Last week I presented the pros and cons of Strata vs. Torrens Title subdivision for a dual occupancy project.
For this project, we are building two free standing homes. The land is not a corner block, so one home is positioned behind the other and they will share a common driveway.
Our first response was to try and achieve a two lot Torrens Title subdivision because it’s what most people understand when purchasing houses. Strata subdivision tends to be associated with multi unit developments, rather than house and land projects. But, when you think about it, if you have two houses sharing a common driveway, then there should be some formal arrangement on who is going to pay for the upkeep of the driveway. A strata subdivision covers this off whilst a Torrens subdivision leaves driveway maintenance up in the air or for owners to fight over.
We asked our surveyor to set up the Strata Plan giving each house its own land on title, minimising common areas to the driveway and the dividing fence between the two houses. Being a small, two lot strata subdivision; it means that we’d be exempt from the more formal strata management of larger schemes. As the houses are freestanding and have their own yards, it is quite a simple process.
If our client, on completion of the development decides to hold both houses, they may also decide not to even register their subdivision immediately. We would have the approval in place and this has no shelf life, so they could register the subdivision years down the track when and if they decide to sell.
If they decide to sell one house and keep one, after registering the subdivision, all costs for managing, maintaining, repairing and insuring the common property are shared by the owners in direct proportion to their lot's respective unit entitlements. In this case it is an equal share; each lot has one unit entitlement, so it is very straight forward to manage. Each owner is responsible for 50% of any costs to repair or maintain the driveway/common area.
Small Strata Schemes (2 Lots)
The special provisions for 2-lot schemes are:
• the 2 owners automatically form the Executive Committee removing the requirement for an election
• a quorum for all meetings is when the 2 owners are present
• Building insurance is not compulsory where the two buildings are detached and there are no additional buildings on common property. However, both owners must decide to forgo insurance cover by unanimous resolution at a meeting. Each owner may then insure the structure on their own lot.
• If the buildings are detached, the owners can decide not to have a sinking fund provided there are no additional buildings on common property. Both owners must decide this by unanimous resolution at a meeting.
With the advent of the compulsory 10-year sinking fund plan legislation, 2-lot schemes managed to get special consideration. Essentially, a 2-lot scheme doesn't need to have a sinking fund.
Finally, there are no requirements for two-lot schemes to have any audit of accounts and financial statements.
Property Bloom found by setting up the strata title subdivision in the right way that it was the better way to subdivide. Not only does a small strata subdivision (two lots) cost a lot less in development costs than a two lot Torrens subdivision, it is also a much quicker process.
The winner is, in our books is a Strata Subdivision for a dual occupancy where there is a shared driveway.
With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now
“I was bitten by the property bug, there was no turning back.”
Jo Chivers proves that women can indeed have it all- a career that you are passionate about and a family. While all of this sounds great, it does require hard work, dedication, perseverance and a bit of risk-taking.
Jo’s love of property development inspired her to leave her corporate career and pursue her true passion. After educating herself in property investing, she started building up her own property portfolio. After purchasing a few blue chip properties in Sydney, she soon realised how negatively geared they were and began researching outside of Sydney. She discovered a more affordable, large region of NSW where she completed her first property development. Soon her friends were asking her to find them sites and manage their developments.
She realised there was a need for an all encompassing project management service and her business Property Bloom™ was born. Ten years down the track, she has developed over 60 properties for clients, creating literally hundreds of thousands of dollars in equity and high end yields.