find anywhere that the deal was marketed to me that it was 5 acres, though NO ONE ever corrected me at any point in this process. I’ll blame it on that knock to the head I took when I fell down the meth lab basement stairs last year. (Wait, what was I just talking about? Oh, right…)

At this point, I called the neighbor, apologized profusely that there was a misunderstanding and that I had screwed up, and then the neighbor divulged lots more information. Turns out that back in 1985 the builder split the parcel into his lot with his own house and the back lot. The only way someone could build on the back lot is if a road is built and the road is required to be a minimum of 50′ wide, and the lot only has 35′ of frontage (check out the plot plan). This fact alone renders the back lot completely unbuildable forever unless one of the two neighbors sells 15′ feet of their frontage, which neither one wants to do since they don’t want anyone building back there. Bottom line, this property is land-locked behind two abutters who do NOT want to sell and will not support any building activity.  This deal is officialy DITW — Dead in the Water. But wait — it gets better…

VarnumPlotPlan

The neighbor graciously offered to buy the lot from the sellers for $5K over what they paid in 1986 — but not $90K over, which is what we had it under contact for. I thanked him for all the info and then made one last-ditch effort to help the sellers recoup any of their investment (because at this time, I knew I was WAY out of this deal). I called the assessor and asked them to check if there was ever a paper road that connected this lot to the street. In some towns, if there is a plan of a road recorded anywhere, even if it’s just proposed and never built, there’s a chance they would allow it, essentially allowing us to “force” the lot into being buildable. The admin in the assessor’s office checked the file, and at first told me she had nothing on file. I asked her to double-check since there were some claims on that paper street. About four hours later the Dracut chief assessor called me back and said “You opened up a whole can of worms on this property. After a lot of research, yes, there was a paper street proposed; but there’s a conflict on this parcel with the engineering department, and let’s just say you don’t want to get involved on this one.”

It turns out there’s a discrepancy between the town’s engineering and assessors department on this parcel. The engineering department claims the back lot should never have been separated from its original parcel and the builder didn’t do it legally, setting in motion a process where their town attorney has been retained to unwind all the transactions that have happened since that date and put the two parcels back together.

Wow. I’ve never worked on a wholesale deal that opened up a can of worms so big that I set in motion an investigation and legal action! Needless to say, I called the wholesaler, shared everything I learned, gave him the neighbor’s contact info in case the seller wanted to make a “quick” $5K on their unbuildable lot, and bowed out of the deal.

Learning moments:
•  Cluster developments are a viable option (but still expensive with time and engineering $$); and
•  Trust my gut when something doesn’t feel quite right in a deal (i.e. 2 public record cards for an alleged ONE parcel being sold to me).

Two good lessons and I’m happy to have learned them on a deal where the biggest cost was my time.  Hope you have had your share of learning experiences along the way too — please share them with us by e-mailing the office, and we’ll post the best ones in a future blog post!

Keep calm and rehab on!

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