Drafting Error Leads to Invalidating Purchase Agreement Under Subdivision Map Act

February 19, 2009

In Sixells, LLC v. Cannery Business Park, 170 Cal. App. 4th 648 (2009), the appellate court found a real estate purchase contract to have violated the Subdivision Map Act because it allowed the purchaser to either complete a subdivision map creating a four-acre parcel, or alternatively to waive the recording of the map and complete the purchase without the creation of the separate legal parcel. The contract included a list of conditions to the purchaser's obligation to close escrow. It also provided that the conditions "must occur and/or be waived by Buyer" before the purchaser's obligation to close was triggered. Reading these terms together, and noting that the purchaser had drafted the contract, the court stated that the contract allowed the purchaser to complete the transaction by waiving the recording of a final map. According to the court, this contract therefore allowed the sale of a parcel before the recording of a final map without being expressly conditioned on the filing of a map. Accordingly it was held void as a matter of law.

The opinion omits important facts about the case and fails to fully comprehend the realities of the subdivision process. The court could have interpreted the "occur and/or to be waived" language as applying to each of the conditions only to the extent they were applicable. Since the recording of the final map could not be "waived" as a condition to closing under the Subdivision Map Act, the court could have read the contract as merely requiring that condition to "occur." This view would have been consistent with the parties' expectations. In fact it was entirely consistent with what occurred, but was not described in the opinion. According to the purchaser's attorney, the purchaser had actually completed the map and submitted it to the seller to sign (as required by the City of Sacramento). The seller then refused to sign as a better offer had come along, taking the position that the contract was void.

In sum, those developers who are pursuing subdivisions in reliance on purchase contracts should review them closely to ensure they will not encounter problems as they get closer to completing the project.