Guido v. Sandy Township,
880 A.2d 1220 (Pa. 2005)

A division-in-fact of property does not in itself constitute Subdivision approval under the MPC.
Case Details:

In 1982, a restaurant was constructed on a 2.6-acre portion of a 3.4- acre lot.  The restaurant did not own the land on which the restaurant was built; rather, the restaurant acquired a ground lease with a purchase option.  At the time of the initial transaction, neither party sought subdivision approval from the township.  The lessor operated a gas station / convenience store on the remainder of the lot.  Although subdivision of the lots would have been possible under the terms of the Zoning Ordinance in effect at the time of the original transaction, an ordinance change in 1996 had the effect of precluding Subdivision of the property, because the land occupied by the gas-station was smaller than the minimum lot size required under the new Zoning Ordinance.  As a result, the landowner refused to honor the purchase option.

The restaurant brought suit, seeking specific performance of the option.  In defense, the landowner argued that he could not subdivide the property because doing so would violate the new Zoning Ordinance.  In response, the restaurant had two arguments:  1) the lease created a per se Subdivision of the property in 1982, or 2) when exercising its option, “its ownership interest should relate back to 1982 and thus be governed by the 1964 Zoning Ordinance.”  The trial court agreed with both arguments and the landowner appealed.  The Commonwealth Court reversed, however, and held that the granting of a leasehold interest coupled with a purchase option does not create a Subdivision within the meaning of the MPC.  The Supreme Court agreed to hear the restaurant’s appeal.

The Supreme Court affirmed (precluding specific performance of the option).  Although it ruled that the exercise of the option in 1998 had the effect of creating a “division-in-fact” of the property as of the date of execution of the lease and option, i.e. 1982, the Court held that a “division-in-fact does not amount to a governmentally recognized Subdivision [under the MPC].”  Accordingly, the Court found that although the restaurant could have sought Subdivision approval under the prior ordinance, absent a request for “modification,” the new Ordinance precluded Subdivision of the property.

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