Subdivisions are more common than you think. A subdivision can range from the carving up of hundreds of acres of rural land for housing, developing land in a prime commercial area, selling half your quarter-acre section or simply wanting to extend your boundary a few metres. Whatever the scale of your subdivision, there is a common thread of stages to be ticked off – we explain below.
The first thing is to line up your professionals – discuss the project with us, arrange finance with your bank, consult your accountant and speak with a surveyor. If you are undertaking a large commercial development, you may want to line up buyers early on. A real estate agent can help with this so that you avoid cashflow issues half way through.
Next, you need to check that your local council’s district plan will allow you to subdivide your property. Your surveyor prepares a scheme plan to submit to the council for resource consent. A resource consent for subdivision may be issued by your council in as short a timeframe as 10 working days from its receipt, but the process can also take years to resolve if the application is particularly complex.
If your resource consent is issued, it will generally have a list of conditions and requirements to be completed before the council will sign off the subdivision. You can include a condition in your agreement that allows the seller and buyer to approve the resource consent before work begins. The council’s signoff is known as ‘s223 and 224 approval’. The council’s conditions and requirements can include:
Once s223 and 224 approval is received, your LT Plan can be lodged with Land Information New Zealand (LINZ); this can take up to 15 working days. LINZ will issue your titles and transfer to your buyer, if you have one already lined up.
The Agreement for Sale and Purchase dictates the whole subdivision process. You must include specific conditions to cover the various steps involved, provide the dates or timeframes for the completion of each step, and identify which party is to cover the subdivision costs. Generally the costs are met by the landowner. In some cases, however, the buyer/s are expected to cover these.
Sometimes we receive agreements that have been prepared and signed by the parties that don’t include the necessary subdivision clauses. When this happens the sellers, the buyers and their lawyers must either revisit the agreement or draft a new document. If we are involved early, it could save you a headache later on.
As well as all the above, you should also consider the need to register any easements or covenants.
An easement is a right on, over or through someone else’s land such as a shared driveway or the right to lay power and phone lines, be it on, over or through land.
Your council may require you to include easements as part of the resource consent. If the correct easements aren’t in place you could find that the section you have sold has an electricity connection, but the purchaser has no right to use it.
Covenants are a type of promise between landowners. By using covenants you can restrict what the buyer does on their land.
Common covenants include restricting the size, colour and value of houses being built in the subdivision. For a rural subdivision, you can restrict the types of animals being kept on the land such as no pigs.
Subdivisions can be successful commercial projects if you are well-prepared and work hard. However, they can cause nightmares when things don’t go according to plan or you miss a step. We deal with subdivisions every day and can guide you through the steps – come in and talk to us.
DISCLAIMER: All the information published in the Property eSpeaking, Commercial eSpeaking, Trust eSpeaking, Rural eSpeaking, and Fineprint newsletters is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this article. Views expressed are those of individual authors, and do not necessarily reflect the view of this firm. Articles appearing in Property eSpeaking, Commercial eSpeaking, Trust eSpeaking, and Fineprint may be reproduced with prior approval from the editor and credit given to the source. Copyright, NZ LAW Limited, 2019. Editor: Adrienne Olsen. E-mail: [email protected] Ph: 029 286 3650 or 04 496 5513.