Large commercial development land acquisitions often require consideration of more complex matters than the purchase of single plots for residential self builders or small commercial traders - but there are some basic points that apply to any development land purchase.
In this article, and the one in next week's bulletin, I discuss the most common issues. This week I am focussing on:
- ground conditions at the site - and suitability for development
- planning consent for the development and
- access routes and rights.
Next week, I'll look at:
- water, drainage, electricity and other utility supply connections
- use and other title conditions to benefit and burden the land to be purchased and any land being retained by the seller
- flood risk and
- minerals reservations.
Suitability of the site
Most buyers of an existing building will get a survey of the building. If you are buying land, it is prudent to check that the site is suitable for your proposed development. As with building surveys, there are many types and degrees of site investigation. What it is sensible to do will depend on various factors including whether the site is greenfield (ie has never been developed) or formerly residential or brownfield (ie has had some industrial or commercial development on it in the past). A further factor will be the design and size of your proposed building.
A brownfield site might be thought more likely to be contaminated by previous uses - but even a greenfield site could be affected by contamination seeping in from neighbouring property or could have its own issues, such as Japanese Knotweed.
In addition to possible environmental contamination or unruly vegetation, site stability and ground conditions can affect the suitability of the site for any kind of development or the cost of development. Poor ground conditions could mean e.g. that more complex (and usually more costly) foundations would be required.
Commercial developers will almost always make it a pre-condition of their purchase contract that they be permitted to carry out the appropriate investigations and be satisfied with the results, before they become obliged to buy. Such protection is often not sought by buyers of self build house plots, generally due to the costs of such investigations or the unwillingness of the seller to entertain the disruption.
Whilst omitting this step can save the buyer money, any issues might only be discovered once a building contract is in place and the contractor has his diggers on site. The worst scenario is that the site is totally unsuitable for the proposed development - in which case its value on a resale might be well below the price paid by the buyer. If the site is developable, but at extra cost, it will be the building contract that determines who bears any extra costs ie the buyer or the contractor.
Planning consent
Sometimes, land will be sold with the benefit of an existing planning consent. The buyer might be happy with that if it intends to develop entirely in accordance with that consent or is satisfied that the local authority will agree to non controversial or minor changes to it.
Alternatively, the site could be marketed without the benefit of a planning consent - but the seller will accept that the sale contract will be conditional on the buyer obtaining, within an agreed time, a satisfactory planning permission for its proposed development.
Few buyers will pay a price that reflects the development potential of a piece of land without some comfort that the necessary local authority consents are, or will be, available. That said, in some cases a buyer might be prepared to take a chance if the risk of not being able to get a satisfactory consent is low. For example, finding a plot on which to build a new house - in a desirable location - can be very difficult. Some plot hunters might be prepared to pay a development land price for a site on which there is a derelict house, on the basis that residential use has been established and so it is quite likely that planning permission will be granted for a new house.
Although the risk in this situation is low, it is still a risk as:
- consent might not be granted at all e.g. if planning policies or development plans have changed or there are many objectors with valid objections; or
- consent might not be granted for the buyer's preferred design, if he wants a palace of glass and steel to replace a traditional brick cottage!
In such a case, a discussion with the planning officials before you commit to buy might provide a bit more comfort.
Access
One of the key issues for any site is access - both for construction traffic during the build and for the occupants and customers once the development has been completed.
If the site has an existing access, direct from the adopted road, that doesn't mean that nothing further is needed. The position and width of an existing access to an undeveloped site might not be suitable for the proposed development - whether from the buyer's point of view or that of the roads authority. If the existing access point has to be widened or moved to another position then "ransom strips" are sometimes a problem. By this I means strips of land that sit between the edge of the adopted road or footway and the legal boundary of the site - which strips are owned by someone else. In these circumstances, as the land cannot be developed without the buyer acquiring title to the strip (or at least rights over it), the owner of the strip sometimes demands a high price (wholly disproportionate to size of the strip compared to the extent of the development site) for his co-operation.
If the site is not beside a public road, but instead is accessed by a route that passes through someone else's land, then the buyer must check that:
- there is an existing servitude right of vehicular access over this route
- such existing right would be adequate for the proposed use of the site - both for the frequency of use and for the type of vehicles including construction traffic and (for commercial development) service and other HGV vehicles
- the buyer would have the right to improve and (if necessary) widen the road and
- the local authority planners would consider the route to be adequate.
Let's look at the example of a rural site, which has always been used as a field, that benefits from a right to take access to the site, with tractors, over a route through neighbouring land. Such a right might be sufficient to include other large vehicles. As to frequency, it might also be adequate for a single house - which would not have too many vehicle movements each day. However, it is very unlikely to be usable for access to a commercial development that involves much more frequent and sustained traffic, such as a retail or office development - for the reason that such use was not contemplated at the time the existing access right was granted. The right to improve the surface of the road might be implied but it is less likely that the buyer would have the right to widen the existing route without the consent of the owner of it.
If there is no existing access then the buyer needs to be sure that it will have legal rights to form and use an access that links to a public road. Unless the buyer intends to implement an existing planning consent for the site, this is likely to mean that the purchase contract will have to be conditional on planning and roads construction consent being obtained - so that the buyer can be sure that it gets permission to build the route over land that it owns or over which it has appropriate rights.
To be continued…..
If you would like to discuss these issues further, please contact our Real Estate team.
