Buying land - time limits to build

Hello,

Just wondering what generally happens in the cases where a block of land is purchased (in an established area, not new estate) and the contract stipulates that the house must be built in x years but this does not occur? Is it a financial penalty?

What happens if say the circumstances of the buyer changed and they could no longer build in the specified time? I'm having a very cursory look at some blocks but this is a downside.

Thanks

 

If a covenant or other title condition imposes a build period you should seek legal advice on a title by title instance to confirm if this will affect you. This could be a reason to negotiate a far lower price if the seller may have a contingent penalty applied. I question how enforceable it can be if you then buy the land ...Does that render the land incapable of building ? Does it leave you liable for a penalty ? Special condition in the contract time ??.

 

I have seen these contracts before: typically they apply when you buy in a new area from the government.

The short answer is that you need to have your contract reviewed by an enlightened lawyer. However I have also seen government agencies be sympathetic to persons who are struggling to undertake the build in the required time. So a co-operative approach with full disclosure to the agency about your difficulties can be a really good outcome.

The ultimate penalty is either taking the land back and losing your deposit or being forced to build.
I knew one guy who had the Environment Protection Authority put a stop work order on the property because of the birdlife (seagulls). A bit of lateral thinking can work wonders!

 

Yes, it's being sold by the government. It's the Mr Fluffy ones in the ACT (houses that had asbestos, were purchased by the gov't and the houses were demolished). The buyer needs to start building in 1 year and finish within 2 years. Some of the land is in good suburbs so we very briefly considered bidding on a block however we wouldn't be in a position to build for some time.

 

there is no tax deductible benefit by holding just the land unless good CG

 

Yes, I realise that. We were considering it for a PPOR but still undecided.