The concept of merger in real estate law is a tricky one but important for real estate investors to understand. Before the advent of municipal zoning, a property owner could divide a large tract of land into individual lots simply by having an engineer or surveyor prepare a map showing a grid of dividing lines superimposed on the land, and filing that map with the county clerk’s office. This would then enable the owner to sell the individual lots. Many if not most lots in this State were created in just this way.
Today, an owner wishing to divide its land must apply to the local planning board for subdivision approval, which is a costly and time consuming process involving the preparation of plans and presentation of expert testimony to the board.
Municipalities adopt zoning ordinances which divide the township into zones and which specify the minimum building lot requirements in each zone. For example, a township could provide that any residential building lot must have a minimum width of 60 feet. However, at the same time, the existing lot width in that township as established by filed map could be 50 feet wide.
If you own a home on a 50 foot wide lot in a zone that requires a 60 foot lot width, your property is grandfathered. However, if the home is destroyed and needs to be rebuilt, the municipality can require you to apply for a bulk variance for relief from the 60 foot requirement.
If you own a vacant 50 foot wide building lot in a zone requiring a 60 foot lot width, you must apply for and obtain the bulk variance in order to build.
The doctrine of merger applies when the same individual or entity owns two adjoining lots of which at least one is undersized or deficient per the zoning standards. In that case, if at least one of the lots is vacant, the law considers that the vacant lot and the adjoining lot to have merged together for zoning purposes. If the owner then wishes to build on the vacant lot, s/he must apply to the municipality for a bulk variance and subdivision approval, a costly and time consuming process. This is true even if the tax assessor is showing the two properties as separate lots on the tax map.
Therefore, if you are considering the purchase of adjoining properties, it is first important to investigate whether those lots have already merged. That can usually be confirmed with the municipal zoning officer and in consultation with legal counsel. If the lots have not merged, and you wish to proceed with the purchase, then you would want to purchase each lot in a separate name. In other words, you can elect to buy one lot in your personal name, and the other in the name of your corporation or LLC. That will prevent the two lots from merging due to common ownership.
The world of zoning and real estate investment can be a difficult place. I have engaged in the practice of land use and zoning law for more than 30 years and can help. Call today.