You have acquired a large site and intend on delivering 100 townhouses in the following staging plan.
Stage 1 – Lots 1-20
Stage 2 – Lots 21-40
Stage 3 – Lots 41-60
Stage 4 – Lots 61-80
Stage 5 – Lots 81-100
In delivering stage 1, you also plan to deliver the pool and recreational facilities for the benefit of the occupiers. Fantastic, the buyers are receiving what was promised in the marketing material they fell in love with. The question is, are the 20 lots in stage 1 going to bare the cost of maintenance for all of these recreational facilities? Will buyers then benefit from buying into stage 5 so they are not contributing to rec facilities for the duration of the development?
Valid questions and probably questions you will get from prospective buyers.
There are two ways you can deliver the stages and the method you choose will determine your answer to these questions.
- Deliver each stage with a balance lot. This will be the remaining land parcel which you can then chop future stages out of.
- Deliver each stage with just the lots and common property delivered. Prior to adding each stage, add the land require to the scheme.
Delivering the stages with a balance lot means that no, stage 1 won’t be responsible for all maintenance costs associated with the recreational facilities, and no, it’s not necessarily beneficial to buy in at the latest stage. Reason being, we can attribute entitlements to the balance lot which will offset the costs for the owners throughout the delivery of the scheme. The entitlements of the balance lots will reduce as more lots are delivered and this should balance the contribution per lot entitlements throughout each stage of the scheme. This will stop owners in the first stage having to pay significantly higher levies until further stages come online.
“This makes sense, why would anyone use the other method?” I hear you ask. Well, the catch is, you as the developer will be responsible for paying the levies attributed to the balance lot.
You can probably guess what method 2 is…you don’t deliver a balance lot with each stage and the lots in the scheme (at any given time) will be responsible for all costs. This is achieved by simultaneously registering the land the stage will be built upon with registration of the new stage. The levies will start quite high for the lots in stage 1 and decrease over time as each stage drops in. So yes, stage 1 buyers will bare all costs associated with the recreational facilities and yes, buying into stage 5 could be seen as beneficial due to economies of scale.
There are many benefits to staging the delivery of a scheme however one thing that always must be considered is the cost of maintenance by the Body Corporate for the period of time between registration of stage 1 and completion of the scheme . Whether this cost is borne entirely by the owners, or offset by yourself as the developer, is wholly your decision and we will work with you to achieve the greatest flexibility for sales and marketing and security of pre-sale contract disclosures.
If you wish to discuss the staging of your next townhouse project further, please feel free to get in contact on the below details.
0411 352 409
0423 874 987