It is exceptionally rare for a breach in town planning legislation to result in a prison sentence. However, that is exactly the circumstance facing two landowners of a Melbourne City site. Fearing they would not receive the necessary approvals to demolish the heritage building on the site, these unscrupulous owners decided to demolish the building anyway and thought they would be allowed to redevelop the land. However, they greatly underestimated the public backlash and the appetite of the Victorian Government to hold them accountable for the deplorable act. Heritage protection controls are some of the most stringent planning controls that can affect a site and limit the development potential. Any buildings and works to a heritage property can significantly impact and sometimes destroy the heritage fabric of a place so any proposed alterations are carefully scrutinised by heritage experts prior to any building work being completed. The importance of heritage conservation to locally elected councillors and the community was emphasised in a highly publicised case during 2016 within Melbourne city council where the owners of a historic pub that was included in the Victorian Heritage Register was demolished without the necessary approvals.
The building in question was located in Carlton and known as the ‘Corkman Pub’. The building was built in 1858 and in the space of a weekend in October 2016 was fully demolished by the owners. The owners were taken to court for the illegal act in 2019 where a magistrate described the act as ‘reprehensible’ before issuing large fines to the owners which you can read about at this link. The owners originally committed to rebuilding the pub but reneged on this commitment and agreed to clear the site and provide a park instead.
In December 2020 the owners appeared in the news again because they were sentenced to 30 days in jail for contempt of court. In an article published in the Age newspaper two of the owners were described as being jailed as a result of their failure to honour a commitment made during legal proceedings to construct a park on the site. The Supreme Court judge in the matter said the owners had ‘thumbed their noses’ on the previous court order that they act quickly to clean the site and construct the park. Planning Minister Richard Wynnewelcomed the decision and said it was appropriate. He added that the government could compulsorily acquire the site but this scenario seems unlikely given the high price tag the site would demand. The sentiments of Minister Wynne were echoed by Melbourne lord Mayor Sally Capp and the liberal opposition planning spokesman Tim Smith. Mayor Capp added that this ruling sends a message to developers that council won’t tolerate developers disobeying court orders or formal agreements.
It is commonplace for land owners to consider ‘heritage overlays’ and ‘heritage listings’ as significant barriers to the development potential of sites. While there is credence to this belief, it is not true to say that just because a property has some form of heritage control that the site is undevelopable and demolition is not possible. Below we look at the town planning heritage controls that can affect a site and describe the likely implications of each for the development potential of the site.
1. A site included in the Victorian Heritage Register.
These sites undoubtly enjoy the greatest level of heritage conservation of any controls that exist. The inclusion of a building or site on the heritage register signifies it is of state significance and is usually accompanied by a ‘Statement of Significance’ that you can read to understand why the property merits inclusion in the state register. The ‘Corkman’ Pub mentioned above was a building that was included in the register and therefore highly protected. It is unlikely its demolition would have been supported and this provides some insight into why the owners rushed the demolition in the space of one weekend and did not seek approvals in advance.
Any demolition, extension or buildings and works to a property included in the register are subject to approval by the department of environment, land, water and planning (DELWP). In some circumstances, where buildings and works are minor the department can issue you an exemption letter like the below one pictured. This exemption is issued when DELWP are comfortable that the proposed works will not impact the heritage fabric of the property and you can continue with the proposal. If the department do not issue an exemption like the below then you will need to apply for a formal permit to undertake the works on the site. This can take months to be approved and is processed similar to a planning permit application.
An important note about properties on the state register is that they are not subject to approval by the local council through a planning permit. Unless there is a subdivision element to the proposal, the local council are not involved in the approval of any buildings and works. This means that once you have your approved exemption from DELWP or an approved permit if required then you do not need to apply to the local council for a planning permit.
2. A site specific heritage overlay
An individual site that is subject to a ‘standalone’ heritage overlay and not included in the state register mentioned previously has been identified by the local council as being of significant heritage value. These sites or buildings have features and characteristics that the local council have deemed necessary for conservation or protection but are not necessarily significant enough to be included on the state register. Similar to properties on the state heritage register these properties will often be accompanied by a ‘statement of significance’ that explains why the property has been included within an overlay and what features of the property are important to retain. Outright demolition of a property that has a site specific heritage overlay is unlikely to be permitted by the local council. Modifications and extensions to properties are supportable on the basis they meet the requirements of the statement of significance. The statement of significance for these properties is usually contained within the ‘Incorporated documents’ section of the planning scheme but can also often be found as a local planning policy clause in some planning schemes.
3. A precinct heritage overlay
This is the most common type of heritage control affecting properties. The difference between a ‘precinct’ overlay and a ‘site specific’ overlay mentioned previously is that a precinct overlay will cover multiple properties and streets and contain a ‘statement of significance’ that describes, in broader terms the common elements of these properties that are worthy of heritage conservation. Typically a ‘statement of significance’ for a precinct overlay will include a list of properties that are either ‘contributory’ or ‘non-contributory’ to the heritage conservation. The classification of a property as ‘contributory’ or ‘non-contributory’ is a very contentious issue and something local councils have to deeply research before deciding. Typically Council will outsource this task to a reputable and impartial heritage consultancy firm. That firm will then define the elements of heritage conservation that are commonplace within a precinct and make a recommendation about whether each individual property that makes up the precinct should be classed as ‘contributory’ or ‘non-contributory’.
Some landowners welcome the security that is perceived by their property being defined as ‘contributory’ under a heritage overlay. They know the features of their property are unlikely to be greatly modified. The majority of landowners would prefer their property be classed as ‘non-contributory’ because of the perceived negative impact on future development potential and land value decline that can result from a ‘contributory’ classification. It is fair to say that councils consent for demolition of a ‘non-contributory’ building is more likely to be approved than a proposal to demolish a ‘contributory building’. However a ‘contributory’ classification does not prohibit or prevent a future extension on your property. It does impede the possibility of an outright demolition of the building being supported in the future. In my experience the only circumstances that the local council will support the demolition of a ‘contributory’ heritage building is when the building is in severe disrepair and the costs of restoration of the building are prohibitively expensive on the landowner.
Heritage controls are a complex but necessary town planning control that exists. The tale of the ‘Corkman’ pub should serve to warn any landowner seeking to circumvent those controls that the legal ramifications can be grave. On the flip side, landowners can often overestimate the limiting impact inclusion within a precinct heritage overlay can have on the development potential of their site. If you have a property within a heritage overlay it is important to find out which of the three types of heritage controls described here affect your property. Our helpful team can answer this question for you quickly and confirm for you the exact implications of the heritage controls affecting your property for the future development potential and value of your site.
The most common enquiry our team receive is from property owners wanting to subdivide a block of land and sell off the empty land for someone to build on. This is known as a ‘vacant lot land subdivision’ and allows property owners to sell land to buyers who are interested in building. This can be a very profitable venture but there three obstacles you need to be aware of before deciding to undertake such a subdivision.
Councils generally discourage vacant lot land subdivision applications in established residential streets
All Victorian councils actively discourage applications that create vacant lot subdivisions in established residential streets because if the vacant lot land size is in excess of 300 square metres there is usually no requirement for a planning permit to construct a new house on that vacant lot after the subdivision has been complete. This means the future purchaser could build any architectural style or size of house on the land and the design would only have to meet the building code. This is particularly jarring for council because it can result in houses being built in established streets that are totally different and at odds with the established character in that street.
There is no rule that prohibits a landowner for applying for a vacant lot land subdivision to Council but Council will usually write to applicants and advise them that they ‘discourage subdivision applications without associated designs for development approval.’ There are circumstances where Council will be more comfortable with approval of a vacant lot land subdivision. These includes in areas where there are large lot sizes (usually greater than 1000sqm) and new houses would be sufficiently setback from neighbours or isolated from view. Where these characteristics exist Council may approve a vacant land subdivision subject to a building envelope or a building exclusion zone being added to the lot.
You have to pay for the service connections
If a planning application to Council is successful for a vacant lot land subdivision the applicant must still pay the infrastructure contribution fees to the water, electricity, water and sewer provider prior to the lot being formally created with the titles office. Until these contribution fees are paid creation of the new lot cannot be formalised. Therefore until these fees are paid you cannot sell the vacant land to a purchaser. For a breakdown of these fees please download and read our article on how to subdivide a block
You will have to undertake and pay for some construction
As a condition of approval of your vacant lot subdivision the council will likely require you to extend the driveway or construct a new crossover (if applicable to your individual site) to provide vehicular access to the new lot. Like the infrastructure contribution fees, this construction will have to occur and be inspected by council before you can sell the vacant land to a purchaser. The most common construction that has to be undertaken prior to selling is the erection of paling fences to separate the land and mark lot boundaries, the erection of a carport or garage to serve an existing house if applicable to your layout, installation of new street crossovers and extension of the driveway if required for a backyard subdivision.
To discover how big a block needs to be successfully subdivided click here.
If you have a property and want to explore what subdivision approach would work best give our friendly team a call today and we would be happy to help.
If you have found a property that has passed the tests for subdivision set out in this article and you have familiarised yourself with the costs associated with a subdivision of land in Victoria then you should follow the below tips and tricks to ensure a profitable subdivision.
1. NEGOTIATE A LONG SETTLEMENT WITH THE VENDOR
The rule here is to give the vendor their price if they are willing to give you your terms. You should be willing to pay the vendors price as this will give you the ability to negotiate a six, nine or even twelve month settlement. A longer settlement is more valuable than the price of the site. Negotiating a longer settlement gives you the ability to get the necessary council permit before you settle on the site. This saves you a lot of money in unnecessary mortgage interest payments while your subdivision application is being processed by Council.
2. GET STARTED ONCE YOUR DEPOSIT IS PAID
In Victoria you do not need to own a site to apply for and successfully obtain a subdivision approval for it from the local council. This is a huge advantage Victorians have over other states of Australia because approval of a subdivision can take between 3 – 9 months. A common misperception is that you cannot start the subdivision process until the site settles. Get started once the deposit is paid.
3. KEEP YOUR TENANTS
If the tenants are at the end of their lease don’t rush to vacate them. If they are happy to stay on a rolling monthly lease with one months’ notice by either you or them to vacate then keep them in the property until you have all your permits and approvals in place and are ready to appoint a demolition company. If you are not demolishing the existing house as part of the subdivision it is worth reducing your tenants rent while construction is ongoing so that there is some monthly cash flow from the property to assist with your bills.
4. MINIMISE YOUR HOLDING COSTS
An obvious step here but ensure you secure as low an interest rate as possible. Subdivision takes time and there is red tape involved that is outside your control. There is no user pays system where you can pay to have applications fast tracked. Your holding costs are your greatest threat to your profit so follow steps 1 – 3 and secure a lender with a low interest rate to make this project worthwhile.
5. KNOW YOUR NUMBERS AND WHEN PAYMENTS ARE DUE
95% of subdivision projects are profitable. However we have all seen subdivisions in neighbourhoods stop mid construction. This is not because the project is not profitable, it is because the developer has ran out of cash to fund the project through to completion. To avoid this scenario request an amortisation schedule from your lender. This schedule shows the actual cash amounts you have to pay a lender each month. This is critical to show how much money you are going to have to pay out of your pocket and how regularly before you get to sell the new lots in your subdivision. This tool can help you accurately predict what months you may run out of cash and plan for it. This is a handy tool to show you a schedule of payments for a loan amount you can enter.
6. NEGOTIATE A LONG SETTLEMENT WITH THE VENDOR
An online search will reveal the sales history in your neighbourhood for lots and houses the same size as you are intending to create. Using these prices you can quickly develop a best possible sales price, a likely sales price and a worst possible sales price for your project. With a list of your costs to subdivide and your amortisation schedule from step 5 you can quickly work out how profitable the project would be based on the best, likely and worst possible sales price you have selected.
7. GET LOCAL EXPERIENCE
Source a local developer who has done the exact same project as you within the same neighbourhood. Pay them an hourly rate for their time and advice. If you’re lucky they might mentor you for free.
8. PAY ATTENTION TO THE POWER LINES
If the powerlines and power poles in your street are on the same side of the street as your site it will be cheaper to connect the new blocks to electricity. If the powerlines are on the opposite side of the road to your site then the electricity supplier will have to dig up the road to run power to the new lots and this cost is payable by you.
9. ARE THERE ANY UNDERGROUND PIPES WITHIN THE SITE?
Create an account with dial before you dig via this link to obtain free information about the location of underground pipes on your site. This information is very important because if there are pipes running along the boundaries of the site then minimum clearances from this pipes to new buildings will have to be observed. This can impact the amount of land you have available to develop on the site. When you obtain the maps showing the location of underground pipes on your site please email them to us at firstname.lastname@example.org and we can tell you the distance the new buildings must be away from the pipes.
10. YOU CAN’T SELL UNTIL TITLES ARE RELEASED
You can’t legally sell each of the new lots (even off the plan) in Victoria until the title for the new lot is released to your lawyer or conveyancer. To get the title released it is not enough to merely get your subdivision approved, you must then meet all of the conditions attached to that approval. If any one of the conditions attached to the approval of the subdivision is not met your title will not be released and legally there will be no sale allowed. Our tip is to ensure you understand each of the conditions attached to your approved subdivision and get on with meeting the conditions as soon as the approval is issued. This is extremely important if you have a buyer lined up subject to the title being released because the longer they have to wait for the title the greater the risk they will pull out of the arrangement.
One tip in closing is to make sure to complete the subdivision within the time limits. An approved subdivision does not run indefinitely on the site so make sure to complete the project within the timeframe on the permit to avoid having to reapply and pay the fees again.
CALL US TODAY TO DISCUSS WITH AN EXPERT YOUR DEVELOPMENT CONCEPT.