Space is at a premium, and owners of large properties stand to make a profit by subdividing land or sectionalising it. Which option suits you best?
- You stand to make more of a profit from subdividing land, but the process is long and complex.
- When you sell a subdivided piece of land, you lose all control over it, and the buyer becomes the new owner of that plot.
- Sectionalising property makes it part of a sectional title unity, so you retain some control over the property, and you share the administration costs with the body corporate.
- Your estate agent is the best person to advise you on whether subdivision or sectionalisation is a good decision.
Space is at a premium nowadays, and for owners of large properties, this presents an opportunity.
If you own a large property with unused space, you can divide it up and either rent out or sell the new subspaces.
You have two options when dividing up your property: Subdivision, or sectionalising. Do your research to find out which one is right for you.
Here’s a brief overview:
Subdivision of property: What does it entail?
Subdivision means the new sections of your property, once sold, will be entirely owned by the buyer. The owner will have their own separate title deed, and will be able to do as they wish with the property. They will be your neighbour rather than your tenant, and the laws that govern neighbourly relations will apply.
Sectionalising, on the other hand, makes the subsections of your property part of a sectional title unit. The owner of a property within a sectional title unit does not have separate ownership of the property; it forms part of the estate as a whole, and is collectively managed by property owners within that estate (this collective management is referred to as a body corporate).
Subdividing land vs sectionalising land: The pros and cons of each approach
- PRO: You can make a larger profit selling or renting out subdivided pieces of your property than if you sectionalised them.
- PRO: By reducing the size of your own property, you cut down on utility and maintenance costs.
- CON: The subdivision process in South Africa is long and complex. You will first have to determine if any zoning restrictions affect the subdivision of your land (a land surveyor can advise you on this). A conveyancer then needs to determine if there are any title deed restrictions. Requirements for the subdivision of land also include approval from the municipality, and the consent of your neighbour.
- CON: When you sell a subdivided portion of property, you hand complete control over to the buyer, and no longer have any say in how that portion of property is managed.
- CON: The subdivision of property costs in South Africa can be extensive. They vary from project to project, but usually start at about R20 000. You can get a breakdown of subdivision costs upfront from your lawyer or land surveyor; it usually includes fees for conveyancing, land survey, town planning and municipal requirements.
- PRO: The process is much simpler. Homes will already be built on the new sections of the property; the land surveyor will just have to certify that they are in accordance with zoning regulations. You won’t need your neighbour’s consent.
- PRO: The sectional title unit will be managed by a body corporate that will share the cost of maintenance and levies. There’s more of a communal feel to the management of sectional titles.
- CON: Of course, being part of the body corporate means you share the administrative workload as well as the costs. You have to be prepared to contribute toward the management of the property.
- CON: In order to make a portion of your property part of a sectional title unit, it has to already have a dwelling with a roof on it. You can’t just sell off a portion of land with nothing on it.
So should you subdivide your land? Seek advice from an estate agent
Your estate agent is the best person to advise you on this important decision. They will have knowledge of zoning and land administration regulations within a particular district, and will be able to guide you through the process and the costs involved.
Acquiring the home loan
The services of a home loan comparison service, such as O-YES Home Loans, can help you take the first step toward managing a property. We can apply to multiple banks on your behalf, enabling you to secure the lowest interest rate and thereby increase the amount of profit you make from subdividing the property. To make the home-buying process that much easier, O-YES also offers a range of home loan calculators to help make the home-buying process easier. Get prequalified.