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Beware of Nasty Easements that Bite

Discussion in 'Development' started by MTR, 15th Jul, 2015.

  1. MTR

    MTR Well-Known Member Premium Member

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    One of my projects I completed last year involved cutting up a corner lot into 2 lots, where I employed a Surveying Company - (Lot 1 400 sqm) and (Lot 2 416 sqm). On the surface nice fat juicy profits to be made. No easement on the block, you little gem:)

    But then.....the Surveyor eventually advised me that there may be a possibility of an easement on my land (lot 2) - due to the proximity of high voltage power line and that part of my land (5 metres) would become an easement (66, 132, 220 and 330 kV overhead transmission lines).

    Yes, ….5 metre easement (ouch, double ouch)….. right across the fence line which could not be utilised, only low shrubs could be placed in this area, nothing that was a permanent structure and if I recall no higher than 1.5 metres. To cut a long story long story short I had a decision to make, either go ahead with this strata survey or put it to bed and kiss goodbye the money and time I had already spent on this project.

    Finally after weighting all the options I ended up going ahead with this project, demolishing the house and selling, they both blocks.

    However lot 2 had to be reduced in price significantly due to the easement I was well aware of this prior to going ahead. My market was also very limited due to the easement and to make matters worse the market started to turn. Suddenly blocks were not selling, they were sitting on the market and even worse more coming onto the market.

    On completion, I employed a Chinese real estate agent who I knew was excellent and there were also many Chinese people interested in this area. However, no one was interested in Lot 2 once they realised there was an easement. Agent then advertised this block in a local Chinese newspaper and created competition. We also organised house plans to show what could fit on this block by a larger spec builder, and even with the easement someone could build over 200 sqm home.

    During this interesting journey, I made many phone calls regarding green title and strata title, let me tell you go GREEN all the time. I got the wrong advice by agents that had no clue, I think I also have to wear that one. For the extra $10K cost involved you will generate far more interest, it’s a big one.

    However, one way I overcame this was to contact Council and ask them for separate Street numbers, you can only acquire this if there is a number available. fortunately there was. By having separate Street addresses it does amazing things to the psyche of the buyer who specifically freaks out when they find out its strata and not green.

    Here are the figures, this was an 8 month project in total from purchase to selling and I did very little work other than to sign off and perhaps a few sleepless nights worrying about the damn easement.

    $572,000
    $46,000 (demo/strata fees etc)
    $13500 (selling fees)
    $12,000 (GST confirmed accountant)
    $9000 (appx holding, renting back house to owner for six months cash each week)
    TOTAL COST: $652,000

    This was a 8 month project from buying to selling, the easement easily cost me around $40K and the change in market cost me at least $25K?? guessing

    Sold 1 and 2 lots - $755,000 (Lot 1 $400K. Lot 2 $355K)
    depending on what I pay for CGT and I honestly don't know cos I am holding quite a few negative properties in my trust which I can offset against profits)
    $103,000 profit - (perhaps $20K ?? CGT, most $30K), a profit is a profit

    MTR (watch those damn easements, they can kill you)
     
    Last edited: 15th Jul, 2015
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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  3. HD_ACE

    HD_ACE Game-Changer Premium Member

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    Yeap, usually 8m total I think from the pole. And 4m from the low voltage lines? Anyway not worth the hassel in these situations and I have passed up a couple because of this. Setbacks are just two great especially if subdividing. But you did well to come out on top well done.
     
  4. MTR

    MTR Well-Known Member Premium Member

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    You missed the point, there was no easement on the block??
    This was only determined by a surveyor once you start working on the block
     
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  5. stumpie

    stumpie Well-Known Member

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    @MTR
    Thank you for sharing, I'm sure lots of people will be taking mental notes on this. Good to hear the good and the not so good stories. We are all learning all the time and get wiser from the experience and knowledge.
     
  6. MTR

    MTR Well-Known Member Premium Member

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    That is exactly right. But when the power pole looks like the normal, how do you know,. you don't know what you don't know??? does that make sense? But now I bloody I know:)
     
    Last edited: 15th Jul, 2015
  7. MTR

    MTR Well-Known Member Premium Member

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    Thanks Stumpie, I had a choice to make I could have done nothing, no strata and kept the property, however there was around $60K in renovation required and I decided to bite the bullet.

    Even so, I still made a profit worse case scenario $70K net, however if there was no easement and market conditions remained strong I would have made perhaps $60K extra???, its academic I guess.

    In hindsight, I think I would have kept the property and just renovated as a buy and hold as it could have easily been turned into 2 separate properties and rent out as dual.

    What does not kill you makes you stronger:)
     
  8. D.T.

    D.T. Adelaide Property Manager Business Member

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    Yep, you did well.
    @Westminster bought with lots of easements so now her friends tease her ;)
     
  9. MTR

    MTR Well-Known Member Premium Member

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    Hehe, damn you and damn easement, but I reckon mention the word HIGH VOLTAGE and watch everyone run for the hills, that must be the worse easement surely.

    Are there any poison toxic easements....hehe???? .
     
  10. D.T.

    D.T. Adelaide Property Manager Business Member

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    Most blocks in Playford council SA have a sewer line easement along the back fence. Its not normally an issue though because need that much as setback when building anyways, so that area can be garden or alfresco etc.

    But yea, always pays to check first!
     
  11. Big Daddy

    Big Daddy Well-Known Member

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    Well done.
    High voltage transmission lines require a 8/ easement either side of pole. You can use 1100.com to find out if the lot is located near an easement before you buy. I only know that in hindsight after reading marisas story.

    Clever idea with the Chinese newspaper and house design plans
     
  12. MTR

    MTR Well-Known Member Premium Member

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    Another thing that I must say am really ticked off, the surveyor would have know this right from the start, that there would be a high voltage easement, but he never told me this??
    I would have thought it was part of his brief??
     
  13. MTR

    MTR Well-Known Member Premium Member

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    I always check for easements. The problem was, there was NO easement on the block that is the point, this only occurred when the block was strata titled. See what I mean, that why it is so frustrating.
     
  14. MTR

    MTR Well-Known Member Premium Member

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    BD
    The problem is these power lines don't look nasty, they are not the monsters we expect to see, they look like any power pole you see in an older resi suburb. So you are not looking at this and the title is clear, NO EASEMENTS. Have learnt from this one.
     
  15. MindMaster

    MindMaster Well-Known Member

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    Easements suck!!!

    How could this kind of problem be avoided? Get a good surveyor to inspect the block during the cooling off period if there are overhead transmission lines running along side?
     
  16. RetireRich101

    RetireRich101 Well-Known Member

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    Green title is just another WA acronym for Torrens or individual title right?
     
  17. D.T.

    D.T. Adelaide Property Manager Business Member

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    Yes, vernacular for Torrens. Every other state calls it Torrens (which initiated in SA btw)
     
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  18. Big Daddy

    Big Daddy Well-Known Member

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    I can offer a little bit of help.

    Usually these transmission lines are on major roads and are usually much higher than normal power lines. These easements are not shown on the Cert of Title.
    Use www.1100.com to search property before you put in an offer. A response from Western Power should show you an overhead map. If you see orange then its a transmission line and its not good.

    How to read 1100.com map below.
    1. Orange = Transmission Line (>33kv). Very high up on poles. ~ 15m high. 8m easement.
    2. Blue = High Voltage (1kv-33kv) . ~6m high.
    3. Red = Low Voltage (240/440v). Short distribution poles with 3 or 4 lines. ~6m high.
    Note: For Blue and Red: No easement or never seen one. Maybe a small easement but since they are located far from the property boundary (near road or footpath) then it has no effect on a property you buy

    upload_2015-7-15_12-30-42.png

    upload_2015-7-15_12-32-7.png
     
    Last edited: 15th Jul, 2015
  19. MTR

    MTR Well-Known Member Premium Member

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    Very good, BD
    This makes a lot of sense now. Major road...
    I know now and will in future. Thanks

    MTR:)
     
  20. Arnel

    Arnel Well-Known Member

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    @Big Daddy , how do you use the site? i can find anywhere to enter the site address?