Case Study: Know what you are acquiring- always check the detail!
- Posted by: Admin
- Category: Technical Insights
A failure to critically review and fully understand the provisions set out in a Contract for Sale before committing to acquire property can prove costly. Whilst the legal interpretation can be addressed, it is always prudent to seek a “second” opinion on the commercial and market risks associated with a specific property ahead of the intending purchase and before you commit to buy.
FerrierSilvia was approached by a client to explore options that could be implemented in order to restore added value to a large parcel of land that had been acquired on the outskirts of Sydney.
The Key Issues
- Purchaser acquired the property with a view to future residential subdivision.
- The acquisition price reflected the future intended use.
- The Purchaser was unaware the property was subject to mining exploration and a mining lease and consequently, the land sat within a mine subsidence area; and
- Contract for Sale did not fully disclose past dealings associated with the land.
FerrierSilvia conducted historical research on the property in question and uncovered through publicly available records and other independent sources that the specific parcel of land had previously been the subject of a land subdivision application that failed due to the existence of the potential for a mine subsidence impact. The topography of the land was such that it could never have been capable of prior subdivision applications particularly as to the number lots that were being proposed.
What did FerrierSilvia do?
To work towards achieving the objective outcome of enhancing the future value of the land that our client had acquired, FerrierSilvia undertook the following steps:
- Engaged with the Company which held the mineral lease beneath the property and managed to reach an understanding with key executives in relation to what types of structures or developments they would be willing to consent to being constructed.
- Promoted the concept of a staged approach to a subdivision with a reduced number of lots in keeping with the topography and natural attributes of the land.
- A key element of the subdivision proposal is the incorporation of an area within each lot being set aside for biodiversity purposes which would restrict the construction of buildings or other structural improvements on that designated area of each lot.
- Worked with specialist planners in developing the plan of subdivision.
- Examined the possibility of sequestrating that area of land that would not be conducive to any residential development – which is expected to contain endangered flora species in difficult to access areas within the land in question. A sequestration of any part of the land thereby generates biodiversity credits that represent potential to value add to the current realizable value of the entire site.