Should I Subdivide or Use a By-Law?

David Bannerman

Ownership and use rights

We have recently seen an increasing number of requests from lot owners in strata schemes to obtain a right of ownership or use for common property areas comprised in:

  • Attics
  • Courtyards
  • Balconies

Also lot owners have been requesting subdivision of an existing lot into two lots and consolidation of two lots into one lot.

Options to implement

There are a number of options available to implement these arrangements. These include:

  • Plans of subdivision of common property, transfer of subdivided common property to a lot owner and consolidation of subdivided common property with an existing lot
  • The owners corporation granting exclusive use by-laws in favour of lot owners for areas of common property with plans to identify the exclusive use area
  • Plans of subdivision to subdivide an existing lot
  • Plans of consolidation to consolidate two existing lots
  • Conversion of a lot into common property

Pros and cons

For subdividing and obtaining a right of ownership rather than obtaining an exclusive use by-law there are various pros and cons.

Pros for subdividing include:

  • An increase in value based on obtaining freehold title to thesubdivided area rather than just an exclusive use right
  • The subdivided area becoming secure freehold title and being able to be dealt with by the lot owner by way of mortgage, lease or sale
  • An increase in unit entitlement in the strata scheme and accordingly greater voting rights

However, cons for subdividing include:

  • Costs, including any price for obtaining freehold title from the owners corporation, stamp duty and taxes
  • The time required, dependent on the complexity of the subdivision and any agreement required between the lot owner and the owners corporation
  •  The local Council needing to be involved for approval purposes and potential delays in the process including due to local Council requirements

Exclusive use by-law article

Also refer to our article By-Laws in Residential Strata Schemes in relation to exclusive use by-laws [via this link].

If you require further details or assistance in relation to these issues, please contact us at enquiries@bannermans.com.au or on (02) 9929 0226

 

***The information contained in this article is general information only and not legal advice. The currency, accuracy and completeness of this article (and its contents) should be checked by obtaining independent legal advice before you take any action or otherwise rely upon its contents in any way.

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