The concept of land development is important in the context of the sub-sale provisions, as ‘double duty’ can arise if a nomination occurs under a contract of sale after the occurrence of land development.

The ruling provides developers with practical guidance as to what activities may constitute land development and highlights the broad interpretation taken by the SRO.

Why is the concept of land development important?

It is common for a purchaser to sign a contract of sale with the words “and/or nominee” after their name.

Whilst the ability to nominate an alternative purchaser allows a purchaser to sign a contract prior to finalising its ultimate land holding structure, the subsequent nomination can result in duty applying to both the initial purchaser and the nominee that settles the contract if either additional consideration is paid or land development occurs prior to the nomination occurring.

It is therefore important for developers to be aware of these provisions and to understand the types of activities that may constitute land development.

What is the definition of land development?

Land development is defined in section 3 of the Duties Act 2000 (Vic) to mean any one or more of the following:

1. preparing a plan of subdivision of the land or taking any steps to have the plan registered under the Subdivision Act 1988 (Vic)
2. applying for or obtaining a permit under the Planning and Environment Act 1987 (Vic) (Planning and Environment Act) in relation to the use or development of the land
3. requesting under the Planning and Environment Act a planning authority to prepare an amendment to a planning scheme that would affect the land
4. applying for or obtaining a permit or approval under the Building Act 1993 (Vic) in relation to the land
5. doing anything in relation to the land for which a permit or approval would be required; or
6. developing or changing the land in any other way that would lead to the enhancement of its value.

It is evident from the above definition that the concept of land development is broad and can occur without the land actually increasing in value as a result.

Preparing plan of subdivision activities

The SRO interprets the activities that can constitute preparing a plan or taking of steps to have a plan registered broadly to include the following:

1. engaging professional surveyors to undertake surveys of the property or the local area and/or prepare reports for the purpose of a plan of subdivision or consolidation
2. drafting or re-drafting a plan of subdivision or consolidation
3. commissioning a professional review of a plan of subdivision or consolidation for the purpose of amending the plan or preparing a new plan
4. lodging a plan of subdivision or consolidation for council for certification
5. undertaking any other works required to obtain a Statement of Compliance; and/or
6. submitting the plan of subdivision or consolidation for registration.

Developers should be mindful that even early stage activities such as engaging a surveyor or commissioning a review of existing plans can amount to land development.

The SRO does, however, list certain preliminary activities that would not generally constitute land development. This includes activities that would typically be undertaken as part of due diligence (such as preliminary research, routine searches and checks of plans and informal surveys and measurements etc).

Applying for or obtaining a permit activities

For permit applications, the SRO considers that minor amendments to permits made via a Secondary Consent Form, permits for maintenance work or extending an existing permit would not generally be land development. However, a permit to extend an existing permit may constitute land development if it leads to the enhancement of the value of land.

Requests to amend planning scheme activities

The SRO confirms that formal submissions to amend a planning scheme including applications to Council to rezone land or making a submission as part of a Precinct Structure Plan (PSP) process would constitute land development.

Building permit activities

The SRO is of the view that the granting of a building permit constitutes land development even if the building permit application was made prior to the contract of sale being entered into but was granted post contract signing.

It is also important to note that activities that would require a building permit are also included even where a permit is not sought. The example in the ruling relates to the demolition of a building which would require a building permit constituting land development.

Catch all enhancement of value activities

The examples that the SRO provides for the catch all enhancement of value provision includes decontamination activities, removal of a covenant on title and rezoning of land.

The development activities do not need to alter the physical characteristics of the land and each activity needs to be considered in isolation to determine whether it leads to the enhancement of value, notwithstanding other activities may result in a negative impact on value.

SRO audit activity

The SRO regularly uses its broad investigative powers to review sales where a nomination has occurred to determine if any land development occurred prior to nomination.

This could take place anytime up to five years after settlement of a property and the SRO would also typically exchange information with Councils and other authorities to consider if any land development has occurred.

What this means for developers

It is very important for developers to be on the front foot. Consider the potential application of these rules at the time a contract of sale is entered into and nominate the ultimate land holding structure as soon as possible, prior to any activities being undertaken that could fall within the SRO’s broad interpretation of land development.