Morgan Miller Blair

For the second time in two years, the Court of Appeal declared a real estate purchase agreement void at its inception because it violated the Subdivision Map Act.  In Sixells, LLC v. Cannery Business Park (2008) 170 Cal.App.4th 648, the Third District Court of Appeal followed – and extended – Black Hills Investments, Inc. v. Albertson’s, Inc. (2007) 146 Cal.App.4th 883, to hold that a real estate contract which allowed a party to waive the recording of a final map violated the Subdivision Map Act and was thus void.

Sixells, LLC, entered a contract to purchase four acres of land from Cannery Business Park (“CBP”).  The contract, drafted by Sixells, allowed Sixells to complete the purchase if, at its election, the four acres were made into a legal parcel by recording a final map, or if Sixells “waived” the recording of a final map.  Two months later and prior to the close of escrow, CBP terminated the contract.  CBP later sold the property to a third party.

Sixells sued CBP and the third party buyers to enforce the contract, alleging, among other things, breach of contract.  The trial court sustained the defendants’ demurrers without leave to amend, finding that the contact was void.

The court of appeal affirmed, holding the contract was void at its inception because the waiver provision violated the Subdivision Map Act.  The Act generally prohibits the sale, lease, or financing of any parcel of a subdivision until an approved map is recorded.  The Act allows a sale to be “expressly conditioned” upon the approval and filing of a final subdivision or parcel map.  Gov’t Code § 66499.30.

However, the contract in Sixells permitted Sixells to waive the recording of a final map, thus allowing the sale of property before a final map was filed and without the sale being expressly conditioned upon the recording of a final map in violation of the Act.  Because the contract permitted Sixells to waive that requirement, it was void as a matter of law. In Black Hills Investments, the Fourth Appellate District held that a real estate contract which violates the Act is void.  (In Black Hills, the contract allowed the seller to waive compliance with the Act.)  Because Sixells’ contract violated the Act, it was not voidable, but void.

The court also rejected Sixells’ argument – not raised in Black Hills – that the court could sever the offending waiver provision to save the contract.  The court explained that even if it struck the term “waiver,” the contract’s remaining language would still have impermissibly allowed the sale of an undivided parcel in violation of the Act.  The court also found that CBP was, as the prevailing party, entitled to its attorney’s fees and costs on appeal, as provided for in the parties’ contract.

As demonstrated by Sixells and Black Hills, courts strictly enforce the Map Act’s requirement that sales be expressly conditioned on the filing of a final subdivision or parcel map irrespective of the party in whose favor a purported right of waiver exists.  Thus, parties drafting real estate contracts should ensure that they carefully follow the Act’s requirements.

The decision became final on March 30, 2009, when the Calfornia Supreme Court denied Sixells petition for review.  Cannery Business Park was represented in the trial court and on appeal by Morgan Miller Blair attorneys Kevin Brodehl, Marilyn Morris and Katherine Wenger.