Subdividing Property in New Zealand

28 January, 2016 | Jennifer Edwards

Often as a result of not understanding the subdivision process, we find people subdividing land experience delays for issue of title, sale of lots from the subdivision and additional costs.

The subdivision process essentially consists of:

Resource consent – Council

The most appropriate professionals to discuss the resource consent with are the planners and surveyors operating in the area.

The terms of the resource consent are extremely important. You must comply with these terms which can be costly. Make sure you are aware of fees and potential costs you will incur during the subdivision process.

There will be filing fees (both Council and Land Information New Zealand for lodgement of title). There will also be development contributions and possible other payments to be made to the Council. You should discuss these in detail with your advisors.

Surveyor

The surveyor will produce a draft plan of the subdivision for the resource consent process, then finalise the plan and carry out the survey. You should make sure that the plan reflects your requirements and work with your surveyor during this process.

The plan once finalised, should be approved by you and needs to be signed off by the Council and Land Information New Zealand (“LINZ”), (this is the body authorised to approve surveys and issue titles).

Lawyers

Lawyers need a copy of the resource consent and plan from the surveyor to prepare documents which may be required, which may include covenants, encumbrances, easement instruments and land covenants. There are fees for lodging the documents in LINZ.

Lawyers work from the plan and if you have specific requirements you need to tell your Lawyer.

Process and Lodgement of Title

Once all the physical work has been completed on the property and has been inspected and signed off by the Council, fees and contributions paid, the Council issue the 224C certificate. (providing Council authorisation of the subdivision for the purposes of the resource consent).

It is important you monitor the Council’s progress with the surveyor for the issue of the 224C certificate (including any Consent Notices) and the subdivision documents are co-ordinated between the surveyor and the Lawyer for the subdivision process to run efficiently.

Lawyers deal with your bank (if you have a mortgage), to obtain their consent to the documents being lodged for the subdivision, attend to execution of all documents by you and any other neighbours if needed, and attend to the lodgement of the subdivision documents in LINZ for the new titles to issue.

The “fast-track process” consists of the surveyor and the Lawyer lodging the plan and the subdivision documents on the same day.

GST & Tax

If you are subdividing you need to consider the GST and income tax implications before you begin. The rules around timing and your intention at the time of purchase mean that you can unwittingly incur a tax liability if the transaction is not correctly structured.

Recent changes to the bright-line test have extended the period to five years between settlement of the original purchase and signing the agreement to sell (Note: there are different start dates for the bright-line test depending on the type of acquisition). The recent change from two years to five years will mean you need to consider the time-frames very carefully. You can read more about the bright-line test here.

Sale of sections before issue of title

Many people subdividing land sell the sections before titles issue. A date for settlement should not be provided. Settlement should always be a fixed number of days after the issue of new title. If a purchaser requires a sunset clause (a clause that gives the purchaser the right to cancel if title has not issued by a certain date) you should provide plenty of time for the title to issue and discuss this with your lawyer.

It is important to take care to make sure the sales agreements do not cause problems with the subdivisions.

We recommend that you discuss the sale process with your lawyer. The more common problems that arise are, failure to detail the area of land being sold or the ability to vary the area, failure to include the correct subdivision plan in the agreement and failure to detail covenants, easements or Council restrictions that will be registered against the title.

For advice on subdividing your property, contact Associate – Registered Legal Executive – NZILE Fellow, Jennifer Edwards by phone 09 837 6889 or email jennifer.edwards@smithpartners.co.nz.