Acquisition of Development Sites for Residential Dwellings - the Process Explained

Our Commercial Property Team are regularly instructed on the purchase of development sites with or without the benefit of planning permission for the development of (or intention to develop) residential dwellings.

These sites can be structured by way of a commercial transaction or residential dependent upon the previous use of the land. The structure in fact does not differ greatly however the previous use will dictate the form of contract to be negotiated between the parties (be that Standard Commercial Property Conditions (Second Edition) for commercial or Standard Conditions of Sale (Fifth Edition) for residential. Each form of contract can be tailored and amended to meet the client’s needs in whichever transaction.

The Process Explained with Potential Pitfalls and Solutions

Contract

Environmental Issues

The contract can and does often contain specific environmental liability clauses which our client who is purchasing the Property needs to be aware of. We negotiate these provisions for our client depending on the site in question – for example some sites have undergone extensive remediation measures due to previous contaminants being found on the site. Both we and our client have to be wary in such a case given the very nature of environmental liability. In brief, being found in breach of environmental legislation can be costly both in terms of clean-up costs and sanctions which can range from a fine to even imprisonment. The local council will try and find the person who has caused the contaminant or environmental damage however if they cannot, liability passes to the land owner (even if they were not the cause and were unaware of it). Contract clauses therefore purporting to pass liability directly to the new landowner should any issues arise are always to be considered by us and discussed with our client at length.

Overage

Contracts can also include conditions on the sale or the purchase of the property – these can range from simply access to the property post completion to Overage Provisions. Overage is quite simply a way that the seller of any land can share in any increase in the value of the property post completion. This is often the case with planning permission which may be granted to our client after completion which increases the value of the land. Overage Provisions can be lengthy and complicated – we break these down to our client in order to ascertain exactly what their liability may in the future be and limit this as much as we can through negotiations.

Purchasing Part of a Property

Often our client is purchasing a piece of land which is only part of the title of the seller. As such we draft a transfer of part of the land, together with a plan of the property being bought. We work closely with our clients in drafting transfers of parts to make sure that any restrictions or restrictive covenants can be complied with, are not onerous and will not inhibit the proposed development. We make sure that the rights granted to the seller over the property will not impeach any development or be a nuisance or annoyance to any future home owners. We consider what rights our client needs over the remaining part of the property that is not being purchased, be that a right of way, a right to lay services, a right to erect scaffolding which overhangs on to their land etc.

Due Diligence

Of course a main part of every transaction is the title review itself. We tailor our reviews to the proposed development/intended use of the land we are reviewing. We will make sure there are no current rights reserved over the property that will prevent the proposed use, there are adequate rights of way, and no positive obligations or incumbrances that may be an issue. Should there be any issues we consider commercial, practical solutions for our client in order to keep the transaction moving forwards.

Reporting

After raising all necessary title enquiries we provide a comprehensive title report to the client breaking down and explaining the title to the property in full with any ancillary documentation thereto. We, depending on the client’s instructions, will have undertaken a full sweep of searches which are also reported on in full. The contract and transfer are explained and we take the time to deal with any client queries or issues they may have. Only after we have confirmation that the client is completely happy with all that he has been provided with would we proceed to exchange and completion.

Post Completion

Post completion we will deal with a range of further work for the client, all linked to the initial transaction. Should planning not have already been in place at the time of completion we will often negotiate and draft a s.106 Agreement with the council to facilitate planning being granted. We will may then negotiate and draft further agreements such as a s.278 Agreement with the council to facilitate highway works required or a s.104 Agreement for the adoption of sewers.

Sale of Dwellings

Post development we are then instructed in residential plot sales. Although these can technically be worked on by our residential conveyancing team, as we have worked on the property pre and post completion our clients consider us best suited to sell the individual dwellings. If the properties to be sold are leasehold we will draft suitable leases and contracts for individual buyers and produce a comprehensive title and contract pack so that each of the individual purchaser’s solicitors receive a full pack of all the information which we hold in relation to the property when we undertook our due diligence. We will have dealt with all title enquiries and any potential issues when we purchased the site for our client which facilitates a smooth and faster sales process for the dwellings.

Summary

The above is an example of our clients, using us for the transaction as a whole and assisting throughout from purchase to sale. The transactions are technical and varied and go beyond just a purchase of a property whereby our specialist team of solicitors work together to achieve a satisfactory outcome for the client at every stage. 

 If you are a developer looking to purchase a potential site which is subject to or will become subject to planning permission for residential dwellings, our Commercial Property Team has vast experience and expertise of advising clients in the purchase of such sites and taking the transaction from the purchase of the land all the way to the sale of dwellings.

If you have any questions related to this or a similar commercial property issue please do not hesitate to contact the team by calling 0345 872 6666 or fill in the contact form here

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