Benefits of selling developments with plans and permits

We are seeing an increased number of development sites being sold with plans and permits.

This means the vendor does the work, spends the funds and waits the time required to get a Planning Permit for the property.

Clearly such a site is more attractive to a builder than a site without plans and permits, as construction can begin much sooner. (As an aside – one of the certainties of life after death and taxes is that builders hate paperwork!).

However, there are at least three key issues to get right when inserting special conditions in your contract of sale.

 

IP ISSUES

You need to ensure that you can assign the benefit of the plans and drawings that have been prepared for you.

In some cases, engagement letters from architects require that assignment must be with permission and on such terms as the architect requires. This leaves the purchaser exposed to a request for further fees. The solution is to ensure that you have the right, if you sell the property with plans and permits, to assign to the purchaser a right to use the plans and drawings.

 

CLARIFY WHAT YOU NEED TO PROVIDE 

Make it clear exactly what you are to provide at settlement.

Where you are required to provide particular drawings or approved plans, make sure that you understand the time frame and cost involved. As an example, we recently had a case where the vendor was to provide approved drainage plans – which could only be done after the Planning Permit was approved. There were various complications which delayed settlement for months.

Ideally you should also ensure that you have electronic and editable copies of CAD drawings in case they are required. It is notoriously hard to get these later when the purchaser decides to change architects. If you can provide electronic copies you will save purchasers time and money and hopefully increase the selling price.

 

SPECIAL CONDITION

Insert the right special condition in the Contract.

In addition to clearly dealing with the IP Issues and details of what you are to provide, you should also cover:

  • Can the purchaser access the property prior to settlement?
  • Can the purchaser apply for a building permit / demolition before settlement (noting that in most cases work won’t start until after settlement); and
  • Ensure that there is a broad disclaimer – so the purchaser can’t blame you if issues arise later on.

If you are considering selling a site with plans and permits, let us help you get it right.

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