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Look before you leap: Site acquisitions

  • January 7, 2018

The property development game is one of calculated risk. Developers assess all the variables in order to model its financial feasibility. While risk can come with great reward, it pays to know what those risks might be, and if you can manage them effectively.

Here are some tips we’ve rounded up on-site acquisitions.

1. Call your Town Planner

Hopefully we’re your town planner! But even if we aren’t it pays to pick up the phone. We can quickly assess the site for you and come back with advice specific to the site.

For example, we can identify any infrastructure like sewers and stormwater (or lack thereof) that might impact a potential development. Our desktop review would also include reviewing applicable zoning and any other obvious constraints. K

There are other nitty gritty details your town planner can also assist with that impact the development, for example boundaries, setbacks, and car parking requirements if relevant.

2. Add a Due Diligence clause

Due diligence takes time! In Queensland we are fortunate that special conditions can be added to a sales contract enabling you to secure a property for an agreed price and on specific terms.

Adding a due diligence clause enables you time to walk through all these steps and obtain greater certainty on its constraints, development costs, and ultimately the feasibility of the proposal. In some cases, this also allows sufficient time to have a pre-lodgement meeting with Council to determine their support for a proposal and position on any potential issues.

A due diligence period will not always be agreed to by a vendor but even asking for a month or so can greatly reduce your risk. The benefits of this clause, if worded correctly, is that if f the feasibility does not stack up you may be able to withdraw from the purchase without penalty. Liaise with your solicitor on the clause.

3. Can you sign subject to development approval?

If your town planner identifies there will be significant risks in obtaining development approval, see if the vendor will agree to a contract special condition that the sale is subject to development approval.

We have witnessed many a project become subject to unreasonable Council conditions in the development approval which are not satisfactory to the client in terms of yield or other requirements. For this reason we stress that this condition should be: “subject to development approval to the purchaser’s satisfaction”. This clause should not be used alone because without a due diligence clause a vendor could force you to proceed through the development application process at great expense even if the site is not suitable.

4. Contact your Architect or Designer

Once you know what kind of development is possible on your site call your Architect or Building Designer. They can assist you to quickly sketch up what might be workable given the constraints of the site and having regard to building codes and regulations.

5. Talk to your Builder or Quantity Surveyor

The next step is to run some numbers on the build you landed on with your Architect. This firms up the feasibility model further and helps determine if the development stacks up.

6. Head back to your Town Planner

Armed with a firmer idea of your build and its cost, head back to your town planner. More detail allows them to assess what kind of applications are going to be required and the associated costs.

Our Director Aaron Sweet has over 19 years of planning experience and a wealth of expertise in site acquisitions and due diligence. If you want his advice for your next project contact office@consultplanning.com.au.

Disclaimer: While every effort has been made to provide accurate information, Consult Planning does not guarantee that this blog article is free from errors or omissions or is suitable for your intended use.

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