Due diligence for development

To safeguard their investment, developers should before embarking on any acquisition of a development site ensure good and marketable title is acquired by instructing their solicitor to carry out extensive Due Diligence.

Enquiries

Generally solicitors raise a comprehensive suite of commercial property enquiries covering topics such as unknown rights, disputes, planning, overriding interests and contamination.  In addition searches should be carried out that include a local authority search, drainage, environmental, chancel repairs and utilities searches.

Searches

A local authority search reveals information relating to the property such as planning permissions, building regulation consents, proposals for road schemes and pollution notices.  Any issues revealed should be raised with the seller’s solicitor, or if that fails the local authority. There are also optional enquiries that can be raised with the local authority in addition to the standard search.  Issues such as road proposals by private bodies, public paths and byways, pipelines, flood defences and others should also be considered when purchasing a site for development. Optional enquiries can provide more extensive information on these issues which a local authority search often fails to reveal.

The environmental search will reveal whether the site is deemed to be contaminated and the drainage search will reveal the location of the nearest mains water supply and public sewer. The utilities searches will reveal the nearest utilities/services in relation to the site and the chancel repairs search will reveal whether the property lies in a chancel repair risk area.

Survey and Inspection

Surveying and inspecting the site is a necessity before acquiring the development site in order to reveal any potential issues. Planning consultants are available to assess the viability of the proposed scheme, prepare an application and deal with submissions. The developer should also have carried out a right of light survey to exclude any negative impact on neighbouring properties’ flow of light, which can be expensive to rectify post-development.

The developer’s solicitor should be instructed to inspect the property’s legal title before exchange of contracts and to report on any encumbrances including third party rights that affect the property. The developer must then consider the report very carefully before proceeding and insist on any defects in the title be rectified before exchange takes place.  Therefore proper due diligence is key as failure to carry out the same could prove very expensive for the developer after completion.