Part 1 of 5 — The Sale and Purchase Agreement for Acquisition of Land

This is usually the first contract for any development — the acquisition of the development site. At this stage of the development, you carry the maximum amount of uncertainty, and therefore, it is vital to ensure it’s managed.

Choosing a site needs to reflect the intended end use. You need to have a concept of what you want to develop, who the end user might be, and how much they might be willing to pay. We often see people paying what is effectively market rate for land, only to find during the feasibility process that the sales value required to support a realistic margin is out of step with what an end user is willing to pay — meaning they have over-capitalised on the site. In simple terms, working backwards from an end sales perspective can help inform what a realistic land price should be. It is usually less than what the seller wants, but this is a logical point to leverage during negotiations.

It is important to ensure you have adequate time to perform your due diligence on the property. You want to iron out as many issues as possible before going unconditional on the contract. This includes a detailed feasibility study, bulk and location analysis, an understanding of project risks (sloping site, services connections, etc.), and finance, among other items.

It is crucial to acquire land at the right price, but you may also negotiate this relative to the terms on offer. A longer due diligence period, for example, may allow you to take things further and remove more risk. We have seen properties contracted conditional on consent being issued, which removes an enormous amount of risk from the project cycle — though this is not common. Deferred settlement is another frequent ask from property developers, as it reduces capital outlay and allows for better cash flow during the consenting process.