Considering buying bare land to build on? We'll tell you how
Committing to buy a new house can be a daunting task at the best of time. Add to that uncertainty of a multitude of unknown costs, timeframes, and having to imagine what the house is going to look like in the end, and it is easy to see why people often are overwhelmed at the idea of buying a bare block of land to build on before they even start.
But building your dream home on your own slice of paradise can be so rewarding if done right. It’s all about doing your initial due diligence and then you are away laughing. At Movest, clients often contact us as they have no idea where to start with their purchase. So, once you have found a section you love, what must you check before committing to purchase it?
Movest suggest there are two main questions you need to answer when purchasing a section:
Can I build what I intend to build on it, and can I afford to build what I intend to build on it?
It can be a very costly mistake to end up stuck with a piece of land that you can’t use as you intended. Generally, it is not as easy to sell bare land as it is a house if you do change your mind. Here are some checks to undertake to assist you in answering these two important questions:
Have your lawyer check the title
Ask them to point out any covenants or consent notices on it which may restrict the property’s use. These days it is commonplace to have lengthy covenants on properties in new developments. All of which restrict the use of the property, often stipulating minimum floor areas and certain materials you can or can’t use, but sometimes even more unexpected than this, and possibly even entailing ongoing care and costs. It is important to familiarise yourself with these documents.
Order a PIM from the council and/or check the council file
Check for anything unusual like, for instance, a previous use that could affect future use (i.e. agricultural sprays can have a long term effect on a property), any notices or outstanding requisitions, drainage or other utility plans, zoning, any future development plans, and so on. The planning consultants at the councils are generally very helpful, so give them a call or flick them an email to check if what you are planning is likely to be allowed and ask them if there are any restrictions relating to the property (i.e. large set-backs or protected trees and the like).
Also check with the council and the water provider if there will there be any development contributions payable when it comes time to build? For instance, a water connection fee in Auckland often now includes a development contribution which can be approximately $14,000, so that is one expense you most certainly need to consider in your budget and wouldn’t want to be surprised with.
Talk to the experts
Get in touch with a builder you may use. Discuss with them what you wish to build to get an idea if the section is going to permit it, as well as if your budget is going to! Prepare a draft budget as early on as possible and discuss with the builder if you have overlooked anything and whether it is realistic. If you are going to engage your own draftsman or architect; discuss the information you have about the property with them also. Both the builder and designer will likely have a lot of knowledge about the local planning rules and what likely will or will not be permitted on the property.
Ask the seller for a Geotech report and if they can provide with discuss this with the builder and designer. Bear in mind that if one is not available you will likely need to arrange one before you can build, and that you will have little certainty about foundation requirements (and therefore costs) until you have one.
Ensure you have the necessary funds for the purchase
Obtain an unconditional offer of finance (if necessary) from your bank for the land, as well as the build. The banks usually have additional hoops you will need to jump through for build finance, so make sure you check you can meet their requirements.
All this due diligence can take time but is essential to get right. If you decide to go ahead and sign up a sale and purchase agreement to make sure you don’t miss out on the property, be sure to include a due diligence condition that will allow you to check everything is ship shape before you are 100% committed to buying.
As always, we recommend involving your lawyer at the earliest possible opportunity in your purchase, so it can go as smoothly as possible. Contact Movest on email@example.com or phone 09 282 3202 if you wish to discuss your proposed purchase with one of their lawyers.