Subdividing property – A guide to subdivision
It’s possible. But it’s a process…
So you have a large piece or plot of land and are finding that the maintenance thereof is getting too much? Perhaps you are hoping that, in these difficult times, selling off a portion of your land will provide a much needed cash injection to ease your financial burden…
Firstly what is subdividing?
Subdividing is the process by which one property is divided into two or more portions. So subdivided. When someone buys a portion of a subdivided property, it is exactly the same as buying any other vacant land (or erf). In other words, the purchaser acquires the full rights and title of an owner over the subdivided portion which they have bought.
There are significant financial advantages to be gained by subdividing property – cash injections to ease financial burden, while also creating additional sources of income and considerably reducing maintenance costs (including reducing rates and taxes). In addition, one can potentially achieve a higher return on investment when selling, and proceeds from the subdivision of land can also be used to finance a new house on the same property (or erf).
In many cases, subdivided properties are sold to developers for town planning purposes. And that can be a very profitable sale. With an ever growing demand for properties in sought after areas (where there is often very limited space), subdividing a property can offer significant financial benefit to the owner by selling off various portions.
And these may be particularly alluring for retirees who find their nest eggs slowly dwindling…
Hold up just a second!
It is not quite as easy as – subdivide, step one, two and then three.
Subdivision (and zoning) of land are stringently regulated by a multitude of laws, regulations and bylaws.
Certain legislation may have an impact on the process, depending on the type of land to be divided. For example, the Subdivision of Agricultural Land Act, 70 of 1970 regulates the subdivision of farmland and requires the consent of the Minister of Agriculture before the requested subdivision can take place.
But this is not agricultural land?
The location of the land is still an important consideration as Provinces and Local Authorities have their own legislation and bylaws that govern subdivisions and regulate the details of such a transaction. These include the minimum size of a subdivided portion, the number of portions on one piece of property, availability of services, access to roads and property zoning (to name but a few). As an example, most plots across South Africa cannot be subdivided to less than 4 000 sqm, although some properties have succeeded in being subdivided to 3 350 sqm. So it depends on the area within which the property is located.
It is crucial to contact the relevant Local Authority to ascertain the specific legislation and bylaws that apply as well as the minimum subdivision portions in a particular situation before beginning the process.
There are many legal aspects that need to be taken into consideration, depending on the classification of the property. Property can be defined as commercial, agricultural and residential and each of these types of land has its own unique set of laws which regulates subdivision. There are also legislative variations based on the geological position of the land within South Africa. Mpumalanga’s laws might differ a bit from the subdivision legislation in the Western Cape.
Therefore, before making any decisions on whether or not to subdivide your property, it is crucial that you thoroughly research options in consultation with an experienced land surveyor, professional town planner and, of course, property law specialist.
At Benaters we have vast experience in subdividing and would be happy to both support and assist you as you go through this process.
To subdivide or not to subdivide
What are some of the reasons people would want to subdivide (other than the cash injection mentioned above)?
Downsizing your home
For some people, moving home in order to downsize may not be the ideal scenario. Considerations like loving your home enough to stick around, or living in an area that is in close proximity to most of your daily activities, may entice you to stay put. But, there is still the nagging sensation that the actual property itself requires too much effort or expense to maintain. This is often the case. Here the ideal situation would be to subdivide your property, reducing the garden size and vastly simplifying the level of maintenance required.
Building to rent or sell
Subdividing a property to develop each portion may be opportunistic for savvy investors. This may involve building stand-alone homes on each subdivided portion or developing townhouses or apartments. These can then be sold off for a profit, or alternatively, ownership of these new properties can be retained and instead each unit can be rented out in order to gain a passive monthly income.
Dividing up your assets
While not always the case, a substantial property can be subdivided in order for the asset to be split equally between children or dependents as part of inheritance. The size of each portion and what existing or new buildings are included in each portion will be determined by the specific terms of the Will.
But this all seems to good to be true, surely there are negatives?
While there are definite upsides to subdividing your property, it is an expensive and lengthy procedure which requires jumping through many hoops with your local authority and ensuring that you comply with all relevant requirements where the size of your property is concerned.
Remember, as with any privately owned property, you will no longer have any say or control over what your neighbour does with the subdivided portion you sold to them. This may be an important consideration for those who appreciate their space or those who are selling off a portion of their property with their beloved rose garden intact. If the new owner says out with the rosebush, it is out with the rosebush no matter how many awards it won.
Once the portion of land is sold, it becomes the same as any other property and any other neighbour.
How do you go about subdividing your property?
Once the decision has been made to proceed with the subdivision of a property (after a full analysis of the pros, cons and requirements), the process will begin by first appointing a conveyancer to attend to a deed search to establish that there are no title deed conditions prohibiting subdivision;
Once the conveyancer’s certificate is obtained, a land surveyor must be appointed to survey the land to draft subdivisional diagrams and to submit an application to the Municipality;
The Municipality will, (after a process of inspection and referral to various departments) if they approve the subdivision, issue conditions of approval;
The land surveyor will then submit the diagramme to the Surveyor General’s office for approval and registration;
The Municipality’s conditions need to be complied with prior to them issuing a Section 137 clearance (which is required in order to register the subdivision). These conditions often relate to separate electricity meters, separate sewerage and water connections, the building of party walls as a fire prevention and the renumbering of houses. This is not an exhaustive list and there may be other conditions. There may be a development levy payable and all costs related to complying with these conditions must be borne by the owners of the property;
A town planner will usually, on behalf of the owner, assess all the requirements as set out by the relevant Local Authority. The town planner will then determine and provide recommendations regarding any restrictions or limitations on the subdivision and attend to advertisements and notification of all relevant parties (e.g. affected neighbours) to allow for legitimate objections to be lodged. Any objections by interested parties will have to be dealt with in the appropriate tribunals/hearings and this may delay the process and increase costs significantly. In addition, a town planner together with an architect, will draw up plans and a detailed report which will be submitted to the city council;
Approval from your neighbours will be required and registered letters need to be sent, informing them of the planned rezoning. Adverts also need to be placed in the press allowing for objections;
Depending on the complexity of the subdivision, the services of an engineering firm may also be required to perform a full site inspection and provide a services report;
When all these condition, consents and advertisements have been complied with, each of the relevant municipal departments will sign a clearance form which will enable the section 137 certificate to be issued, and
Once all legislation and bylaws are complied with, a conveyancer will then be instructed to draft the necessary documentation for registration of the subdivision in the Deeds Office. These include (but again is not an exhaustive list) a Partition agreement between the owners in terms of which each owner agrees to the allocation of the individual houses to specific owners, as well as an application to the local municipality (where the property is located) for the new SPLUMA certificate (under the new Spatial Planning and Land Use Management Act) which the National Deeds Office will require before any property transaction can be concluded.
What is a SPLUMA certificate for?
The SPLUMA certificate is to ensure that the zoning of the property matches the land use and ensures that all the buildings on the premises are in accordance with approved building plans which should be filed at the municipality.
While the time frame for the final registration process remains the same as for all other property transfers (which is uncertain), the full subdivision process can be a very lengthy one and as such should be commenced well ahead of any desired deadline for the final registration and sale of subdivided land portions (if applicable).
How much does this all cost?
Costs associated with the subdivision of property, particularly relating to the various professionals required in order to complete and register the subdivision, are important considerations that must be taken into account to make sure the process will provide long-term benefits.
Some of these fees can be found here. But remember these are not exhaustive. Costs of a conveyancer, land surveyor, town planner, engineers, architects and costs to advertise will all differ. And these must be determined prior to commencing. Remember these are all costs for your own account (unless they are being financed by developers) so you should know what you are in for financially before starting. But it is fair to say that the costs are not going to be a meager R25 000 all in. The R25 000 is probably just an initial starting point. So bear this in mind.
Regardless of the reason for the subdivision of property, you will need the assistance of a number of qualified and experienced professionals to get it done. Do not attempt this alone to save a buck here and there.
This professional assistance will help you ensure that the required steps are followed correctly and that you have the best chance of a successful subdivision. So do things right.
Get in touch with Benaters to see how they can support and assist you during your subdividing process. It will be worth it.