Pre Land Purchase Due Diligence

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Purchase of Land without doing due diligence can be a once in a lifetime costly exercise

One of our clients emailed us a section 32 of a property they had recently purchased in Croydon and asked us to start preparing plans for the 4 – 3 bedroom dwellings. The client was comfortable with this outcome as the site was relatively large with an approximate area of 1300sqm.

Our process is one where we start investigating as much about the property as necessary to find out both the site’s opportunities and constraints. As such, we begin by investigating information about the land, certificate of title, planning, building and services regulations. Unfortunately there is not just one place to find the regulations and each council and service authority have different regulations. The system of checking is so adhoc that many believe that it just takes years of experience to know what to look out for.

Amendments to their planning scheme

Many know about planning zoning and overlays and how that impact on development yield. This site was in a general residential zone, so density would not be an issue. What many do not know, is that council sometimes make amendments to their planning scheme where they change zones or introduce new planning overlays. This process can sometimes take up to a year and does not come into affect until the amendment to planning scheme is ratified by the planning minister.

Sometimes finding an amendment to a planning scheme is like finding a needle in a hay stack. One method we use, and this depends on how good council’s search engine is, is to search Planning Scheme Amendment. Low and behold upon doing this search we uncovered an application to the minister to change the zoning of this land from a General Residential Zone to a Neighbourhood Residential Zone. Wow, this means that the 4 unit site would become a 2 unit site.

We phoned Council enquiring about the timing of the amendment and were told that this was likely to happen within 3 months. Now since a planning application normally takes between 6 to 9 months we promptly notified our client what we had uncovered.

Cooling Off Period

Fortunately it was the last day of his 3 day cooling off period and he was lucky enough to get out of the contract. Had we not done the due diligence our client would have been only be able to build 2 units equating to a potential loss of some $200,000.

It just goes to show, many say that developing is easy and developers make easy money. Don’t be fooled, it is highly risky, so we urge you to do your due diligence prior to your next purchase.

The problem is, that many do not know what they do not know!

The Documents

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Note: All care is taken in researching this information, however, it is general in nature and may not be specific to your case. Independent professional advice should be sought before proceeding with any development.