Should I notify my bank when doing Subdivision?

Hi everyone,

I'd like to perform a subdivision for my current lot so I can build another property for my own house (PPoR).

The bank knows that I borrowed for $1.8m against the property, the purpose is for an Investment property.

if I'd like to divide the lot equally and create:

• 82 Smith Road, Suburb, NSW - Investment property
  
• 82a Smith Road, Suburb, NSW - PPoR

Do I need to let them know about it before or after the subdivision?
What would be the consequence of my action in subdividing it now.

Any help and suggestion would be greatly appreciated.

Thank you in advance.

 

suggest edit your address off the internet
I keep my bank relationship manager informed of our plans, sometimes they have to approve things that happen to titles

 

Anything to do with altering the security would need the permission of the mortgagee.

 

My understanding is that the bank needs to sign the plans/titles before registration at the Land Services Registry so at some stage they will be involved. It may be after the council issues the sub-division certificate and before registration.

 

@Terry_w, in your experience, what would be the consequences that you've seen it before?

 

I've seen people knock down houses and not tell the lender. In most cases they will not find out but when you go and apply for something which requires a valuation, such as subdivision, they do find out. I haven't heard of any loans being called in though.

 

ah, I see.
Because at this stage, I'm about to submit the DA proposal to the council, hence based on the suggestion on this thread, it is better to notify the bank after the council has approved the subdivision.

 

correct,

the subdivision plan will be rejected and it wont get registered unless the mortagee's signature is on the plan and or administration sheets.
and you will be unlikely to find a Surveyor to lodge if it is incomplete.

once you have completed all the conditions in the DA - council will sign - then the bank. then you can lodge with LRS

 

Nice, that does make sense.
Thank you for the clarification @bmc, @Anthony416 & @Hebro

 

Is the same process applicable nation-wide? (given this example and all respondents are NSW centred).

 

If you are altering the title (which you do when you goto LRS) then the owner of said title (bank if mortgaged) would need to give the okay.

My interpretation.

 

The bank isn't the owner - that is old system title, they are the mortgagee.

The owner or mortgagor enters into a contract with the mortgagee not to alter their security without their permission. Same all over

But that doesn't mean you cannot do it, just seek their consent.

 

that's great, thanks @Terry_w & @Archaon

 

My subdivision has been certified but titles won’t be released until the bank signs off on it.

 

Make sure the bank knows exactly what you want to do when subdividing and particularly selling a subdivided lot. I had them close a loan out on me despite the fact that there was more than ample security, we just weren't on the same page at the same time when the subdivision went through.

 

No actual reluctance just a lack of communication on both my part and the banks.

Loan was for about 200k from memory and total value of both lots after subdividing was 530k. I assumed that upon sale of one lot there would be a valuation and security would transfer to the remaining property (worth 350k) but instead the loan was closed out upon settlement. A giant pain as I had intended to keep the remaining property as an IP and wanted to keep the loan on it.

Lesson learnt....don't assume anything!

 

Banks just don't pay out loans, you must have not instructed them properly

 

I didn't instruct them at all, I just assumed that the loan would remain on the original property that it was attached to. They also didn't inform me that they were planning to close the loan upon settlement or I would have advised them differently.