Subdividing: what do I need to know?

If you're interested in creating some extra income, subdividing land is an option to consider. Developing land is an attractive proposition. It has the potential for great profit and can increase the worth of your property. However, you do need to conduct a comprehensive market analysis and due diligence.

The process of subdividing land involves taking a larger plot. This plot is divided to create separate plots with their legal titles. These plots can then be resold or developed. In some cases, you can make a substantial profit, while in other cases, the profits may be more modest.

Profit is reliant on the size of the plot, the location, finance, and the demand for the land. Making a profit from subdividing a section may appear simple on paper. However, do not underestimate the complexities of New Zealand property laws and regulations. Weston Ward and Lascelles Christchurch Property lawyers share tips for successful subdivision projects:

1.  Examine the amount of (supply) and interest (demand) for real estate in the region you are considering. Learn the median costs, and length of time properties remain on the market, and gain knowledge of the local Canterbury housing market. How long will it take to sell the sectioned-off piece of property - 31 days or 300 days? Remember, time is money!

2.    Surveyors, civil engineers, planners, geotechnical engineers, environment and sustainability consultants, legal advisors, and financial advisors are all involved in subdivision projects. Do not scrimp on consulting professionals at each stage of the project to avoid nasty surprises. For example, a misunderstanding about how you structure the deal could have severe tax consequences.

3.  Think ahead about how you plan to exit the business. Will you sell, keep growing, or do a combination of both? Consult an accountant and expert tax advice before signing any agreements. It is best to seek legal advice to determine the most beneficial business structure for subdivision. Doing so can help you save a lot of money in the future.

4.    Become familiar with the Record of Title and the council's Land Information Memorandum (LIM) report. Doing so will help you confirm if a site is suitable for subdivision. Each Canterbury has its regulations regarding section size, setbacks, frontage, overlays, floor space ratios, easements, water runoff, tree preservation and other aspects of construction.

5.    Precision is vital for the project's success and planning for the worst-case scenarios is vital. Take into account all necessary expenses including council fees, services, specialist legal advice, and loan interest.

While subdividing can unleash significant profits, rarely is it easy – and if it is easy, there is a team of highly experienced specialists in your corner. The good news is that through Weston Ward and Lascelles, you have access to a host of multi-disciplinary legal services all under one roof who are with you every step of the way.  Click here or call 03 379 1740 – whether you have found the ideal section or need further subdivision legal advice – we’re here to help.