Purchasing land for development can be an attractive investment, but it carries legal, financial and practical risks. Understanding these risks is essential before committing to any transaction.
Planning Permission:
Securing planning permission can take months or years and there is no guarantee that planning permission will be granted. There may also be local authority restrictions such as Article 4 Directions and zoning rules which can remove permitted development rights to consider
A condition of granting planning permission, the local authority may require a section 106 agreement or a Community Infrastructure Levy (CIL) may apply which imposes financial and infrastructure obligations.
You can mitigate this risk by entering into a conditional contract, which would be contingent on obtaining planning permission or an option agreement where the seller grants you an exclusive right to purchase the land within a set timescale.
Title Issues:
These can be discovered during the due diligence process, checking the title could reveal restrictive covenants, which may prohibit certain types of development or impose conditions, lack of legal access rights can render the land unusable and rights of way and boundary issues can be expensive to resolve.
Environmental and Compliance Risks:
Contamination and protected habitats identified in the results of searches and surveys can trigger statutory obligations and could prove costly and affect the viability of your project.
New legal requirements require developers to enhance biodiversity which add costs and complexity to any development project.
Financial Risks:
Selling undeveloped land can take longer, affecting cash flow, whilst development finance may be available, these are often short-term loans with high interest rates and fees in addition if you are purchasing in a company name, you may be required to provide personal guarantees increasing personal liability.
Market and Location:
Land values vary widely by region, changes in market conditions, interest rates and housing market fluctuations can impact profitability.
Purchasing land for development is not just about the price – it is about navigating complex legal and regulatory factors. The Commercial Property Team at Lawson West Solicitors has years of experience dealing with development land and sites meaning that we can help you carry out all necessary due diligence, guide you through the process from start to finish and help you avoid making potentially costly mistakes.
If you require the services of a solicitor to find out more about land development and the issues, get in contact with our Commercial Team today. Contact Us
