valuing the land component in a strata title (apartment/townhouse)

[daedalus2014]

Hi everyone

I am new to investing in strata titles and am abit unsure on how to value the land component of apartments and townhouses. Unfortunately the articles I have read on the internet are abit vague on this.

For terminology i understand that a strata title is divided into lots and each lot is allocated ?units?.


1. How do I value the land component of an apartment? Can I take its allocated units as a percentage of total units? For example, if my lot is 10 units, and the whole strata title has 100 units I own 10% of the land. So in future if a developer buys the land for $10m, I am entitled to $1m of the proceeds. Is this right?

2. Does the location of the lot affect the allocation of land to me (refer to Location Plan, page 9)? http://rgdirections.lpi.nsw.gov.au/__data/assets/pdf_file/0005/143078/Strata_Plans_Fast_Facts.pdf

This question is unrelated as it is more of a risk assessment

3. I understand that the strata title document at its creation will list the lots and units. Is it possible that in future the body corporate reduces my unit? Or gives additional units to other lot owners and therefore diluting my share of the land?

Thanks!

 

[Richard Feynman]

Hopefully someone else will chime in but my thoughts on calculating the land component is that there are at least three ways, each progressively more accurate.

• # of units / sqm of land on lot
  e.g. 10 apartments on 300sqm = 30sqm land component per property.
  
  
• Total lot size / total allocated units * allocated units for the the property in question
  
  
• Total lot size / total sqm (internal and external) of all properties * total sqm (internal and external) of the property in question

I'm not sure which would be taken as "correct" if the site was acquired in the future. Probably the allocated units method.

 

[mattysavager]

Let me preface this by saying that I'm not an expert on NSW Strata, being from QLD - but it's all pretty much the same.

1. How do I value the land component of an apartment? Can I take its allocated units as a percentage of total units? For example, if my lot is 10 units, and the whole strata title has 100 units I own 10% of the land. So in future if a developer buys the land for $10m, I am entitled to $1m of the proceeds. Is this right?

The value of the land is apportioned according to your unit entitlements. If your Lot has 12 entitlements out of an aggregate of 100, your land value is 12% of the total. This is how council works it out for your rates also.

2. Does the location of the lot affect the allocation of land to me (refer to Location Plan, page 9)? http://rgdirections.lpi.nsw.gov.au/__data/assets/pdf_file/0005/143078/Strata_Plans_Fast_Facts.pdf

That page isn't loading, but no. The unit entitlement calculations should have taken into account lots of variables when they were determined (value of unit, location, size, amenity etc), so this number is the one to look at.

This question is unrelated as it is more of a risk assessment

3. I understand that the strata title document at its creation will list the lots and units. Is it possible that in future the body corporate reduces my unit? Or gives additional units to other lot owners and therefore diluting my share of the land?

It is possible for this to occur via NCAT, if you are looking at a staged development etc then I recommend contacting a lawyer and asking the question. Entitlements can be changed by NCAT if specific requirements are met, but Owners at large would be involved in this process, so you would be aware.

 

[Scott No Mates]

2. Does the location of the lot affect the allocation of land to me (refer to Location Plan, page 9)?

You are not allocated any land. Think along the lines of tenants in common principles - you own a share of the land in a given allocation not a defined portion/location.

3. I understand that the strata title document at its creation will list the lots and units. Is it possible that in future the body corporate reduces my unit? Or gives additional units to other lot owners and therefore diluting my share of the land?

Thanks!

Unless the strata plan is resurveyed and resubmitted to Dept of Lands, it is unlikely that anyone would go through the trouble. If it were done, all owners would need to agree (though plans are afoot for a lesser % of owners to agree eg. for a sale of the complex to a developer if a more intensive use is available).

Generally, an SP is not resurveyed (brings up BCA compliance issues). If it forms part of a staged development, then you have a stratum plan which is then subdivisible into further strata plans.

 

[daedalus2014]

Thanks everyone for their replies!