LAND ASSEMBLAGES — OVERLOOKED ISSUES

by L. Charles Long, Jr. *

Transaction real estate attorneys often are called upon to assist their clients in negotiating and drafting real estate contracts to acquire land for development. Occasionally, practitioners are called upon to help in the assemblage of multiple parcels of land into a much larger potential development – a jigsaw puzzle, with each land parcel constituting a more or less important piece.

Such assemblages require the practitioner to ramp up his drafting skills and to employ an overlay of additional contract considerations rarely otherwise utilized. The purpose of this article is to provide real estate practitioners with an overview of items which need particular attention under these circumstances. The discussion embraces two categories of issues – considerations for contract drafting and title and survey issues.

I. CONTRACT DRAFTING CONSIDERATIONS AND CRITICAL DATES CHART

A. All-or-None Clauses

Since an assemblage consists of putting under contract and then closing upon a number of parcels of land, usually adjacent to one another, it is critically important that the acquisition contract contain at least one clause specifically making it a precondition to purchaser's obligation to close that purchaser has the capability to close simultaneously for the other parcels in the assemblage. Your client and you will need to consider the principal disadvantage to such a clause, namely, blowing your client's "cover." The clause puts the sellers on notice that his piece is important above and beyond its intrinsic value as a stand-alone parcel, giving the sellers an opportunity to be more aggressive in price negotiations and the entire range of "lone-wolf" and "spoiler" behavior. It has been my almost universal experience, however, that the advantages of the specific contract "out" far outweigh the disadvantages of exposing the purchaser's assemblage intent.

It is often useful to append an exhibit to the Contract – either a list of the other key parcels in the project or a map with the other key parcels outlined or cross-hatched. Thus, the clause can point to the exhibit to identify the other parcels that are the basis of the contract precondition. A sample clause follows.

B. Contract Deadlines

Typical land acquisition contracts provide for a time period or varying time periods during which purchaser may: (i) exercise due diligence by undertaking a spectrum of investigations and studies of the property, including physical surveys, title examination and title insurance commitment issuance; environmental engineers' studies; other geotechnical studies, such as soil bearing loads; wetlands investigations; and, in many instances now, archeological/historical significance surveys; and (ii) seek to obtain all required governmental and regulatory approvals, including rezoning; utilities provision; highway matters, including entrances, de-acceleration lanes, traffic signals and the like; and, if necessary, U.S. Army Corps of Engineers wetlands delineation/mitigation.

Aside from the obvious desirability of providing purchaser with lengthy time periods within which to satisfy himself on due diligence and to acquire regulatory approvals, the contract draftsman will need to be alert to the need to be flexible. Sophisticated sellers understand that different matters mentioned in the preceding paragraph take very different time tracts and, accordingly, can be expected to negotiate for a matrix of deadlines – different for each category of inspection or approval. Quiz your client and list the time periods for each that he "can live with" and try to settle for nothing less in the contracts.

Try to negotiate built-in extensions, especially for regulatory matters timetables over which your client has little control. Expect sellers to ask for extension fees, or for the deposit to "go hard" if extensions are required. Some (thoughtful) sellers will seek to provide that purchaser must settle if your client actually "pulls the trigger" and rezones the land, attempting to preempt any other contractual preconditions or outs. If you draft a powerful enough all-or-none precondition, you may be successful in providing your client with the necessary out. Some sample provisions follow:

Since the zoning process and associated regulatory approval processes typically take the longest of all the due diligence activities, seek to provide the buyers with an "out" which permits termination of the contract if, at the end of the day, buyers are "missing" an important governmental approval, or the final rezoning award.

C. Critical Dates Chart

Once sufficient contracts have been entered into with prospective sellers to assure the buyer that he can gain control over the entire "project," or at least the critical core properties, consider creating a Master Closing Checklist which sets forth sellers' and buyers' obligations under the contract, referencing the paragraphs which require the performance, by date (e.g., July 9, 2001) or time period (60 days after the contract is executed by all parties). Then circulate the checklist to sellers and their attorneys and to the buyers for their respective use. With such charts, there should never be any surprises about deadlines during the complex due diligence process, and there should be no doubt about what responsibilities fall upon buyer, or seller, as the case may be. Such a chart also highlights for third parties, such as surveyors and environmental engineers, deadlines by which they must perform services to buyer. A sample of part of such a checklist is appended at the end of this article.

II. TITLE AND SURVEY ISSUES

A. Title and Survey Issues Made Easier

The very fact that your client is assembling multiple, adjoining parcels actually simplifies some of the usually vexing problems attendant upon land acquisitions, as we will investigate below. Many complexities remain nevertheless.

Encroachments. Fences, walls, building corners or walls, roadways, power lines serving one parcel but encroaching on others – these are all situations in which the assemblage aspects of the transactions can make problems "go away." If your client is acquiring the property encroached upon as well as the property on which there are encroachments, the encroachments, as title issues, simply disappear.

Gaps and Overlaps. Here, too, the fact that your client is acquiring multiple properties can have the effect of eliminating the problem of overlapping property lines – unless you are paying by the acre and the overlap is considerable. And "gaps" between two otherwise adjacent properties can be, for practical purposes, solved with a sensible title insurer if you are acquiring the properties on both sides of a "gap," by having both sellers quitclaim title thereto.

B. Title and Survey Issues More Likely to Arise or to Become Exacerbated by Assemblages

Acquiring large tracts of land — most of which, by necessity today, are rural — makes it more likely that you will encounter title issues not customarily at issue in a normal land acquisition. These include:

Cemeteries. Many rural tracts contain burying grounds – some obvious and well-kept and visited, others not so obvious and apparently abandoned. These parcels can be "in the way" of development plans for utilities, roads or buildings. Even if not, some developers believe that they cast a "shadow" on the real estate, making it less desirable.

In Virginia, the heirs of persons buried in cemeteries have a right to get to, maintain and visit the graves of their ancestors. See Va. Code Ann. § 57-27.1. Sometimes it will be apparent that a path or roadway exists over a parcel of rural ground simply to permit such activities. Unless the pathway or roadway to the cemetery is reserved or dedicated in the chain of title, your client can typically provide an alternate route. Virginia statutes also permit disinterment of bodies from graveyards with reburial in suitable alternative graveyards under most circumstances, especially in cases where the graveyard appears to have been abandoned and when no recent burials appear to have taken place there. See generally id. §§ 57-36 to 57-39.1. Certain circumstances, however, may frustrate your client's efforts to have a court order disinterment from such graveyards – recent burials, vociferous heirs or assertions that the graveyard possesses some significant archeological or historical importance – such as an early nineteenth century slave graveyard for a plantation.

Historically or Archeologically "Significant" Land. If your client's target land contains any historically significant buildings, or was the site of important historical events, such as battles or encampments, or contains forested or waterfront areas where early native American tribes were likely to have settled, fished, hunted or camped, you will have to cope with the burgeoning regulations obliging a thorough "audit" to be made to ensure preservation of historically or archeologically significant buildings or sites. See generally id. §§ 10.1-2300 to 10.1-2600. The audit's results will impact your client's development plans and will restrict him from utilizing portions of the land being acquired to the extent it contains historically or archeologically significant areas. Unfortunately, your client will likely learn that (a) in the world of preservationists, all too often, anything old is somehow "significant;" and (b) many preservationists are not, by nature, persons who compromise. Instead, they want things left exactly the way they are. (1)

Significant Wetlands. By now all real estate practitioners are conversant with the issues surrounding and regulations restricting the destruction of wetlands attendant upon the development process. I do not intend to rehash the obvious. Nevertheless, the practitioner who is involved in assembling a large tract of land will inevitably encounter various wetlands issues (because large tracts of land need to drain themselves) and so, your client and you should be prepared to work with a skilled civil engineer, landscape expert or others who can be discerning and creative in maximizing the development potential of the assemblage.

Easements and Utilities Benefiting Fewer than All Assembled Parcels. One issue that it is easy to overlook in assemblages concerns easements benefiting certain of the target properties, which may not be "expandable" to benefit the larger, assembled parcel. I have in mind such things as ingress-egress easements benefitting a landlocked interior parcel which a developer would like to utilize post-assemblage to benefit the entire assembled parcel.

It is at least theoretically possible that only part of the assemblage will be entitled to utilize certain easements. This is especially true for utilities, where volume and capacity are evident issues. The practitioner needs to pay careful attention to the terms and provisions of the instruments establishing the easements in question. You cannot assume that an easement benefiting one of the parcels being acquired automatically "expands" to serve the rest of the assemblage. That is not, however, to say that your client may not wish to push the envelope and attempt, unilaterally, to expand the scope and utility of narrow easements. Make sure that he understands the risks. While it may be easy to "get away with it" with respect to an ingress-egress easement, it would be much tougher to bluff the right to expand utilities usage.

III. CONCLUSIONS

The practitioner who sets out to represent a client who is assembling land needs to both ramp up his attentiveness to detail and, at the same time, keep before himself the "big picture" – which parcels, easements, utilities and appurtenances are absolutely vital to your client's objectives, and which might be permitted to fall by the wayside or be sacrificed on the altar of expediency. He also needs to collaborate continuously with the client and the client's other experts on the acquisition/planning team throughout the contracting phase, the due diligence investigations, and the land use/governmental approval phases as well. It is a richly rewarding intellectual exercise in lawyering.

*Chuck Long has practiced commercial real estate law with the Richmond, Virginia law firm of Hirschler, Fleischer, Weinberg, Cox & Allen for thirty-eight years. During that time, he has represented scores of real estate developers engaged in the assemblage of large tracts of Virginia real estate. Mr. Long is a graduate of Princeton University and Harvard Law School.

(1)The author recently worked on a large acquisition which unwound in no small part because there was a residence on the property at which, one afternoon in 1862, General Lee and his staff, stopped and chatted about tactics. The residence is vacant, not maintained and on the verge of collapse. The buyer-developer proposed to restore completely the residence and turn it into a cultural interpretive resource for the local civil war community, but wanted to move the residence a few hundred yards away to a location within his development more suitable for such a use. The preservationists protested the move. The assemblage collapsed; the residence is in a virtual ruin. Who won?

back to top

back to top