Conflict of interest to take land as payment

I wouldn't touch it with a ten-foot pole. That little patch ain't worth squat to me. Especially if the subdivision never really happens, the utility plan won't work out, it turns into a haven for trailer trash, and so forth and so on. You just as well own a piece of the Brooklyn Bridge. And, what return you eventually get will be a long time in showing up.

It may not always be lucrative, but it's not unethical.
I've seen it often here. I've worked for companies that accepted lots as payment.
Never did myself because no one ever offered one.
Lots have value, they're an asset.

Don

I almost forgot this:

Years ago, a surveyor friend discussing just such a situation told me, "My partner told me to try to get a lot, but I only got a little:-( "

Don

Not an ethical problem. Any more than pumping your own gas, or checking your own oil.
Get you a nice enough piece.

N

Have a buddy who, as a party chief, got a lot out of a biggish redneck subdivision out by the lake about 20 years ago. Owner gave the rpls and each guy on the crew a lot. He never really paid attention to it, paid the minuscule taxes on it- everyone else sold theirs over the years for 5 or 7k. Now that's hot real estate, 20 years later, and he's getting offers on it in the mail every week for more than he paid for his house around the same time.

Conflict of interest to take land as payment-It Depends

If you are doing a subdivision and you only get paid if it is approved, it may well be a conflict.

However in most subdivisions (as opposed to variances) approval is generally a right, time till approval though is a factor. Land poor farmers may not have the cash to cover subdivision costs so land as payment is a viable alternative. subdivision costs can go on for years; survey, plans and meetings, stakeout, costs of improvements. If you do it be cautious and don't get stuck with lots that are useless because neither the developer nor you can pay for the infrastructure. Almost every subdivision has the potential of lots on existing road frontage.

Paul in PA

You're darn right it's a conflict!

Every time you have a current or future ownership interest it's, at the least, a potential conflict of interest and probably an actual conflict of interest.

As soon as you know your pay is going to be a lot then you have an interest in seeing the project succeed - no matter what you may find along the way.

If it's such a great deal, then the owner should have no problem selling "your" lot and paying you with the first sale.

You're darn right there's no conflict!

You have an interest in having the project succeed because you are the clients consultant whether or not your payment will include a lot in the APPROVED subdivision. There is no conflict in accepting value as payment, no matter the form.

Don

The potential conflict of interest might be illustrated further by considering a related case - you, the surveyor, are 10% owner of the entity (Rusty Acres, LLC, etc.) that owns the land and is trying to get a subdivision created/approved.

Is that any different?

To me, on the one hand, no matter whether you are paid in peanuts, dollars, or a subdivision lot, you have an interest in seeing your client succeed.

On the other hand, as a surveyor, you are given license to practice upon tenets of protecting the public, etc. Would a surveyor be more likely to jeopardize the public interest if you were paid by subdivision lot than you would be if you were paid in peanuts? If so, what are the specific ways in which the public's interest would be or could be jeopardized? Please be specific.

Good post.

Big Al

Above is thinking right.... it is no more a conflict of interest to be paid in land, than to be paid in money.

N

Big Al

…..

To me it's not unethical, just not very smart as a general rule. As Dave Ingram pointed out, if the lot has value, someone will buy it from the subdivider and he can pay you cash. If the subdivider is so undercapitalized that he can't pay you with anything but the promise of a lot (remember, it's not a lot until it's subdivided), then I don't want him as a client, let alone a creditor.

The only circumstance I can see in which it would make sense is if the promised lot is just what you've been looking for and you get a secured interest in the land pending subdivision completion, with fallback provisions ensuring payment should the subdivision fall out of bed. In other words, it makes sense just about never.

> The only circumstance I can see in which it would make sense is if the promised lot is just what you've been looking for and you get a secured interest in the land pending subdivision completion, with fallback provisions ensuring payment should the subdivision fall out of bed. In other words, it makes sense just about never.

I think that's about right. On the other hand, if you are prepared to insure that the title you receive to some subdivision lot is free and clear of all liens and the lot is agreed to have a value of $X, then if you hold it for sufficiently long to realize an improvement in value at sale, there should be significant tax advantages over ordinary income. It's a gamble, obviously.

I've discovered from research into land litigation in 19th and early 20th century Texas, that it was quite common for lawyers here to take as their fees a fractional interest in the lands, the titles to which they were being engaged to defend. The fees typically ran between 1/3 and 1/2 and partition suits usually followed a successful outcome in original lawsuit. Not recommending this, but pointing out that where advocacy was involved (quite unlike land surveying) an ownership interest wasn't uncommon at all.

I don't think it's unethical. A surveyor always has an interest in seeing the subdivision approved, and taking the steps to make that happen ethically.

From an economic standpoint, I would approach it like this: If I were given the cash instead, would I then voluntarily exchange the cash for the lot? If the answer is no, then you should not accept the lot. If the answer is yes, then take it. Hell, buy one or two more.

Personally, I wouldn't be interested since 1. Land doesn't cash flow (like rental real estate should) 2. In a taxed area, cash flow is actually negative. 3. You can't depreciate it on your income taxes. 4. Buying for appreciation is generally speculation, not investment.

But that's just one man's opinion. 🙂

I guess getting actually PAID (in anything) could be a conflict of interest.....

> I guess getting actually PAID (in anything) could be a conflict of interest.....

:good:

I don't think that it's a conflict to get a piece of land as payment, as long as it's up-front, in the contract, and agreed upon.

Sure, you'd then have a vested interest in the subdivision getting approved. But I'll assume that's the intention to begin with when performing the job, whether you get land or cash.

The point is if you agreed to get paid with a lot, then you can't get paid until the subdivision is approved - hence the potential conflict because you have a vested interest in completion & approval. Getting paid in cash has no such vested interest.

> The potential conflict of interest might be illustrated further by considering a related case - you, the surveyor, are 10% owner of the entity (Rusty Acres, LLC, etc.) that owns the land and is trying to get a subdivision created/approved.
>
> Is that any different?
>
...
Well, owning 10% interest in the development would be a big difference as a 'conflict of interest'.

I remember a local case years ago where a surveyor had a 10% interest in the development that he was surveying. He did the survey and it ended up in court against a local municipality. There was boundary issue that was based on the interpretation and intent of parties of an old description. When it got to court, he was pretty much chastised by the judge for conflict of interest and his survey/testimony was booted from the case. Needless to say that the developers lost the case since they had no survey to stand on in court.

I'd probably put something in the contract about getting paid cash if the subdivision fails to get approved because of the actions/inactions/fault/etc. of others.

Waiting to get paid isn't the issue, but I agree that payment being contingent on something else is.