Subdivision is the process of dividing an existing parcel of land into two or more lots, or changing the boundaries of an existing parcel of land. The process includes navigating surveyors' reports, Council rulings, zoning certificates and other legal processes. Due to the many procedures involved in subdivision, it is important that you comply with all legislative requirements and seek legal and specialist advice when preparing your application. A failure to meet all relevant requirements may mean that your proposed subdivision is delayed.
You will need to ensure that:
- the land you intend to subdivide is capable of being subdivided - this is usually assessed by a surveyor;
- you obtain the relevant plans and approvals from your local Council, and gather the appropriate evidence for those applications; and
- you consult with your mortgagee (if applicable) and obtain its consent to the subdivision, so that it can produce the property's title documents to enable the subdivision to be registered.
Once you have obtained your approvals and plans, you can lodge your subdivision plans with Land Registry Services NSW to formally register the subdivision.
Can I sell the property before it is subdivided? Entering into a contract for the sale of land of the proposed subdivided lot is known as selling "off the plan". That is, the contract will contain the documents (such as certificates, searches and dealings) as they relate to the un-subdivided land, as well as documents relating to the subdivided lot. Completion (also referred to as settlement) of the property sale can only take place once the Plan of Subdivision has been registered, therefore the contract will an anticipated date of when this will take place (known as the "Sunset Date"). Contracts for the sale of property "off the plan" must contain the following:
- 10 business day cooling-off period (rather than the standard 5 day cooling off period available for most other types of purchases);
- A Disclosure statement setting out the main features of the off-the-plan arrangement, such as the Sunset Date, the vendor's ability to extend the Sunset Date if, for example, bad weather has delayed the construction, and noting the documents that are attached to the Contract;
- The draft Plan of Subdivision, prepared by a registered surveyor;
- The proposed Schedule of Finishes;
- Any section 88B instrument intended to be lodged with the draft Plan of Subdivision; and
- For a strata scheme - a copy of the draft by-laws.
Further information about the requirements for off-the-plan sales, following the legislative reforms in late 2019, is available here.
Do you need to partition the property?
When a lot is subdivided, the newly created lots will continue to be owned by the original owners. For example, if the original lot is owned by 3 people, and the subdivision results in the creation of 3 new lots, then each of those newly created lots will be owned by the 3 original owners. Partitioning allows the respective interests in the property to be transferred between the owners so that, say, one owner owns Lot 1 outright, another owner owns Lot 2 outright, and the remaining owner owns Lot 3 outright.
Partitioning is important for a number of reasons, namely:
- there may be stamp duty concessions depending on how the transfers are prepared (see the NSW Revenue Duties Ruling 35 version 2);
- it clarifies exactly who owns the subdivided parcels of land; and
- it establishes the terms of the agreement between the former joint owners in respect of the subdivision and partition.
Partitioning may also have taxation implications and so it is important that you consult with a financial advisor or accountant if you are considering any of the above options.
Shire Legal has acted for numerous property owners wishing to subdivide their properties and property purchasers wanting to purchase a property off-the-plan.
The importance of having a co-ownership agreement (August 2018)