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Selling a Subdivided Parcel

Subdividing to sell a portion of property can sometimes necessitate site improvements for preserving the use or future usability of the remaining land. A private road for example or underground utilities might have to be constructed, which is often made the buyer’s obligation as part of the sale terms for acquiring the new parcel. However, the P&S Agreement describing the agreed upon site improvements isn’t always written clearly, and ambiguous language will favor the buyer. Promaneer has reconciled disputes over such improvements to be constructed by the buyer for which some were dragging on years after the sale because no timeline for the improvements was established in the P&S.

“The spirit of the contract language” is a scorned catchphrase for most experienced professionals. Sorting out the intent of inexact language in an already executed agreement is hardly ever an open-and-shut case that is settled by the author of the contract in question. When the dispute escalates to legal proceedings, it’s “the four corners of the contract” that are scrutinized, and the language still doesn’t become any clearer intensely debating its meaning.

When drafting language for the post-sale obligations of the buyer be certain the scope requirements for site-improvements are descriptive and tied to defined durations starting on computable dates. Of course a detailed scope of work is difficult to define at the P&S stage and the buyer would be highly unlikely to invest in design fees for particularizing the work; however, similar to a design-build project you should approach this situation in the same manner. You are essentially making the buyer perform a design-build, so utilize the same methods to ensure all parties are clear on what is to be delivered after the sale.

If you are not familiar with design-build delivery projects, the initial document that is prepared is frequently referred to as the Owner’s Project Requirements (OPR). Not to be confused with the Basis-of-Design, the OPR is developed well before the start of the design phase, but is the guiding document all the way through the project from beginning to completion. If written properly, the OPR is used to measure the contractor’s satisfaction of its obligations to the Owner. Thus the terms in your P&S for the buyer to construct whatever site-improvements are agreed upon should mimic the OPR.

Great, but what is an OPR? What does it contain? How should it be written?

At the most basic, the OPR establishes the criteria for the scope, quality, and duration of the work. For example, let’s say a private road is to be built by the buyer for the seller. The OPR might set a SHA pavement design standard as a requirement. If an asphalt pavement, define the asphalt mix requirements too. Additionally, continuous concrete curbs and gutters could be described to 2013-06-03_08-56-56_475meet or exceed a pre-defined design reference standard. The slope and plane of the road pavement surface should be adequately specified so as to avoid ponding water and low spots. Who will maintain the pavement after construction? Warranty of the pavement? These are just a few of the requirements that Promaneer has had to re-establish during negotiations to resolve disputes over unclear obligations written for the buyer to construct site improvements. Craft these requirements properly and during the P&S negotiations so you can avert the potential consequences later.

Storm-water is another major issue that is best sorted out early between buyer and seller as to how it should be managed and by whom. Does the topography and natural flow affect one or the other parcel? Will future paved surfaces increase flow onto one or the other? Where will the storm water outflow? These questions are quite difficult to answer at the P&S stage because many variables that can influence storm-water management (SWM) are undetermined. If there will be any earthwork, re-grading, or other future improvements, all of these can impact SWM. It behooves the seller to seek a civil engineering firm to assist with assessing storm water issues in order to inform the P&S negotiations and establish respective requirements for inclusion in the terms. Of course upfront money is put at risk to engage a civil engineer before the land sale is consummated, but you also probably have engaged an attorney(s) already to draft the P&S. So augment the language being drafted with the input from a good civil engineer who is invaluable to your team of advisors during any major land transaction.

For more information on preparing an OPR or developing a design-build project, contact Promaneer at 202-715-3990.

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May 2024


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