Obtaining Public Report

Introduction

Escrow of the West understands how important it is to obtain a Public Report in a timely manner. We will coordinate with an experienced DRE Consultant to assist you in obtaining a Public Report.

What exactly is a Public Report? A Public Report is a disclosure statement which provides consumer protection in the sale of subdivided land, including air space subdivisions. It is issued by the Department of Real Estate (DRE) after the submission of a filing package, their initial review, deficiency submission, the recording of certain documents and their final review.

Projects requiring a Public Report:

• A Standard Subdivision of five or more lots to be sold with completed homes (residential houses within a subdivision with public streets and no common area) located within an Unincorporated Area of the County

• A Standard Subdivision of five or more lots when all or some lots are to be sold as vacant lots

• Residential common interest subdivision of five or more units or lots, such as a Condominium or planned development. Stock Cooperatives and Community Apartment Projects (Own-Your Owns) are also considered common interest subdivisions but are rare except in their conversion to condominiums.

Projects that DO NOT require a Public Report are:

• Commercial Condominiums

• Any subdivision of four or less lots or units

• Standard Subdivisions within the City limits to be sold with completed homes
  

Types of Reports

There are seven types of Public Reports, but the ultimate one obtained for a new subdivision is a Final Public Report (called a WHITE).

1. Preliminary Public Report, called a PINK. A PINK will allow you to advertise the project “For Sale” and take refundable deposits to secure a reservation of a unit or lot. Escrow must hold buyer’s deposits, but you cannot sign a binding contract or escrow instructions. Either party can cancel and all monies must be returned. A PINK is good for one year and can be renewed and/or amended as often as needed. A PINK requires a very short application and in most cases can be issued in one to two weeks of submittal to the DRE. The requirements for a PINK are that the developer be in title or be an “owner-in-escrow” and the project have a tentative tract map approved.

2. Conditional Public Report, called A YELLOW. A YELLOW will allow you to enter into a binding contract and open escrow, subject to the completion of specified conditions. Only when these conditions are satisfied and a Final Public Report is issued can escrow close. A YELLOW can only be issued after a completed filing package has been submitted, a request letter has been filed with an additional filing fee, the DRE Deputy has completed their review and any corrections have been satisfied. Timing for the issuance ranges from 2 ½ to 3 ½ months from the initial submittal, but is not guaranteed. A YELLOW is good for six months and can be extended only once for an additional six months.* This makes it possible to get a YELLOW too early with the potential for it to expire before you can obtain a WHITE. In addition, because one of the conditions to be satisfied is most often the recording of the subdivision map and/or Condominium Plan, title reports cannot be issued, making buyer’s loan approval not possible until the Final Report is issued.

3. Final Public Report, called a WHITE. The WHITE is the Report, which allows you to enter into binding contracts and open and close escrows (provided the project is completed). A WHITE requires the same filing package as the YELLOW with the addition of final DRE approval and recordation of the final documents. Once submitted to the DRE, it usually takes between four to six months to obtain a WHITE, provided the subdivision map records within that time. A WHITE is good for five years, after which it can be renewed at five-year intervals.

4. Amended Public Report. This is obtained when an existing Public Report has a material change. Consult your DRE Consultant or your attorney to determine if the change in your offering is material. A short form application, explaining the nature of the amendment, is required with a filing fee, along with back up documentation relative to the change.

5. Renewed Public Report. This is obtained when the existing Public Report has expired. A Public Report must be renewed even if the number of unsold lots or units falls below five. The renewal process should begin several months before the Public Report is due to expire, as budgets will need to be re-reviewed and approved.

6. Interim Public Report. This is similar to a PINK on a project that is under DRE review for an Amended or Renewed Public Report

7. HUD Limited-Term Final Public Report. This is a fairly new report, which is subject to change and discontinuance. It is similar to a YELLOW on a high-rise project of more than 100 units which is subject to HUD jurisdiction, has a lender pre-sale requirement and where construction cannot be completed within two years. This Limited-Term WHITE must be renewed every six months. Your DRE Consultant or your attorney can help determine if this report is still available or applicable to your project.

* In certain high-rise condominium developments of 25 units of more, a YELLOW can be issued for up to 30 months with one six-month extension. This additional time is granted on a case-by-case basis with special approval required by the DRE.

Getting Started on the DRE Process

The DRE process should be started after the City or County approves the tentative map and before construction commences. Assembling your processing team early will help you determine the timing that works best for you.

Your processing team should consist of:

• Escrow of the West Sales Representative and Escrow Officer

• DRE Consultant from a qualified title company or other DRE processor, such as your attorney’s office or an independent DRE processor

• Engineer

• Attorney

• Title

• Budget Preparer, if the project is a condominium or
  planned development

If this is the first time this team has worked together, it is a good idea to have a DRE “kick-off ’ meeting of all of the team members. This can expedite the process when everyone receives the information they need at the same time and can discuss aspects of the project that make it unique.

The following documents should be brought to your “kick-off ” meeting:

• Developer’s entity documents, such as LLC-1 and Operating
  Agreement, or LP-1 and Partnership Agreement or Corporate
  Resolution, if a corporation. The purpose of these documents
  is to provide the DRE with evidence of the signing authority
  of the person signing the application and other documents.
  A signature block will be generated from this and given to the
  engineer, attorney and DRE consultant.

• Site Plan (five copies) showing the building layout and common area facilities

• Architectural Plans (one set) for the Budget Preparer

• Tentative Tract Map (five copies)

• City or County signed Conditions of Approval

From this meeting, your team members will receive the information they need to complete their part of the DRE filing package.

The following is a summary of responsibilities for each member of your processing team:

Attorney - Management documents (CC&R’s, Bylaws, Articles) and possibly the Purchase Agreement/Escrow Instructions, sample Grant Deed and Deed and Irrevocable Escrow Instructions for Association Property

Budget Preparer - Budget and Common Facilities Sheet

Engineer - Tentative Tract Map, signed Conditions of Approval and preliminary Condominium Plan (if a condominium)

Escrow - Purchase Agreement/Escrow Instructions

DRE Consultant - All other DRE forms including the Questionnaire

You should carefully review the documents prepared by each of your team members to make sure your project is being correctly represented and your preferences covered.

The DRE Process

Once your DRE Consultant receives all of the documents and information for the filing, including the filing fee, they will assemble to DRE filing package and Duplicate Budget package. Once filed, they will become your “Single Responsible Party.” The DRE will send you copies of the Deputy Assignment Notice and future Deficiency Notices, but the originals will go to the Single Responsible Party with the expectation that they will assemble and submit future documents.

You will receive a request by the DRE to complete an on-line survey. The request will have your individual project code. This can be completed anytime during the filing process, but MUST be completed before the WHITE is issued. Only you can complete the survey.

To expedite your DRE process, once a filing has been made, you should work closely with your engineer to get the Map recorded. This will involve complying with all of your tracts conditions of approval, posting of subdivision and tax bonds and paying many fees. It is important to remember that every time your engineer submits a copy of the final map for checking to the City or County, they need to send a copy to the chosen title company’s Subdivision Title Officer for checking.

Another final document to complete your DRE filing is the Maintenance Assessment Bond or other security device, which amount is approved by the DRE. Your DRE Consultant will notify you when your budget has been approved and it is time to deposit this security with escrow. The Maintenance Assessment Bond is the most commonly used security device. The purpose is to guarantee your payment of assessments on unsold units. It is deposited with escrow and can be in the form of a Surety Bond, Cash Deposit, Letter of Credit or Set Aside Letter. Your filing may have included an optional Subsidy Agreement or Start-Up fund. Both of these arrangements also require the posting of a bond or other security to guarantee your obligation. Your DRE Consultant will let you know if these bonds are required.