Are you thinking about a small-scale subdivision of your property for future sale?
Are you also unsure if you can afford to build a new dwelling on the subdivided land?
(Endorsed development plans for a new dwelling on the title are often required by council to begin a subdivision application).
Funding a small-scale subdivision process, on top of financing a new build, can be daunting and out of reach for a lot of us.
You may think that being unable to construct a new dwelling precludes you from being able to subdivide your property.
This isn’t necessarily the case.
A section 173 agreement can help you to maximise the wealth of your land through subdivision, without having to foot the costly bill of building the new development on site.
What is a section 173 agreement?
A section 173 agreement is a legal contract entered into by council and another party, most commonly the property owner. The agreement may also include additional parties like local service authorities.
A section 173 is used to set out conditions or restrictions on the use or development of the land, or to achieve other planning objectives in relation to the land.
A section 173 agreement is recorded on title, meaning that the owner’s obligations under the agreement will bind any future owners over the course of the agreement.
How can a section 173 be used in my small-scale subdivision project?
As most small-scale subdivisions (depending on council and zoning requirements) will require previously endorsed development plans for the new title, most developers will complete the build of the home alongside the subdivision process. This provides them with the opportunity for greater wealth return by being able to sell a finished home on a separate title.
However, if your goal is to sell your newly created titled without a completed build, this can be achieved with the help of a section 173.
As part of the subdivision application, you will need to demonstrate a prior permit for building plans to demonstrate that a dwelling can fit appropriately on site. You will need factor in the cost of having these building plans drafting and endorsed by council.
However, there are then avenues to complete the subdivision application without the dwelling having been built. This is where a 173 agreement with council will come into play. This agreement binds the endorsed building plans to the title being established through subdivision.
What does this mean? In short, when selling the subdivided land, any future development by new owners would be restricted to the endorsed building and landscaping plans outlined in the section 173 agreement.
What are the pros to a section 173?
- In general, the subdivision process can occur more quickly, without waiting for the build to be completed.
- You save on the cost of building the approved dwelling on the separated title.
- You may attract builders or developers who are looking to purchase the title and complete the build for future sale (without having to do any of the initial planning or permit work.)
- The value of your new title would include the endorsed building plans (this could add value for those not wanting to go through this planning & permit process themselves).
Are they any cons to consider?
- You may be reducing your market to only buyers who are looking for sites with endorsed building plans.
- Similarly, buyers may not like the building and landscape designs in the approved plans, which would limit your property’s appeal. Changing any endorsed plans linked to the title would require an application to amend the section 173. This could be a costly process for any new buyer.
- By not completing the build, you may be limiting your potential profit by selling land without a finished home.
- You will still need to fund the process of having building designs drafted and then endorsed by council in a development permit.
Subdivision can be a complex process, so we highly recommend giving the team at Linear Land Surveying a call so you can begin your project with confidence and more specific advice tailored to your needs.
How can we help?
If you need assistance with a subdivision, give Sam and team at Linear Land Surveying, (Melbourne land surveyors) a call on 9873 8888, or email survey@linearlandsurveying.com.au for more information and help.
The information on this website is intended to be general in nature and is not personalised land development advice. It does not take into account your specific objectives, land development site or financial situation. Before acting on any information, you should consider the appropriateness of the information provided and seek more specific advice from the professional team at Linear Land Surveying.
