Administrative rule impacts land division

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"I regard this new rule as one of the most serious complicating factors in developing commercial real estate that we’ve seen in several years." Nancy L. Haggerty, Michael Best & Friedrich LLP discussing Trans 233

A veteran real estate attorney warned her colleagues of the potential a relatively new administrative rule has for causing problems with projects involving land division.

Nancy L. Haggerty, of Michael Best & Friedrich, has 23 years of experience practicing real estate law. Last Thursday, she warned a group of real estate attorneys to be very aware of a state Department of Transportation administrative rule pertaining to the division of land along or near a state highway. The rule, Trans 233, also pertains to the combining of two or more lots in close proximity to a state highway.

"I regard this new rule as one of the most serious complicating factors in developing commercial real estate that we’ve seen in several years," Haggerty said.

She spoke as part of a State Bar of Wisconsin CLE program on Commercial Real Estate Law in Wisconsin. Haggerty’s discussion of Trans 233 came during her presentation of The Ultimate Real Estate Development Checklist.

The list provided 74 areas which real estate attorneys should pay particular attention to during property transactions. It started with a look at the "Accepted offer to purchase" and followed a chronological progression to the crowning moment, "Champagne for all."

Each item on the list featured a statement on why it was important and what the attorney needed to do to satisfy it. Although Haggerty did not have time to discuss each of the 74 elements of her list, she highlighted about 18 of them.

Trans 233

Among the elements that she signified as most important was item 23 — "Traffic issues — Trans 233." Trans 233 is part of the Wisconsin Administrative Code requiring that all land divisions abutting a state highway meet certain requirements, related to access, setbacks, drainage, noise and visibility.

The DOT reviews survey maps or plats for those projects to make sure that they meet requirements for developing land along a state highway. Haggerty noted that property on highways feeding into state highways also may be subject to Trans 233.

"It’s a very big change in the way we have been able to develop property," she said.

The rule established the potential for the DOT to significantly impact the development of a property, by making changes to the plat, related to setbacks, septic systems, wells, parking lots, retaining walls, drainage facilities or access to highways, she said. Such changes can impact the profitability of a project.

"As real estate attorneys … we need to draft contingencies in our offers to purchase, so before we are committed to go hard on a deal, we know exactly where the DOT comes out on this," Haggerty warned. "This is something that I regard as a real risk in how we want to develop property…"

Other Areas

Throughout her discussion, Haggerty touched on a variety of areas including getting the seller’s prior title insurance policy. She urged attorneys to secure it from the seller or the seller’s lender, so that it could be used for comparison purposes.

"It’s very important to get the seller’s title insurance policy," she said. "It gives you information about what one title company thought was on the title at that point."

She also noted the importance of early contact with title companies, given the glut of residential refinancing taking place. Title companies can be so busy right now that it can potentially lead to scheduling problems if attorneys are not thinking ahead.

Haggerty’s list included a note about surveys and the importance of having a surveyor prepare a new survey. Attorneys should make sure they leave a contingency in the offer in case the survey indicates a problem.

During her discussion of surveyors, Haggerty observed that they are not required to have errors and omissions insurance. Given the potential dama
ge that can result from an inaccurate survey, she urged her colleagues to make sure to ask their surveyors whether they have E&O insurance.

She also touched on well water reports, noting that standard testing only looks for bacteria and nitrates. A standard well water test would not look for petroleum from a nearby gas station or chemicals a nearby dry cleaner.

"If you are going to ask for a well water test whether its for an industry or for a home, you need to specify what it is that you want to test for above and beyond those two standards (bacteria and nit-rates)," Haggerty said. "The standard well test doesn’t do as much as you may think it does, therefore, you’ve got to be careful about that."

Throughout her discussion of the checklist, Haggerty emphasized the important role that real estate attorneys play in protecting their clients during the purchase process.

"We’re kind of in the quilt making business," she said. "There’s a whole series of risks out there for the buyer of the property and we try to cover some risks from the survey; we cover some risks from the title company; we cover some risks from the zoning… If we are careful, we can put a little blanket of protection around our client for all of the different issues that may pop up during a transaction."

Haggerty’s discussion was part of a State Bar CLE program focusing on commercial real estate issues. Other afternoon sessions touched on title insurance and eminent domain. Morning sessions featured discussions related to tax incremental financing. The State Bar videotaped the whole program and will present that video at locations around the state on June 25.

Tony Anderson can be reached by email.