Yulia Barnes, the founder and managing partner of Barnes Law
Land and property are among the few assets that typically appreciate in value, making them highly appealing to both individual and corporate investors.
Even with recent interest rate increases, investing in land and property continues to be a significant way to achieve financial gains, especially when the land is acquired for development purposes.
However, the process can be complicated and carry many potential risks, so it is crucial to conduct thorough due diligence.
Set out below is a brief overview of the checks and considerations you should look out for before purchasing land for development.
Title investigation
Investigating a property’s title is vital for any land buyer. Areas of land forming part of a proposed development may be subject to a number of third-party rights, covenants, restrictions on use, or a party may even have already entered into a contract to buy it. These could prevent you purchasing a site, or there may be items that you would need to consider in planning your development.
Therefore, it is important to ensure that the seller has clear ownership and the right to sell the property, and this involves examining the title deed and checking for any encumbrances, liens, or legal disputes associated with the land.
Land use and zoning regulations
Understanding the zoning regulations and any restrictions on land use imposed by local authorities is key.
Confirm that the intended development complies with local zoning ordinances and land use plans, and that the land is suitable for your intended purpose, whether it is residential, commercial, agricultural, or industrial, as zoning restrictions can impact everything from the type of structures allowed to their height and density.
Consulting with local planning authorities or a zoning solicitor can provide clarity on these regulations.
Environmental assessments
Compliance with environmental regulations and sustainability is increasingly important in property development, and due diligence in this area is essential to identify any potential contamination or environmental hazards on the property.
An Environmental Site Assessment [ESA] should be conducted to uncover any issues that might require remediation. This is particularly important for land that may have been used for industrial or agricultural purposes in the past.
As part of this, assess the impact of your development on the surrounding environment, including any protected areas, wildlife habitats, or ecological considerations.
Survey and boundary checks
One issue many people overlook when purchasing land is ensuring that the property’s boundaries are clearly defined. While there may be a fence or other boundary marker in place, this doesn’t mean it runs along the legal boundary of the property.
Having a land survey carried out will clearly establish the boundaries of the plot so you know exactly what you are buying. This can potentially save you a significant amount of time and money further down the line if someone disputes the boundaries of your site.
Easements
Understanding easements is crucial for successful and seamless project execution. Easements are rights that benefit one piece of land [known as the “dominant land”] over another piece of land [known as the “servient land”], and they play a pivotal role in determining what can and cannot be done with a property.
If the development site lacks existing easements, you may need to establish new easements over third-party land to provide access or services to the development site.
Failure to carry out these investigations properly can lead to significant wasted planning and professional costs, where the presence of such rights or lack of rights [as the case may be] ultimately prevents development.
Planning and building permissions
Securing planning permission is another critical component of the development process, and it is vital to fully understand the requirements you are expected to meet when seeking planning permission to develop your property.
The most important of those requirements are contained in the Government’s National Planning Policy Framework and in your local authority’s Local Plan.
It is often helpful to discuss any proposal with the Local Planning Authority [LPA] before you finalise and submit your application. More complicated development proposals will usually benefit from the advice of a professional planning consultant and may also require legal advice.
Failure to obtain the necessary approvals can halt your project and lead to significant financial losses.
Infrastructure and services
Assess the availability and quality of infrastructure and services, such as roads, water supply, sewage, and electricity.
Development projects often require substantial investment in infrastructure, and understanding these needs beforehand can help in budgeting and planning.
If the land is in an area with inadequate infrastructure, the cost of bringing in these services may impact your project’s feasibility.
Financial and tax implications
Consider the financial aspects, including the cost of land, taxes, and potential development charges, and conduct a financial feasibility study to ensure the project is viable.
Understanding the tax implications, such as property taxes and capital gains tax, is also crucial in making informed decisions.
The construction sector is ever-changing, with tax legislations altering regularly, so it is important to always stay up to date with amends to requirements.
Final thoughts
When purchasing land for development, due diligence is the key to minimising risks and can be the difference between a successful acquisition and a costly mistake.
By following the above steps, you can ensure your property investment is well-researched, legally sound, and financially viable, and identify any potential issues or constraints that may impact the success of your project.
Yulia Barnes is founder and managing partner of Barnes Law
