Contract Crashed – Deposit forfeited!

with 1 Comment

We were approached by the buyer of this home in Fig Tree Pocket, a leafy western suburb of Brisbane. He was ebullient because he believed that he’d just found the bargain of the century. He couldn’t believe his luck! He’d had his finance approved and was just days away from settling the purchase of this home located on a little over 2,700m2 of development land. His contract was now unconditional and he’d paid a deposit of $25,000.

Subdivisions are often not straightforward – there can be many twists and turns along the road to success – – and the consequences of missing one can be expensive

Just to give you the overall picture the property was an existing house with a very large back yard which had been promoted as having “subdivision potential” [in fact the zoning did allow subdivision into lots as small as 400 m2] so the prospective buyer, having looked at it on Google Maps and doing some quick research, signed up the contract to purchase. On the face of it, it seemed like a good buy, but after we checked it out there were multiple issues to overcome, all involving substantial cost and uncertainty.

The Issues – What were they?

Issue 1: Access: The developable land was at the rear of the house and access to it from the road was next to the house. There was insufficient width without either modifying or demolishing the house which the buyer had not bargained on. Access width requirements can vary depending on the number of lots being served.

Issue 2: Topography. The land sloped away from the house – downhill. The existing house sat on a ridge and the sewer was just behind it and was the only sewer that serviced the property. With the bulk of the land being lower down it could not be serviced by that sewer – remember water does not run uphill – and therefore access would need to have been gained from neighbouring properties lower down & that’s something that can be, and often is, denied. It’s not an automatic right to access services in neighbouring properties and neighbours often refuse or demand payment of compensation. Another term for it sometimes could be “held to ransom”.

Issue 3: Overland Flow: Part of the way down this lot a small gully traversed the lot, placed there to control / divert overland flow of storm water. Overland flow is often a big problem & is sometimes, but not always, protected with easements (so is not obvious) and cannot be built over without remedies being put in place. In this case a small bridge would likely be required with one or two large concrete pipes to be placed underneath to gain access to the land on the other side.

Issue 4: Vegetation: This lot had quite a lot of trees in place and in that zoning removal of trees requires a separate application – there is no automatic right to remove them. One consideration may have been that on sloping land they provided a degree or erosion control – if so removal may not have been possible.

Conclusion: To address all these issues the costs involved would have been prohibitive rendering the project unviable. Our buyer concluded that it would be futile to proceed with the purchase and walked away forfeiting his deposit. Ouch!

These issues to a trained eye are fairly obvious but to someone without experience they are not always apparent

Avoid your project being underwater before you start
Avoid your project being underwater before you start

One Response

  1. Benny K
    | Reply

    Crikey, I never realised that there was so much involved. Easy to blow your doh if ur not careful

Leave a Reply

Your email address will not be published.