Plain English Guide to Selling your Property with your Neighbours to a Developer

The days of a property developer approaching individual owners to purchase their properties is fast becoming a distant memory. Increasingly, owners are taking the initiative and joining forces to offer their properties as a package deal.

This is particularly the case in areas where a developer considers if the area is either ripe for rezoning or has been rezoned, as well as areas where new infrastructure such as railway stations and roadways are being constructed.  This type of arrangement has become a popular way for owners of individual properties to maximise their sale price by becoming part of a larger site offering, and consequently, typically a more attractive proposition for developers.

Coleman Greig can help you and your neighbours as a group, from the outset so that you are not only comfortable with the process but also confident knowing what you have signed and what your rights and obligations are.  Sometimes the documents issued by developers can be complex and they more often than not, require professional advice from both lawyers and accountants, particular if the property is not an owner’s principal main residence.

What should I do first?

Firstly, you need to know a developer won’t always bite just because a group of owners have banded together in order to sell their individual properties collectively. Equally, from a developer’s perspective, the overall costs of acquisition are an important factor concerning the overall profitability of the intended development.  Council’s have certain development ratios that apply to their local government area and that in turn affects the number, style and size of properties that can be developed, particularly in a high rise development context. For these reasons, you can expect some developers to be inflexible when negotiating the commercial terms of the transaction.

Joint Sales Agreement

In our experience, especially when the group of owners is quite large, a joint sales agreement is a useful document that sets out the rules and general structure that your group will use and adhere to when making decisions or giving instructions to us. This includes setting up a structure so that there is an Executive group tasked with convening and holding meetings, deciding upon various issues and representing the wider interests of the group. Decisions taken can then be provided to us from the the Executive so that a clear line of communication can be established which avoids a multiplicity of contacts and correspondence. This  also leads to costs savings and greater efficiency.

It’s also recommended that  the lawyer acting for your group review other associated documents such as the real estate agent’s agency agreement (where applicable) or Heads of Agreement or other correspondence, to ensure that such correspondence  properly reflects what has been agreed in principle.

An Owner can expect that each property owner  sells their property subject to an interdependency clause. In simple terms, what this means is that all of the group properties must be exchanged and settled at the same time.

In many instances each individual owner who is a party to the group transaction will need to complete an individual questionnaire about their particular property as properties within your group will vary – for example, not all will have a swimming pool or be rented. In this instance, individual special conditions would need to be tailored into the contract to cover these situations. In addition, some property owners may need to consider  land tax and capital gains tax issues whilst others would not. This is a step the Coleman Greig team will identify as part of the process.

The other important issue that needs to be considered in group sales is how the sale price will be split between the parties to the group. Will you split the sale price based proportionately upon the size of the properties or split equally between all members of your group, regardless of their property size? It’s an important question to consider and should be considered right from the outset.

The spilt may seem quite clear cut to you, but it pays not to assume that you and your neighbours are in agreement.  Have the discussion early and set out the parameters for your sale.  as surprises further into the process could potentially stall your group sale or to the extreme put the nail in the coffin of the venture altogether.

Coleman Greig is experienced in acting for groups in these situations. Coleman Greig has highly skilled and specialist Property Lawyers ready to jump into action. Even better, our team of property lawyers are willing to attend any initial meeting of the group (for free) and field any initial questions the group may have or set out the process in greater details.

For more information on selling your property to a developer with your neighbours, please contact our property development team.

Disclaimer: The information provided in the document is a general summary and is not intended to be nor should it be relied upon as a substitute for legal or other professional advice.


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