Early Possession - Vacant land

Discussion in 'The Buying & Selling Process' started by Barkly, 24th Mar, 2020.

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  1. Barkly

    Barkly Member

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    Is it possible to negotiate early possession of vacant land, and commence construction prior to settlement? Are there any additional risks to consider (other then being unable to settle?)?

    Thanks,
    Alex
     
  2. just_some_guy_89

    just_some_guy_89 Member

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    Anything's negotiable. But I'm not sure why a Vendor would agree to this. The risk to the Vendor of a Purchaser not settling would be enormous - it's easy enough to sell vacant land, but what about one with a half constructed building on it?

    The Contracts I have seen with early access clauses generally include provisions that if the Purchaser does not settle, they are not entitled to any compensation or reimbursement for works done on the property. They are also always unconditional contracts. Funnily enough, most purchasers aren't prepared to take that risk on.

    Finally, if there is a Mortgagee involved, you'd need them to sign off too. Again, they don't want half constructed buildings on there as it makes it harder for them to sell if the Purchaser defaults.
     
  3. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    How would council approve a build on anothers land and why would they consent? And you assume council can approve in the settlement period?
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    All of the telco's do this with their mobile phone base stations - they only hold a lease over the vacant land.

    Those otherwise holding land with ground leases (aka @Stoffo), permit the leaseholder to submit DAs.

    As for whether you can get approvals within time, depends on the settlement period.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Yes, but you couldn't fund it unless you had cash or loan secured against other property.
     
  6. Barkly

    Barkly Member

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    Thanks Terry, would that likely be full cost of the build? Or say if you just wanted to get a slab down to get started would the building contract price up to that point be sufficient? I imagine I could obtain pre-approval for the remaining funds to appease the builder
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Not sure what you mean but if you have the money you can always build on land you do not own. But there are lots of issues to consider, one of which might be to get a lender to fund a half completed project. I suggest you get legal and credit advice.