Our client Dan, owns a large dairy farm in the Rural Zone. Dan has been hit hard by the downturn in the dairy payout in recent times, and his bank is putting the squeeze on him to reduce some of his farm debt.
Dan’s property adjoins a State Highway; is within an area of high class soils; and has a significant area of native bush. He goes to visit his lawyer to see what he can do.
Meanwhile another client, Sally, who has a house on the edge of town on a 6000m2 section, wants to subdivide her property. Development of the town is getting closer and nearby properties are zoned residential, but Sally has been told she can’t subdivide because her property is still zoned rural.
Sally mentions this frustration to her lawyer
A possible solution for both Dan and Sally lies in the Waipa District rules relating to transferrable development rights (TDR’s).
What is a TDR?
A transferrable development right is a right to transfer a right to subdivide from one property to another.
Under the Waipa District Council Plan it may be possible for an owner of farmland that is considered “sensitive” to transfer their “right to subdivide” their farmland to another property that is not located within a sensitive location.
“Sensitive” land may be within a significant landscape area, near a river or reserve, it may encompass a bush stand, it may front a State Highway, it may be within close proximity to a Quarry, Industrial Zone or Hamilton City Council Limits, or it may have high class soils.
Depending on the size of the farmland, a person (known as the “Donor”) may have a number of TDR’s in relation to their property.
How do TDR’s work?
If the above criteria are met, the Donor is able to transfer/sell their TDR’s to a person who may not otherwise have a right to subdivide their property (known as the “Recipient Site”). , In order for the Recipient Site to use that TDR the property must also meet certain criteria.
The Recipient Site has to be within a non-sensitive area, or if it is close to an urban area and have an area of between 5000m2 and one hectare.
The Recipient Site is only ever able to use one TDR to subdivide their property.
What’s the benefit of using a TDR?
The use of TDRs has several benefits.
It’s a win for Waipa District Council as TDR’s result in “sensitive” land being protected, while concentrating development closer to urban areas.
It’s a win for the owner of sensitive land as they are able to create value by selling these rights to the Owner of the Recipient Site.
Finally, it’s a win for the owner of the Recipient Site who then has a right to subdivide their property which they would not otherwise have been able to do under the rules of the District Plan.
An example of how TDR’s add value
The nature and location of Dan’s property means it has a number of TDR entitlements. Those TDR’s would each have a current market value of around $30,000.00 plus GST.
Dan is thrilled as this money would make a real difference to him, and take some pressure off with the bank. He is happy for his lawyer to do what they can to arrange for sales of the TDR’s. Surveyors often have a register of people interested in both selling and buying TDR’s.
Meanwhile, Sally could purchase a TDR in order to subdivide her property. Her lawyer puts Sally in touch with Dan, and before too long they have entered into an agreement to buy and sell a TDR.
Sally then applies for, and is granted approval to subdivide her property into two lots by using the TDR that she purchased from Dan.ki
Even factoring in the cost of the TDR, and the cost of subdivision, Sally has significantly increased the value of her property by creating the extra Lot.
Conclusion
The Waipa District Council has some strict controls around subdivision.
The TDR rules, while very specific and quite complex, can benefit both Donors and the owner of the Recipient Site.
It is vital that you talk to advisors with a good knowledge and understanding of the rules.
Download our Ebook ‘Subdivisions Made Easy‘ or call Gallie Miles 0800 872 5882 to discuss your options.