Plottage is an increase in the value of a parcel of real estate when you combine it with another or multiple parcels under one ownership to form a plot with a higher and better use.
Plottage is associated with assemblage, which is the process of combining multiple parcels into a single larger plot.
Plottage occurs in urban areas where large swaths of land are covered with small individually owed parcels. Developers buy several adjacent individually owned parcels and combine them into large plots to develop housing or commercial complexes.
The increase in utility of a parcel, and thus its value, resulting from combining or consolidating contiguous parcels into one larger developable plot is called plottage value or plottage increment.
For example, consider the owner of an undeveloped parcel of land worth $250,000. A neighboring parcel of land of the same square footage comes on the market and is listed for sale at $250,000. Each is permitted for four units of construction.
The owner of the first parcel purchases the neighboring parcel and combines them into one. The combined parcels are permitted for 12 units. The value of the parcels when combined is $700,000, greater than the sum of the value of each parcel when used separately by different owners.
In this example, the plottage increment is $200,000 in additional value due to the parcels when combined being put to a higher use than developed separately. When combined the permitted use was for 12 units, not just eight.
However, an increase in plottage increment is not always the result of construction. An owner of improved property may purchase a neighboring vacant lot, putting additional space between them and their neighbors. Here, the increased utility comes in the form of added privacy, convenience or expansion.
History behind the word
The first known use of the word plottage dates back to 1910.
