I just built and own 3 townhouses - do I need a body corporate?

Discussion in 'Development' started by Glebe, 17th Feb, 2020.

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  1. Glebe

    Glebe Well-Known Member

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    Hi all,

    I've recently built 3 townhouses on the Central Coast and plan to keep all 3. I could keep them on 1 title but I'm looking to get the properties re-evaluated and borrow against the increased capital, so I'm planning on creating a strata plan.

    But given I'll own all 3, is it mandatory to establish a body corporate? And if it is mandatory, what are the legal obligations? And must I employ a strata manager or can I do it myself?

    Thanks!
     
  2. Heinz57

    Heinz57 Well-Known Member

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    I’ve got three townhouses on one title; think you will need a body Corp set up but shouldn’t cost much.

    Can I ask please what you think the price difference will be by strata titling v single title? (% is OK)
     
  3. wylie

    wylie Moderator Staff Member

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    We know we could save money (upfront) by holding our townhouses on one title, but if the council changes the rules, we don't want to be stuck having to sell four in one tax year. So we will create whatever we have to as soon as they are built.

    So, I can't help you with the legal stuff, but perhaps think about whether a rule change would upset your plans on eventual sale.
     
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  4. Glebe

    Glebe Well-Known Member

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    Hey Heinz, about a 15% increase in valuation.
     
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  5. Scott No Mates

    Scott No Mates Well-Known Member

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    Yes - refer: NSW legislation

    Division 3 Meetings of owners corporation
    14 First AGM must be held within 2 months after initial period
    (1) The original owner or, in the case of a leasehold strata scheme for which there is no original owner, the lessor of the leasehold strata scheme must convene and hold a meeting of the owners corporation, in accordance with this Act and the regulations, not later than 2 months after the end of the initial period.
     
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  6. Glebe

    Glebe Well-Known Member

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    Thanks very much Scott, much appreciated. That all seems quite heavy so I'll have to do the ring around to enquire with Strata Managers.
     
  7. Scott No Mates

    Scott No Mates Well-Known Member

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    You might just engage them in a basic capacity to help set things up and get you on the way.
     
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  8. Bunbury

    Bunbury Well-Known Member

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    Firstly, I think you should seek legal advice.

    However, I would personally subdivide them rather than keep them 'in one line'. This is especially so if you are looking to tap in to the equity as you will have 3 separate properties to extract equity out of rather than drawing from the whole development of the three properties which would effectively be cross collateralised.

    A few points to consider:
    • You should prepare for a higher land tax bill once you subdivide
    • You will need a strata plan to obtain strata insurance - this is especially important regarding common property insurance coverage
    • It will be quicker and easier to sell if your intentions and circumstances change
     
    Last edited: 17th Feb, 2020
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  9. Heinz57

    Heinz57 Well-Known Member

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    Nice :):)
     
  10. Archaon

    Archaon Well-Known Member

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    Strata subdivisions will affect land value?
     
  11. Bunbury

    Bunbury Well-Known Member

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    Absolutely. Try getting a valuation for 3 townhouses in one line and compare it with 3 strata titled townhouses. The valuation in one line will always be lower.
     
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  12. Archaon

    Archaon Well-Known Member

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    Do you get a land valuation as a percentage from the Valuer General every year?
     
  13. Bunbury

    Bunbury Well-Known Member

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    ???
    No. Only when financing, refinancing or cashing out. When it really matters.
     
  14. Archaon

    Archaon Well-Known Member

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    When the owner receives their rates from council as part of a strata, do they get a land value yearly?

    I would've thought the land value would be sent to the body Corp.
     
  15. Bunbury

    Bunbury Well-Known Member

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    Yes. But this is largely irrelevant as councils all apply their own 'rates' and it has very little relation to the market value of the property. Just as the land tax value is academic as it is dependent on the of the State Revenue Office land tax rates and the total value of properties held based on the progressive land tax rates.

    No, that is incorrect in my experience.
     
  16. Archaon

    Archaon Well-Known Member

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    So the Valuer General will value the section of land each Strata'd property occupies?
    That makes sense why the land value will go up, thanks for the info.
     
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  17. Bunbury

    Bunbury Well-Known Member

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    Yes, and your council rates and land tax assessment will reflect this.
    Cheers
     
  18. Glebe

    Glebe Well-Known Member

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    Hi Bunbury, we will definitely strata subdivide for all the advantages you list and we'll align a mortgage to each property so as to avoid cross-collateralisation. Our town planner has already drawn up all the plans. I just wasn't sure to what extent the body corporate needed to be formalised/legalised - Scott has informed me of the legislation now.
     
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