Does the agreement expire once my construction project is completed?

No, a Section 173 Agreement is designed to be a permanent fixture on your Certificate of Title. Unlike standard permit conditions that are satisfied once during the build, these obligations 'run with the land' and bind all future owners of the property.

Why am I required to pay the council's legal fees as well as my own?

In Victoria, it is standard practice for councils to pass their administrative and legal costs on to the developer or landowner. This means your budget must cover your own solicitor’s drafting fees, the council's review fees, and the lodgement costs charged by Land Use Victoria.

What role does my bank play in the Section 173 process?

If there is a mortgage on the property, your lender must formally consent to the agreement being registered on the title. Since the agreement can impose restrictions that might affect the land's value, your lawyer must coordinate with the bank to obtain their written approval before the agreement can be finalised and lodged.

How does this agreement affect my ability to sell the property in the future?

The agreement must be disclosed in the Section 32 Vendor's Statement so potential buyers are aware of the ongoing obligations. While common agreements for dual occupancies rarely deter buyers, unusual or highly restrictive clauses should be reviewed carefully as they may influence a buyer's decision or the property's valuation.

Can I receive my Statement of Compliance before the agreement is registered?

Generally, councils will not issue a Statement of Compliance until the Section 173 Agreement is fully executed and recorded on the title. Because this is a crucial step for finishing a subdivision, it is important to start the drafting and bank consent process early to avoid lengthy delays.

Section 173 Agreements Explained: Costs and Process Victoria

You have received your planning permit from the local council. You scan the conditions, expecting requirements about drainage or tree protection. Then you see a condition requiring you to enter into an agreement under Section 173 of the Planning and Environment Act 1987. For many first-time developers and investors, this is an unfamiliar term.

In simple terms, a Section 173 Agreement is a legal contract between the council and the landowner. It places restrictions or obligations on how you can use the land. Unlike a standard permit condition that you satisfy once during construction, this agreement gets registered on your Certificate of Title. It runs with the land, meaning it binds not just you, but anyone who buys the property from you in the future.

We see these agreements daily in our Melbourne practice. They are a standard tool councils use to secure planning objectives that need to last longer than the construction phase.

Why Councils Require These Agreements

Councils use Section 173 Agreements to enforce ongoing obligations. A planning permit expires or gets acted upon, but the council often wants assurance that specific conditions will remain in force permanently. Common reasons include:

Subdivision restrictions: Preventing further subdivision of a lot. This is common in dual occupancy developments where the council wants to ensure the backyard isn't split again later.
Environmental protection: Requiring the maintenance of native vegetation or specific landscaping offsets.
Infrastructure contributions: Securing payments for local infrastructure like drainage or roads.
Design compliance: Ensuring that a development is built exactly in accordance with the endorsed plans, often used for multi-unit developments.
Bushfire management: Mandating specific maintenance regimes for properties in bushfire-prone areas.
Water management: Requiring the ongoing maintenance of on-site detention systems or rain gardens to manage stormwater runoff.

If your permit requires one, you generally cannot reach the Statement of Compliance stage, and therefore cannot register your subdivision, until this agreement is signed, lodged, and recorded.

The Real Section 173 Agreement Cost

One of the first questions clients ask is regarding the price. The total Section 173 agreement cost involves more than just a drafting fee. You need to budget for three distinct components.

First, there are your legal fees. Your solicitor prepares the agreement or reviews the draft provided by the council. We ensure the terms match the permit conditions exactly and do not impose unnecessary burdens.

Second, you must cover the council's costs. Even though you are the one entering the agreement, most councils in Victoria require you to pay their legal fees for reviewing and signing the document. This often comes as a surprise to landowners. These fees vary between municipalities.

Third, there are registration fees. Land Use Victoria charges a fee to record the agreement on the title. If you later need to amend or end the agreement, further costs apply. For example, the state government sets specific fees for an agreement to a proposal to amend an existing Section 173.

When budgeting for your subdivision, do not overlook these expenses. They can add thousands of dollars to your final compliance costs.

The Drafting and Registration Process

Getting a Section 173 Agreement registered follows a strict legal process. Delays here often stall the entire subdivision, so we aim to move through these steps efficiently.

1. Drafting

Usually, your lawyer drafts the agreement based on the council's standard template. Some councils prefer their own lawyers to draft it, which you then review. The document must precisely reflect the condition in the planning permit.

2. Council Review

Once drafted, we send it to the council. They check it against the permit. This stage can take weeks depending on the council's workload. They will not sign until they are satisfied the wording is correct.

3. Mortgagee Consent

This is a frequent stumbling block. If you have a mortgage on the property, your bank must consent to the agreement. The bank wants to verify that the agreement does not devalue their security. Your lawyer must coordinate with your lender to get this written consent. This is similar to the process required when your SPEAR application lawyer seeks bank approval for the final plan of subdivision.

4. Execution

You sign the agreement first. Then, the council signs (executes) it. In the past, this involved physical documents circulating via post. Now, many steps occur electronically, though some councils still require hard copies.

5. Registration

Once fully signed, your lawyer lodges the agreement with Land Use Victoria. It is then recorded on the Certificate of Title. Only after this registration is confirmed will the council usually issue the Statement of Compliance for your subdivision.

Implications for Future Sales

A registered Section 173 Agreement appears in the Vendor's Statement (Section 32) when you sell the property. Potential buyers will see it. While standard agreements for things like dual occupancy are common and rarely deter serious buyers, unusual or highly restrictive clauses can raise eyebrows.

For instance, an agreement that prevents any future development or mandates expensive maintenance might affect the property's value. It is similar to how vague restrictive covenants can complicate land use, although Section 173 Agreements are statutory tools rather than private contracts between neighbours.

If you are developing townhouses to sell off-the-plan, the contract of sale must disclose that a Section 173 Agreement will be registered on the title. Failing to disclose this can give a purchaser the right to walk away from the contract.

Amending or Ending an Agreement

Nothing lasts forever, but Section 173 Agreements are designed to be difficult to remove. However, circumstances change. You might want to extend a dwelling, but the agreement restricts further development. Or perhaps the agreement relates to a requirement that is no longer relevant.

You can apply to the council to amend or end the agreement. This is a formal process under the Planning and Environment Act 1987. The council will assess whether the change undermines the original planning intent. If they agree, you will face another round of legal and registration fees. For instance, Maroondah City Council lists specific fees and charges for amending these agreements, which gives you an idea of the costs involved.

Some modern agreements include a "sunset clause," which states the agreement ends automatically upon a certain event, such as the registration of the plan of subdivision. This is ideal for developers as it cleans up the title for the end buyer. We always advocate for sunset clauses where the council permits them.

Managing the Timeline

Time is money in property development. The Section 173 process often runs parallel to your civil works and surveying. We recommend instructing your solicitor to start the Section 173 process as soon as the plans are endorsed. waiting until you are ready for the Statement of Compliance is a mistake. Council review times and bank consent queues can add weeks to your project completion date.

Your team, surveyor, town planner, and lawyer, needs to communicate effectively. We work directly with the surveyor to ensure the agreement aligns with the Plan of Subdivision and does not conflict with any easements or other encumbrances.

By understanding that this agreement is a standard part of Victorian property law, you can factor the time and cost into your feasibility study. It is a hurdle, but with correct preparation, it does not need to be a roadblock.