Think Twice Before You Subdivide

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26 May 2010

Residential property subdivision is becoming a major trend among homeowners in the middle to upper ends of the market.

So says Peter Gilmour, chairman of RE/MAX of Southern Africa, who adds that “with the cost of living on the increase, the cost of maintaining large properties has also risen”.

“Add to this the difficulty and expense to secure a large property and it is clear why so many homeowners today are opting to downsize and subdivide their properties. Not only does this promise potential financial benefits, but it also assures a home environment that is more secure, as well as an opportunity to save thousands annually on general maintenance costs, rates and taxes, and water bills,” says Gilmour.

However, he says, before you launch headlong into subdivision, homeowners must note that it is a time consuming and often expensive course of action. “Today, subdivisions are rife, and many town planners and property consultants are cautioning people to be aware that costs have increased substantially over the last few years.

“Added to this, there are many existing conditions that are being applied far more stringently than before, and there are quite a few relatively new laws and bylaws that have been passed that are aimed at protecting the sustainability of the natural surrounds – all of which can stall or even negate the approval of any subdivision application.”

As a result, Gilmour explains that it is very important that anyone considering subdivision makes a point to study their options and the viability of going through with it. “The best option for any homeowner is to get a property lawyer, town planner or subdivision specialist in right from the word go. Try and choose somebody that has had experience in your area, as they will be well versed on the limitations and potential of subdivision in your particular locale. A true professional should be able to assess the property and offer detailed guidance on the feasibility of subdividing.”

The first thing that needs to be considered is the zoning rights of the area in question, and all the laws and bylaws that might be applicable to your particular zoning category.

“To explain, town plans are divided into various areas, which are then divided into different zones. Each zone allows for a specific type of development, such as residential, commercial, and so on. The zoning rights will verify whether you can or can’t subdivide your property, and if you can, what the limitations will be,” explains Gilmour.

Each zone will have its own specific requirements. “For example, according to the Johannesburg spatial development framework, a 1,000sqm erf is considered to be a low density development, but in upmarket areas, different limitations may apply,” says Gilmour.

He says the time and cost involved in subdivision varies from project to project, starting at approximately R20k and five months for a simple subdivision, and moving up from there. He advises that homeowners get a full breakdown of all the costs involved in the process from their appointed lawyer, surveyor or town planner upfront, so that they can budget for the project accordingly.

Depending on the nature, extent and complexity of the proposal, he says that an application for subdivision will normally go through the following procedural steps:

1. A surveyor or town planner will carry out an initial detailed survey and prepare the layout plan.

2. The complete application will then be lodged with the local authority, and it will then be advertised for public participation, where the public can lodge any objections and applicant responses.

3. A detailed technical assessment will then be undertaken. Here, an engineer will perform a geotechnical report to communicate the site conditions and design and construction recommendations, as well as a report on waste water and sewerage disposal, as well as access to water and electricity. This will include possible revisions by the applicant if so required.

4. The council will then make a decision, where they approve or decline the application, and this will be communicated to applicant and/or objectors. The decision can then be appealed by the applicant and/or objectors.

Gilmour says that it is important to bear in mind that if the property is bonded, for any subdivision to go through, the bond holder’s consent is required. “The process will need to be approved by the local authority, the Registrar of Deeds, and the Surveyor General. A land surveyor will draw up the new site diagrams and lodge these with the Surveyor General and the municipality, after which he/she will lodge them with the Registrar of Deeds.”

Subdivision is certainly a very tempting prospect, and there are various subdivision options open to those considering going through with it. “You can opt to subdivide the land, keep the house and sell off the plot, or build another house or flatlets on the plot to let out to generate rental income. Alternatively, you can sell off both pieces of land, or demolish the house entirely and develop the property into clusters, townhouses or flats. Each property will offer different potential, and will need to be considered on an individual basis."

Laurie Wener, area manager for Pam Golding Properties (PGP) in the Western Cape, says it is an open question whether subdivision is a good idea or not.

“Assuming that subdivision is permissible in terms of the municipal regulations and the title deed, the feasibility all depends on the size of the erf, the position, whether there is an existing structure on the plot and the position of that structure.

“Another factor that should be carefully looked at is the impact that the subdivision will have on one or all of the subdivided portions. It may happen that by subdividing a plot into two or more portions, the impact is detrimental to all or any of the portions and may well devalue them. For instance, subdividing the garden off a substantial house may devalue the house to a degree that will reduce the profit by a major amount.”

“However, purchasing a subdivisible property may well yield a handsome profit when a portion is resold.

When asked whether subdivision is a prevailing trend, she said it all depends on the area. “However, with the development market being very slow at present and the cost of building still high, in addition to which there is no shortage of stock, the applications for subdivision as with all other applications is low.” – Eugene Brink

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