Redeveloping Land Affected by an Old Strata Plan: Common Pitfalls and How to Convert to a Modern Subdivision

Many properties in Victoria are still affected by old strata plans created under the Strata Titles Act 1967 before the current subdivision system was introduced under the Subdivision Act 1988.

We have found that most owners are not aware that their property is part of the older strata plan regime until they want to renovate, build a second storey, redevelop the land or sell the property.

What often starts as a “simple” development proposal can quickly become complicated when the property to be developed is part of an old strata plan.

What is a Strata Plan?

Old strata plans are usually identified by the prefixes RP (Registered Plan) or SP (Strata Plan).

Unlike modern plans of subdivision, strata plans often define boundaries by reference to buildings and structures rather than surveyed land boundaries. This means, determining ownership of the individual lots on the plan is not always as straightforward as looking at a fence line.

For developers and property owners, understanding the strata plan should often be the first step in determining whether a project is feasible.

How Do You Read a Strata Plan?

There are three key things to look for when reviewing a strata plan.

1. Boundaries

The plan will show how lot boundaries are defined.

Generally:

• Thick continuous lines indicate boundaries defined by structures, such as walls.
• Thick broken lines indicate fixed boundaries that are not defined by structures.
• Thin lines and hatched lines generally do not represent property boundaries.

This becomes particularly important when considering extensions, second-storey additions or redevelopment projects.

2. Common Property

Plans registered under the Strata Titles Act 1967 generally included common property, which may be located on the ground, below the ground surface or the airspace above the lots.

Most people think of common property as driveways or shared accessways. However, common property can also exist below ground level or within the airspace above the lots.

As each lot owner has an interest in the common property, it can significantly affect redevelopment proposals because the consent of the other lot owners will be required for any change to the common property.

3. The Legend

One of the most overlooked parts of a strata plan is the legend.

The legend explains how boundaries are defined and how the plan should be interpreted. It often contains critical information regarding ownership, boundaries and common property.

The legend should always be reviewed and considered before making assumptions about what is owned by a particular lot owner,.

Land Use Victoria has published a guide on interpreting strata plans which may assist property owners and practitioners when reviewing older plans.

Why do Strata Plans Cause Problems for Redevelopment?

Many older strata plans contain restrictions that were never intended to accommodate modern redevelopment or subdivision.

Common issues include:

• Height restrictions
• Building envelope controls
• Restrictions affecting common property
• Easements and rights benefiting other lots
• Complex ownership arrangements
• Common property within the proposed development area

In some cases, a development may comply with council’s planning controls but still be prevented from proceeding because of restriction under the strata subdivision itself.

This often comes as a surprise to property owners who have already invested considerable time and expense in obtaining planning advice and preparing development plans or, in some cases, completing the building works.

Example: Can I Build a Second Storey on a Property in an Old Strata Plan?

A common enquiry we receive is from property owners who wish to add a second storey to their home.

The owner may have obtained preliminary advice that the proposed development complies with the relevant planning scheme and council requirements. However, that does not necessarily mean the development can proceed.

For example, we frequently encounter strata plans where the legend contains provisions such as:

“The upper boundary of each of unit is twenty-five feet above the part of the site which is within the vertical or near vertical boundaries of the relevant unit as shown on the diagram below.”

In this example, the strata plan appears to define the upper boundary of the lot at 25 feet above the site. The airspace above that boundary may form part of the common property. If a proposed second-storey addition extends beyond the upper boundary of the lot, the owner may be proposing to build within an area that is not exclusively owned by that lot. As a result, the strata plan may need to be amended or the land re-subdivided before construction of the second storey can proceed.

As a result, the development may require an amendment to the strata plan or a complete re-subdivision before construction can commence.

We have had instances where property owners have purchased a property specifically for redevelopment, only to discover later that the strata plan significantly restricts what can be built on the land.

For this reason, it is important to review and obtaining advice on the title, strata plan, common property arrangements and any applicable restrictions before committing to a purchase or redevelopment proposal.

A relatively modest investment in legal and surveying advice at the outset can help identify potential issues and avoid costly delays later in the project.

Can an Old Strata Plan Be Converted to a Modern Subdivision?

In many cases, yes. However, the process is often more complex than property owners expect.

Where only part of the land affected by an owners corporation is being altered, section 32 of the Subdivision Act 1988 will generally apply.

In most cases, a unanimous resolution of the owners corporation is required. In practical terms, this means obtaining the agreement of all lot owners.

An exception may apply under section 32AI of the Subdivision Act 1988, which allows certain alterations to an individual lot without a unanimous resolution, provided the proposal does not affect common property, other lots or prescribed lot entitlements and liabilities.

Where all land affected by the owners corporation is being consolidated and re-subdivided, section 32A of the Subdivision Act 1988 may apply. In that case, all lot owners who are members of the owners corporation must participate in the new plan.

From our experience, obtaining unanimous agreement is often the most significant hurdle. Owners who have no redevelopment intentions may have little interest in participating in discussions or supporting the proposal.

Ownership and Duty Considerations

Property owners should also be aware that converting a strata plan to a modern subdivision can have ownership and duty implications.

Where a strata subdivision is wholly consolidated and re-subdivided, the resulting ownership structure may differ from the previous lot ownership structure. In many cases, the land is initially held by the former lot owners as tenants in common in proportions reflecting their lot entitlements.

Further transfers may be required to achieve the intended ownership outcome.

As a result, property owners should consider:

• Transfer requirements;
• Mortgagee consents;
• Ownership restructuring; and
• Duty implications.

Depending on the ownership restructuring, duty may be payable where an owner receives a greater beneficial interest in the land than they previously held.

These issues are often overlooked at the start of a project and can significantly affect costs and feasibility.

Obtain Advice Before You Buy or Redevelop

Before purchasing or redeveloping a property affected by an old strata plan, it is important to obtain legal and surveying advice.

A review of the subdivision can identify:

• Boundary issues;
• Common property interests;
• Height and redevelopment restrictions; and
• Whether the strata plan can be converted to a modern subdivision.

Identifying these issues early can save considerable time, cost and frustration later.

How We Can Help

Our Property team regularly advises property owners, developers and purchasers on:

• Interpretation of strata plans;
• Redevelopment constraints;
• Owners corporation issues;
• Section 32 and section 32A subdivision applications;
• Ownership restructuring;
• Duty implications; and
• Conversion of older strata subdivisions into modern plans of subdivision.

If you are considering purchasing, developing or redeveloping land affected by a strata plan, we can help identify potential issues early and guide you through the process from due diligence through to registration of a new subdivision.