Acquisition of development sites
Once a prospective project is sourced the developer will need to go through a process of its acquisition.
Identifying the key issues
When investigating the development potential of a project there will always be one or two ‘ Key issues’ that need to be understood or resolved prior to any further investigation and work is incurred on the project. These might relate to just about anything. Commonly ‘Is there the realistic likelihood of achieving the desired planning permission?’. Or ‘What is the extra over cost of the retaining walls likely to be?’. Less common, ‘Can we indemnify the potential enforcement of the restrictive covenant?’. Or ‘What on earth is the neighbour doing with twenty old cars rotting in his back yard?.
Key issues need to be addressed before any others and this means that the due diligence process is not a methodical ticking of boxes. Some issues will demand to be addressed prior to others. The Developer needs to have the ability to recognise these key issues and to prioritise them. There is no point in commissioning a land survey and architects plans for project that is for example, subject to a building scheme restrictive covenant which is likely to defeat all potential for development. You may not wish to instruct a lawyer until the cost of the retaining walls on a sloping site is quantified or the results of a pre application meeting with planners is known.
All development projects will have key issues. The developer must be sure to identify them and be prepared to walk away from a deal if there is no solution to them.
Controlling the acquisition
Whomever is handling the acquisition it is important to be in control of the process and its timing. Control may be asserted by the developer preparing the agenda for a meeting, or drafting sketch plans. It may mean that the developer sets out the timescale. He may offer the vendor to have his lawyer draft the legal Agreement. He sets out any requirement that the vendor will need to action. For example, seeking a mortgagee’s consent to a sale of part may take time and hold up the transaction if not identified at the outset and undertaken expeditiously. Matters such as this should be addressed when terms are agreed and timescales discussed not left to the week before exchange of the purchase contract. The developer should instigate a Heads of terms agreed.
Due diligence
Due diligence is the process of investigation and obtaining answers to all the questions that arise for an acquisition of a site.
It is certainly good practice to prepare a Pre contract report that requires a list of questions to be answered such that all matters are documented and reviewed prior to the acquisition taking place. When I worked for a national house builder the review process included a Pre contract meeting where the land buyer was sat the end of a table of heads of departments, all experts in their own fields and ready to interrogate every aspect of the project. It was almost inevitable that one of them would be disappointed. The sales director would raise eyebrows on the projected sales prices, the engineer would be concerned about the extra over costs of foundations or drainage, the lawyer might grumble about a risky title. The bottom line was, as they all knew, that every project has its risks. If it does not, that is probably because the land buyer had not recognised it. Risks then are identified by the due diligence and a strategy put in place to overcome them.
Collating information
Maintaining a well ordered filing system is an important part of the acquisition strategy. You will need to maintain files of sites you are considering and those you have looked at and for some reason had to put to one side. You should not throw away details of sites you have rejected until you know that another developer is building them out. It is surprising how often opportunities for projects reappear and if you have information on them it could just be useful. The file should retain details of telephone numbers and addresses, sketches, reports and any copies of information that became available while investigating the site. Keeping details of the offer date and terms could be useful.
A telephone number of a relative in Scotland noted on a file once gave me the advantage to pursue a site many had given up on. The site’s owner had taken herself off to live in Inverness. The site became a very successful development.
Today we all use some form of Dropbox for information storage where we can attach plans reports and correspondence to e mails and send them by internet at the flick of a button. This has enormous advantages over the paper filing system of copies of correspondence notes and sketches. Whatever system is employed, the developer must have a system for storage of data on sites he is investigating and retain information on those he has investigated. Information of this kind is valuable.
Maps are an essential reference for the land buyer. Some of the best maps are those that lurk in the back of the Local plan obtained from your local planning department. They are often at a useful scale that shows streets and planning zoning. What better to give pride of place on the office wall as a constant reference. Today we have the benefit of the wonderful Google earth and specialist programs such as Landsearch. What a facility these are. Browsing is an effortless pleasure.
Site assembly
Site assembly is the process of putting a number of land interests together to make up an area suitable for a development site. This may mean parts of two or three rear gardens to make a site for just one new house or it might mean a complex assembly of legal interests, freehold, leasehold and third party rights such as fresh easements and sight lines, or extinguishment of existing rights, to create a much larger site for a multiple housing scheme. Site assembly tests the acquisition skills of the developer. There is inevitably much negotiation involved and it is interesting to experience the wide range of attitudes and motivations in the intending vendors with whom the negotiations are conducted. There are often unequal timing requirements. An urgency to sell from one vendor is almost inevitably countered by an inability to go ahead immediately by another. Then there is the ‘recalcitrant’. Does she really not wish to sell or is she holding out for a higher price? This is a question I cannot answer, only to say that in my experience not everyone ‘has their price’.
Site assembly is one of the great skills of the land buyer and it often results in the acquisition of a site at a more favourable price than an open market purchase of a site that has been assembled given the personal involvement of the land buyer in negotiating with each seller separately. There are a few rules to follow in a site assembly. First is to secure the tranche of land that is the key to the planned site. This will tend to exclude the competition who will not then wish to acquire the remaining tranches of land. This key tranche can be secured by way of purchase or by contract or option and clearly the developer who is prepared to put money down and purchase is in a strong position. The next rule is to be prepared to work with the least number of tranches of land not withstanding that the opportunity exists to acquire a great many more tranches. If a development can be carried out with just three tranches one should not delay by attempting to negotiate further land even though that is the longer term intention. The next rule is to control the negotiation by dealing with each vendor separately where this is possible.
In addition always appreciate that it is often not only freehold land that needs to be assembled to make up the site. There may be easements for laying drainage or sight lines for egress across neighbouring properties. These are third party rights and they can sometimes be just as important as the land that makes up the substance of the site.
Planning History
Knowing the Planning history of a project can be crucial. It could be that where an intending vendor has failed to secure planning permission on several occasions he is likely to welcome an approach from a professional developer willing to take a chance at his own expense. This may give the developer an opportunity to acquire the site on favourable terms. I have very recently developed a site where two planning applications had been made that I considered had completely missed the point and were unlikely to have ever been supported by the planners given the very clear guidance in the local plan. My own proposals recited precisely the objectives of the local plan so were approved without amendment. Consider then that I was able to acquire the site upon favourable terms but also, and importantly, I was pretty well sure that I was not wasting time and money on a chance planning application.
I highly recommend investigating the planning history prior to agreeing terms. This can be done very simply by viewing the local planning authority website.
Meetings
If you are called to discuss proposals at a meeting with an intending vendor perhaps with his advisors then it is as well for you to go well prepared. It is said that there is no point in having a meeting without an Agenda. I agree, and I would go one step further. It is beneficial for the developer to prepare that agenda. In that way he may steer the meeting to discuss his points. You should bring any back up material that will support your case such as comparative sales, legal opinions or construction costings . I have always found that if a sketch plan of the proposed development has been prepared this is an effective centrepiece to the discussion.
It is always good to stick to the agenda and take notes marking who is to action the various points agreed. At the end of the meeting you should summarise the action to be undertaken and confirm that you will email the meeting notes to the vendor or his advisor. In this way you will find the deal moving forward rather than being subject to an ambling discussion centred around the intending vendor’s principal concern. You should date the meeting notes and file on drop box.
Negotiating
There is certainly some truth in what Donald Trump had to say about site acquisition.
The worst thing you can possibly do in a deal is seem desperate to make it. That makes the other guy smell blood, and then you’re dead. The object of the negotiation is to agree terms and a purchase price for the site. Often this will involve agreeing the terms of the acquisition and a Heads of Terms document is prepared to pass to the lawyers on both sides recording the agreement. Never take ‘no deal’ off the table. If the vendor believes that the developer will do the deal in any event the developer has destroyed any advantage he may have had. Negotiating is an art but there is some advice I can give. One must always understand that some vendors will be keen to sell and some keen only if the buyer is prepared to overpay for the site. Most development sites come with drawbacks possibly even risks. The land buyer’s task then is to identify these issues and to persuade the vendor that he is able to overcome them. A simple example is obtaining planning permission. Where a vendor has been offered a sum for a site subject to obtaining a planning permission for a scheme that is in a developer’s opinion unrealistic, it is perfectly in order to say so. It may be that this is what the vendor wants to hear as he wishes to dispose of the site swiftly and does not wish to hang around waiting for a planning permission that is unlikely to materialise. OK, it is equally likely that this vendor wishes to try his luck in obtaining the consent and the enhanced value. A refusal of planning permission in such circumstances will however give an opportunity to return to the negotiation.
Making an offer
The professional way of making an offer is to carefully consider all the costs and ensure that all the viabilities and sketch plans have been prepared. The offer might even attach a copy of plans to a carefully written letter if the deal is to acquire subject to planning permission just to prove that it is the intention to take the matter seriously. Or there is an alternative. I recall one very successful developer who used to visit me when I was a selling agent on the date offers were due and make his offer verbally. He would then judge the reaction and swiftly increase the offer if he felt it needed to be done. Unless the agent states that offers need to be in writing stating various matters to be confirmed one might wish to avoid doing so. Too much information is sometimes what vendors are persuaded by but in my opinion most focus on the offer price. Rarely is the vendor’s decision made straight away. It may need to be compared to alternative offers if there are a number of conditions or indeed if there are a number of vendors such as a family of relatives then it may need to be aired among them prior to acceptance. In such circumstances the vendor or agent may return to the developer seeking confirmation of terms, or commitment to further terms.
One should never be too keen to get a deal agreed at any price. Often the better deals are ‘second time around deals’ that is the first offer has failed to go ahead perhaps through inability to obtain finance or planning permission or perhaps because the party of the successful offer now feels he is overpaying for the site. If a developer is contacted by an agent to ask if he will proceed with his offer as the agreed deal has not gone ahead it is the ideal opportunity to amend the offer slightly introducing a further requirement such as more time to go ahead or to make the offer subject to an additional condition.
When putting an offer in writing for land it should state that it is subject to contract. This means that it is setting out the terms of the offer but that the terms will not form part of a binding agreement to purchase until they are incorporated in a contract for sale and purchase prepared by lawyers. Contracts for the sale and purchase of land have to be in writing and signed by both parties and they have to incorporate all the agreement in one document. That is to say that any promises made that are not picked up in the contract cannot later be relied upon. S2 Law Property Act 2002.
Heads of Terms
When the offer is accepted the developer should volunteer to draw up the Heads of terms that will brief the lawyer the agreed terms of the transaction.
It is useful for the developer to carefully consider a Heads of Terms in instructing his lawyer setting out all the above in clear and considered terms. Failure to do so may result in omission of some important aspect of the developer’s intention.
Instructing lawyers
When a lawyer is to act in the acquisition of property he will need to be aware of the project proposals so that he may look out for any legal restrictions of any kind that would inhibit their implementation.
What are the intentions? The lawyer will be drafting or approving a contract or option agreement so it is essential that he is advised of the terms of the deal. There may be a proposal to allocate communal facilities within the project that will require properties to be granted rights for their use and an obligation to meet part of the costs of maintenance. There may be proposals to extend the site at a later date with the acquisition of contiguous land. Rights of access and easements for services will need to be reserved.
What is the timescale? Is there a wish to exchange a contract as soon as possible or to delay exchange until other matters are settled. There may be time limits within legal documentation that should be taken into account such as an overage clause. Whether the acquisition is to be conditional. Whether the proposal is to access further contiguous land. Is the intention that estate road and drainage be adopted by the local authorities? If this is to be the case then adoption agreements will have to be drawn up by the local authority lawyer and approved by the lawyer acting for the developer.
What is the identity of the acquisition company? Should this need to be altered prior to completion for any reason it will be advisable, for the avoidance of doubt, to have an alienation clause in the contract specifying the ability to assign.
Who are the funders and which lawyer will be representing the funders? The acquisition will require approval from the lawyer acting for the funder and there will be a number of documents that the developer and the funder need to agree.
Conclusion
There is much to consider when sourcing and acquiring a development project. Get it right and the development can reap great rewards. Get it wrong and life can become very difficult. DBS Development Projects we provide site search Initial reports and Development Appraisals in Kent East Sussex and East Surrey. Denis.minns@dbsdevprojects.co.uk.
Sourcing of development sites
The Developer has to find a site suitable for development. So let’s talk about site sourcing. How do you find a development opportunity ?
The Project
You will be able to identify many opportunities for redevelopment, but we should not be too excited about a site until we have assessed the viability of a project. It has to ‘stack up’. That comes about only if the value of the site for redevelopment exceeds the current use value. Indeed the price should reflect the Residual land value. The residual land value is what remains following deduction of costs, construction, fees, finance and profit from the projected sales, the Gross Development Value GDV. The calculation undertaken to analyse these figures is the Development Appraisal. The Residual Land value of the site must be greater than the existing use value EUV. Few will undertake a development project with all the effort skill and risk this involves merely to improve the environment. It must be clear. Do the figures genuinely anticipate a return of 15 to 20% of GDV or more? If the answer is no, there is no point in going ahead.
Mindset
The sourcing of development projects requires instinct ,time , energy focus and strategy. The Developer will need some instinct as to what makes a potential residential development site. I suspect that it is precisely this that has inspired your interest to undertake a residential development project. If you have no instinct for it, you will no doubt have no wish to do it. It will need time allocated to the search. You cannot merely turn up at an Estate Agent and be handed a list of development projects available to purchase. Sourcing sites takes a great deal of time. Housebuilders employ full time professionals to do this who are often qualified chartered surveyors or town planners with huge experience in site sourcing. If a developer is not prepared to spend some time and energy on this activity what chance does he have in competition with these professionals?
Search area
To source projects you first need to decide where to focus your efforts. It serves no purpose spreading the net widely. It generally makes more sense to select a geographical area that you are to operate in. Clearly it is best to select somewhere that you are familiar with. The local area, where you are known will no doubt be best. Working in a local area may allow you to hear of opportunities from acquaintances and friends. Working locally will help build up knowledge of an area and perhaps you will become someone who local people contact when they are considering selling property.
A useful boundary for a geographical area is a local authority boundary. Say you decide to focus on just three London boroughs or district councils. This will enable you to understand the planning policies in certain Boroughs or district council areas and even get to understand the preferences of certain councillors on the planning committees if you take the trouble to attend them. Local developers may even be invited by the planning authority to attend planning forums that create policy. Not all planners work in ivory towers and many welcome the views of local developers. Attempting to buy sites in unknown areas where values are not understood, where you are not in touch with local demand and have no knowledge of local planning policy can be a recipe for disaster.
The developer will always keep a look out for potential development projects. Altering your route each time you drive to familiar places to get a feel of side roads. It is amazing what is revealed when driving in a quieter ‘road not taken’ regularly and Google earth is there to reveal further information.
Seeing potential in property sometimes takes experience. The dilapidated building on a good sized plot has an obvious potential. Often however, a great many letters have been posted through that door already over the years from developers who have also identified that potential.
Economic obsolescence is less obvious. It occurs when a building for reasons of its design or use, simply does not command a high value not withstanding its condition. The land value can in such cases be more than the value of the existing building and as such might subject to achieving planning permission, be a development project. Such buildings are less likely to have been identified by developers.
Contacts
Let us then talk of strategy. Professional Contacts are essential and the developer must be prepared to reach out to Estate Agents, Architects, Surveyors and Town Planners and keep in touch with them. He must be in the market to acquire projects consistently. As the ex chairman of Berkley Homes said to me ‘This business is often about being in the right place at the right time. It helps to be in all the places all of the time’.
Responding to contacts is essential. He should follow up leads and make offers where he can. He should not be afraid to say ‘ No‘ so long as he does so swiftly. If a developer is recognised as a ‘player’ he will have agents contacting him.
Networking
It is important to build up contacts and network as much as possible.
Estate agents, surveyors and architects will be the developer’s first contacts. You will find that the more you are visible in an area the more estate agents and others will come to you with development opportunities. A board on a site stating that ‘further sites are required in this area’ is the very best, and cheapest, way of getting further sites. Of course, a glamourous website is a benefit . It does not require too much detail but photographs of past and current projects will create credibility and interest. Property Network events are a good way of spreading the word. Many attendees may not be developers themselves and may wish to collaborate or recommend introductions.
Site finders
I have mixed feelings about introducing agents. If you are introduced to a highly profitable deal then why should you not pay the introducing agent? I have often found however that introducing agents have the impression that the mere advising of the availability of a project is enough to warrant a substantial fee. I do not agree. To my mind an introducing agent should be prepared to put together information about the project and to handle the acquisition negotiation on behalf of the developer . He is then worth his fee and I would never resent that. When I say a fee, I mean 2% to 2.5% of the purchase price of the site paid upon completion of the purchase. I do not mean a share of the profit of the project which is to be created by the multiple and complex activities of development team. There is so much more to a successful project than its acquisition, notwithstanding the importance of the identification and negotiation involved in the acquisition process. However, there are times when, conscious of the sensitivity of a negotiation the involvement of an intermediary introducing agent can be very beneficial.
So you have sourced an exciting opportunity. Read my next blog to see what I have to say about the acquisition of the development site.
Is shared ownership the key to an affordable home?
The desire for home ownership is stronger than ever but high house prices, lack of supply of homes and increasing costs of services make it difficult for low income households to access a home of their own. Shared ownership can act as a bridge between renting and owning a home .
The Resolution foundation report way back in 2014 considered the opportunity for the shared ownership sector to flourish as it considered the tenure the most affordable on an ongoing cost basis in the initial years. That was right. In the last decade the sector expanded and now over 200,000 households are living in shared ownership. It is a tenure that can offer affordability, security, and asset accumulation.
Shared ownership is where buyers buy a share of a home and rent the balance from the landlord who is often a Housing association. The idea is that the buyer can buy a greater share of the home as time goes by increasing their share of ownership by a process called ‘staircasing’. If they buy more shares they pay less rent. So say a buyer initially buys 25% of the value of a home, 75% will be owned by the Housing association . The buyer will obtain a mortgage on the 25% share so they will only need to raise a deposit on this 25% share. So if a flat is worth £300,000. They will need to contribute £75,000. They will need a deposit of minimum 5% of this amount, so £3,750.
In addition to the mortgage repayment on the £75,000 they will pay rent to the housing association for its 75% equity of the home. Most housing associations charge 2.75% of their equity in rent so if in our example the housing association owns £225,000 the rent will be £6,187.00 per annum or £515.00 each month.
There are some additional costs. The home will always be leasehold and therefore be subject to a service charge payable monthly, particularly if it is a flat. The buyer will also be responsible for repairs and maintenance of the home.
New homes are often purpose built for shared ownership and are therefore as new homes they are energy efficient, saving service costs and less likely to require repairs. Ground rent will no longer be charged on a new home. This makes shared ownership of a new home an attractive option.
Shared ownership is increasing in popularity and while many housing associations offer shared ownership schemes the issue is the same as with all housing ; There are not enough shared ownership homes to meet demand. What is needed is support for small housebuilders to source development opportunities for Housing associations shared ownership schemes and build for them quality and affordable shared ownership homes that are so much needed.
Denis Minns is author of Projects in Property: The business of residential property development. Bath Publishing.
Some Ideas on Housing
Photo by James Feaver on Unsplash
We need more than Help to Buy and nil SDLT for first time buyers. There are many opportunities to create more and fairer housing that grows our economy. House building is a massive economic accelerator . Let’s put our foot down.
The great thing about building more homes is that we can solve a social problem by growing our economy.
Re grade some Green land to grey and allocate for new housing: Sites close to rail routes should be considered. Allocation of affordable housing land as separate planning use from housing land.
Reimpose housing target numbers on Local Planning Authorities: This will force LPAs to allocate land for housing.
Create guidance for higher density housing up to 5 stories: This to make housing developments more pedestrian and neighbourly. Do away with detached housing layouts.
Introduction of Help to build equity loans: This is a good idea but it has not yet taken off.
Removal of restrictions on development of small sites: Too much unnecessary red tape. BNG for example.
Increase availability of development finance: Government to work with established development funders to ensure availability of funding for SME housebuilders. Perhaps to provide low cost ‘top up’.
Make self & custom build 'material planning considerations': In order to allow more Self & Custom build.
More flexibility in Housing Association funding: Support housing associations who want to build new homes not just to manage them.
Promote alternative dispute resolution for construction matters: Support RICS in providing fast solutions.
Encourage 'tiny homes' in cities: Encourage off grid and innovative homes. Tiny homes. Floating homes: Allow innovative design of small new homes to reduce costs to residents.
Make private renting more attractive for Landlords: Allow all interest payments as an expense of letting. We still need private landlords.
Introduce a more secure lease akin to a commercial lease: 3 year rent reviews. Optional to Landlords. Both Landlord and tenant would have more security of tenure.
Encourage modular construction: Encourage fabrication of homes in factories not on sites. Better insulation, faster construction, reduce waste.
Place less emphasis on zero energy construction: Don’t let the ambition to create perfection get in the way of building new homes.
Retain No fault eviction until more rental homes are available: Don’t scare off landlords. We need landlords.
Set up a committee of housing experts to advise: Not TV personalities. There are experts in housing and housebuilding who can advise.
Reduce SDLT on purchase of land for small housing schemes: Where obsolete buildings are being demolished replaced by new homes.
Longer eviction periods in residential leases and mortgage repossession: A minimum 90 days. Fair mortgage code to be adopted by all lenders.
Maximum increase in rents in Short Hold Tenancies: 10% Per annum is advised.
Housing Minister to be cabinet appointment: This to show the importance of housing.
New town program and infrastructure investment: Inevitably long term. Will not e a quick fix.
Create a more balanced demographic for Britain: Grow Tyneside to be our second city.
Restrict restrictive covenants to maximum timescales: Restrictive covenants can restrict development. They should expire after a set period subject to no objection from a beneficiary.
Simplify the planning system: We now have an absurd number of reports and surveys in support of planning applications.
These are just a few ideas.
15 Rules for the business of property development
The Rules the Developer has to follow could be said to be complying with all the law that runs through the development process. Here I am not referring to those but the unwritten rules I advise any Developer to follow. These are rules based on experience not those imposed by statute or common law.
1. Spread your risk
A Developer with three speculative projects on the go at any one time may be on his way to make his fortune. He is however taking a large risk especially if he has borrowed large sums of money to undertake these three projects. History supplies evidence of this risk. What is better is to spread the risk. One speculative project one Joint venture where the risk is shared with a funding partner and one custom build project. Sure the profit gained from the JV and Custom build is less than it might be but so to the potential for loss. The second piece of advice I give to mitigate risk is the sale off plan. This cannot always be achieved but consider, if a site of say 5 houses has say 2 houses under contract consider the confidence that gives to the developer and his funder.
2. Do not be against “turning” a site
Imagine you have worked hard to get a site prepared. All planning approvals are in place and the Project planning is agreed, professional team appointed. You have had meetings with neighbours about the scheme and given them assurances as to the construction and outcome. You then get an attractive offer from another developer to sell the site to him as he needs to have a project to move ahead with. The last thing you want to do is to sell the site. You have put your heart and soul into it. My advice is to detach your emotions. Sure some people may feel let down if you sell and sure the profit on the turn will be likely to be less than what you forecast for the development but consider.
A quick turn gives you, no delay in completing the project, no need for bank borrowing, no potential cost overruns or collapse of the sales market while the development is being completed.
3. Choose your area of operation and stick to it
You will not be the expert in every geographical area. Sales values and planning policy are two examples of factors that vary from area to area. I would always recommend choosing an area based on Local Authorities areas. Say you live in Bromley you may add Bexley and Lewisham. You get to know the agents and professionals in those Boroughs and the planning policies that each have. Concentration of sites also contributes to a recognition of your brand too. A development site with clear signage will attract enquiries.
4. Site Investigation. Make sure to be thorough
Often referred to today as Due diligence or the Pre Contract report . It is important to document the investigation and my advice is to record everything so that if you need to look up any information it is there in you Pre Contract report. Even minor information such as post code and Grid references. When undertaking Due diligence identify the Key issues first. If you consider that they will not be overcome do not continue with an acquisition.
5. Staff and overheads
Outsource activities where you can. Fixed overheads are not appropriate to the development business where a planning refusal can keep you inactive for months.
You will need a site manager on each site and to make arrangements for payment of invoices so a part time administrator for this role. All other staff can be outsourced to professional consultants. Remember that the consultant specialising in one subject is bound to be more up to date than you and can save you a great deal of time.
6. Keeping Records
Keep records of everything. Copies, plans, addresses, certificates. This is so much easier with a cloud storage system. You never know when information proves valuable and buyers lawyers do have a habit of asking for copies of obscure records the day before exchange of a sale.
7. Vanity projects
It is not your obligation to take on a project for the community benefit nor is it your job to prove that you can take on a project that no one else can. Avoid vanity projects.
8. Personalising the project
If you are a fantastic celebrated designer then it might be that your efforts to personalise your project result in praise and profit. For the rest of us the rule is do not personalise. Colours are neutral for a reason. Not because everyone likes them. Because they are less likely to offend. The bright blue kitchen that looked stunning in the showroom losses its appeal in your show house. Soft neutral colours . Uncomplicated design. Quality finish. The buyer will personalise in time.
9. Unconditional acquisition
By unconditional I mean that planning permission has not been granted for anything so you are taking a punt on this. Such acquisitions are often the first step in a site assembly. Site assembly can take a long time. You may find yourself holding on to this property for years. My rules here are first, only buy property unconditionally if there is some income from it. If you buy a house and let it out it will at least yield some income. Also do not borrow to buy. Only buy unconditionally if you can afford to wait for an outcome. Also if you are buying unconditionally do not be tempted to reflect development value. You buy at current use value.
10. Go with the flow
Go with the flow when dealing with planners. Swimming against the tide is hard. Whatever you may feel about the decisions the planner makes she is advising her councillors not you.
Appeals are always uncertain. Try to agree at local level.
11. Be prepared to engage a first class professional team
You may wish to save costs by using Bill from the pub to knock up your plans. This is not good policy and indeed could cost money. First Bill is not a professional and does not have the Professional Indemnity insurance that your funder will wish to see. Also your New home warrantor is an insurer. He will price the premium based on risk and the absence of PI will be a risk for him. In addition you are of course at risk if there is a fault in the design. Ensure that professionals scope of work is in writing.
12. Residual land
When completing a development there may be slivers of land or perhaps an access road that is not part of any one of the plots. There are several ways of dealing with this. First to split the access drive between the plots. The issue here is that the area will be included in the New home warranty as it is sold with the plot. Next you may wish to sell it with the furthest house, the one that uses the whole drive. Then you may wish to create a management company to hold the access and common parts, the bin store, cycle shed and landscape areas. This is advantageous if you wish to create mutually enforceable restrictive covenants on the plots. The common parts can take the benefit of those covenants. My advice is to retain any private road or land that might offer a future access to adjoining land. This is what I mean as residual land. This residual land will have no value until you receive a call from the neighbouring owner’s Executor to say that the adjoining property is to be sold.
It then takes on an exciting potential for further development without the threat of competition.
13. Estate agents
You will have decided which agent to use to sell the project. Either you bought through them or they seemed most responsive when you undertook the sales survey. Do remember that the agent will no doubt be dealing with dependant sales and this is an important role. Good contact with the market is essential for this.
14. Invest in your Brand
I am not suggesting spending a great deal of money on promotion. However the local developer will benefit by a reputation for quality, good design, service, considerate construction. A good reputation for quality will help with sales.
15. Never fetter your discretion
Sometimes you are faced with a request when entering a contract for some form of overage payment contingent on a certain outcome. For example you are applying for planning consent for three houses and buying the site subject to receiving planning permission. The vendor states that he wants a further payment if you obtain planning permission for more than three houses. This does not seem unreasonable when you are keen to get the deal done. Following submission of the planning application however the planner says that the committee are to turn this down. They want to see five smaller houses. Your contract has fettered your ability to simply agree to this without further negotiations with the vendor.
I recently had a vendor require further payment if I sold the site to another developer when planning permission was granted. How can I know today what I may need to do tomorrow? What if the sale price to another developer is less than I am paying my vendor?