VIDEO: Building a Duplex: Is Dual Occupancy a Good Option for You?

With housing affordability front and centre in the minds of many Australians, particularly those living in the capital cities, we are seeing a growth in the number of people looking for alternative ways to make purchasing a property work for them. 

Building a duplex, or dual occupancy property, can be a more affordable way of owning property in both well-established areas and new suburbs. It allows you to use the second property to generate income and offset the cost of the building, or it can provide a more affordable housing option for extended families that pool their resources.  However, whilst it might sound ideal, building a dual occupancy property can also present a unique set of issues given the different regulations involved. Having an experienced property lawyer on hand to help you navigate the process will ensure you avoid some of the most common, and often costly, mistakes!

What is a duplex?

• A duplex is a single residential building with two dwellings under the one roof and a dividing wall between.

• Also known as a dual occupancy, each side is a completely separate home, with its own entrance, amenities and yard.

• Duplexes are sometimes on one title, meaning both halves must be sold together. The optimum position however is for the duplexes to be subdivided into two separate titles, which means each home can be sold separately making for a better financial outcome and greater flexibility.

Why build a duplex?

Building a duplex can be a good option for a number of reasons. 

Some of the reasons why you might want to consider building a duplex include:

• It can accommodate multi-generational living – for example, when older parents live in one dwelling and a child lives in the other. This allows each family to live separately, but the child is on hand to look after the parents as they age.  The child can also get the benefit of capital gains if and when the properties are sold at a later date.

• It can help families who pool resources to move up the property ladder and live where they want to.  Once finished, the duplexes should be divided so that each party owns one of the properties.

• Normally, there is no stamp duty or taxes payable when the properties are divided at this stage.

• It can be a good investment to build two dwellings, live in one and then lease or sell off the other.

Things to Consider/Potential Issues

Duplexes generally require large, wide or dual-frontage blocks as well as the appropriate zoning to subdivide the property into two separate lots.

Given the size of the land and the zoning requirements, the kind of blocks that are suitable are often more expensive and command a premium because you may be competing with developers.

You also need to consider the additional costs associated with development applications, extra bank fees or holding costs, and the demolition of any old buildings on the block as well as the length of time required to complete the process.

Getting the right approvals and ‘ticking all of the boxes’ is critical so you really need to make sure you work with lawyers, builders and lenders that understand the process.

What is the process of building a Duplex?

Once you have decided that a Duplex is a good option, the process usually follows these steps.

A and B purchase a property with the intention of demolishing the old house and building duplex.

1.The purchase of the property would be A and B as tenants-in-common in equal shares.

2. Once the property is purchased A and B would lodge an application to build the duplex and subdivide. It is important that the application includes the 2^nd part namely the subdivision application so there is no need once the duplex is constructed to lodge any further applications regarding a subdivision.

3. The duplex is constructed by a licensed builder as required by the New South Wales legislation.

4. Usually there is a mortgage, so on completion an application must be made to your bank to allow the subdivision to be registered and the property to be partitioned.

5. On completion, an occupation certificate is issued and a plan of subdivision is prepared and lodged electronically at the land titles office.

6. Upon registration of the plan of subdivision or strata plan depending on which approval you obtain the 2 lots will issue Lot 1 showing the registered proprietors A&B as tenants-in-common equal shares, and Lot 2 showing the registered proprietors as A &B as tenants-in-common in equal shares.

7. A valuation of both lots must be obtained by a registered valuer for stamp duty purposes and we will assume that both lots are of equal value.

8. A deed of partition and transfers are prepared petitioning the 2 lots for Lot 1 to be in A's name and for Lot 2 to be in B's name.

9. As each property is of equal value there is no stamp duty payable on the transfers under current laws.

10. The bank will produce the titles to allow the transfers to be registered (and any new mortgage the bank required to separate the mortgage between A and B).

11. New titles will issue Lot 1 in A's name and Lot 2 in B's name and the Council, water rates, valuer general and land tax will all be automatically notified of the change.

The process of building or developing a dual occupancy property can be complicated, time consuming and costly.   An experienced property lawyer can guide you through the process step-by-step and ensure everything runs as smoothly as possible from a legal perspective. 

If you are thinking of building a Duplex, contact Maclarens Lawyers on 02 9682 3777 and I would be happy to discuss your project in more detail.