Insight from Shazad Banaras Commercial Property Solicitor in relation to Development.
Purchasing Development Land
Land and property are assets that very rarely decrease in value and they are highly attractive for investors – whether commercial or on an individual basis. Despite the current economic turmoil, property investment remains a lucrative proposition especially when it relates to development opportunities.
We highlight some of the key considerations for prospective investors:
Location
One of the most important points to consider is location as this will directly impact the investment success. Development land usually attracts a high asking price as the potential for success is higher. This is often the case in areas of urban gentrification which attract new businesses seeking to invest in the area of increasing desirability.
Funding
As a purchaser you should have a funding plan in place, this will detail how the purchase of the land and any subsequent development projects will be financed. Smaller development projects are sometimes funded via bridging due to the simplicity of the product especially in comparison with lengthy mortgage applications. Bridging loans are a secured loan, meaning that you must secure an asset against them, usually a property or properties. They are especially useful in development as a quick turnaround is sometimes vital for turning a profit which is why it is important to stick to deadlines during the development phase. A word of warning though. Bridging finance is usually at a high rate of interest and on top of that there can be extremely severe financial penalties if the project is delayed and the repayment date not met. It is vital that you take proper advice about this and be certain that you can meet the timetable.
Legal Advice
Once you have considered the above it is important to seek legal advice from an experienced Commercial Solicitor who regularly deals in development work even if you feel you are familiar with the land and the development plan. Your solicitor can carry out a variety of different searches against the land to confirm its viability for the development as well as highlight any potential pitfalls.
The solicitor will also be able to investigate the title to the land and highlight any issues such as restrictive covenants that may hinder the development. A restrictive covenant is an agreement where one party promises to refrain from doing something in relation to the land for the benefit of another, they can even restrict building on the land or using it for residential or commercial purposes etc. It is important to thoroughly investigate these issues prior to purchase so you can be ensured the investment is safe and future proof.
Services and Access
These can be a pitfall for the unwary. Knowing where services run (including those which already cross the site) is vital. If you cannot get direct connection to mains water and sewerage you might end up with paying large sums to adjoining owners to cross their property or you might even have a site which is undevelopable. You do not automatically have the right to move existing services so you need to know where they run and what rights attach to them. Again an experienced Commercial Property Solicitor will check all this for you and advise if they find any potential problems.
Planning Permission and Consent
If you are buying a potential development site it is very important to ensure the relevant planning permissions and consents are in place for the development works you are looking to carry out. If the necessary consents are not in place then you will need to consider an Option to purchase the land or possibly a contract conditional on planning being granted. These are complex documents and whether you are selling or buying having advice from a solicitor with experience of drafting them is crucial.
As with any property investment there is a risk involved however at Hatchers Solicitors, we have a team of Commercial Solicitors who together have vast experience in assisting sellers of development sites, self-builders and developers on sales and purchases and development suitability.
Hatchers can be contacted on 01743 248545 or email: mail@hatchers.co.uk
