Why a Due Diligence Investigation is Crucial for New Developments
New developments equal high-investment risks. To mitigate these risks, it’s important to perform a due diligence investigation before you submit the final purchase offer on a piece of land.
It’s for this reason that developers include the due diligence investigation clause in their offer to purchase. The clause gives the purchaser a specific period in which to undertake the necessary enquiries and research to determine if the land is suitable for the type of development they have in mind.
The seller has to provide the necessary documentation to help the buyer make an informed decision. The clause also enables the buyer to retract the offer or to negotiate a better price or terms, based on the due diligence investigation’s results.
Why you will want to add the due diligence clause
Following the mentioned procedure, you can establish if the site is suited for the project you have in mind, whether you can acquire the desired ROI, if the profit margin will be sufficient for it and whether the development will be feasible on the piece of land.
The due diligence investigation provides the necessary answers. It also reveals factors that might increase the cost of the development or delay the project commencement and completion dates. It makes sense to insert the clause in the purchase offer and to have professional town planners carry out the investigation.
Restrictions noted in the Title Deed
The process covers several aspects. For one, it entails reviewing the property’s Title Deed to determine if restrictions apply to the type of construction, materials to be used, height of the buildings, land use restrictions, allowable density, percentage of the land to be covered by buildings, and easements that might cause restrictions on access to the property. This part of the process also entails identifying property ownership.
It is possible to have some of the restrictions removed. To this end, it’s crucial to do so before commencing with the building process. By enlisting the services of The Practice Group to assist you with the due diligence investigation, you can identify potential pitfalls and find out which issues can be resolved.
Information about the utilities
The investigation uncovers issues like service lines or pipes above and below ground that might have to be moved or might affect where you can build on the property. The town planning consultants review the maps, land surveyor diagrams, databases and information available from the service companies to find the exact location and depth of the service lines.
Knowing the details of these service lines will help you calculate costs and decide if the changes to the location of the buildings to cater for the service lines will affect its usability.
Note the fact that the presence of service lines doesn’t mean your building project will not be viable. It simply means you have to determine which restrictions apply and where you will have to move these services.
In some instances, the cost of moving the services, in addition to the time it will take to get the necessary approvals or consent, might not be worth the investment. In other instances, only minor alterations might be required. Having the information at hand to make a decision is why you want to perform the due diligence investigation.
Approvals required for the particular piece of land
You might find that the necessary approvals are already in place for the particular property, or you might only have to get one or two additional approvals. It’s important to know which ones are in place and what you still have to get as this can affect the feasibility of the project on the piece of land.
Even when all the approvals are in place, the project might still not be profitable on the particular piece of land. It is possible to apply for amendments to approvals to allow for a higher density or consent for another type of use. To this end, the help of experienced town planners is valuable.
Due diligence investigations reveal more than the mentioned information, including geological characteristics and environmental aspects.
Minimise the risk and get the information you need to ensure the land will be suitable for your intended development. Reach out to The Practice Group for expert help.