Land Development and Due Diligence

Completing due diligence review for a vacant land acquisition can be much more extensive than completing due diligence for the acquisition of improved commercial real estate. The process can be arduous and an expert or team of experts can drastically reduce due diligence turnaround times. For the purchase of vacant land, there are often additional considerations that the purchaser must address, particularly because the purchaser wants to ensure that the land may be used for its intended development.
This Checklist focuses on due diligence specific to land being acquired for development. For resources related to due diligence in purchase and sale transactions generally, see:

Land Use Due Diligence

  • Determine the jurisdiction where the land is located.
  • Identify the governmental entities that have jurisdiction over the property.
  • Identify the zoning classification of the property and, if applicable, the surrounding properties. An understanding of the permitted and conditional uses in the applicable zoning designation is essential.
  • Determine whether the property is covered by a comprehensive plan, master plan, growth management plan, or other community planning regulations.
  • Determine whether the property is affected by an overlay district or other districting regulations.
  • Review applicable municipal codes and county regulations that may affect the proposed development of the property.
  • Confirm the zoning classification by requesting a zoning verification letter from the municipal authorities identifying:
    • the zoning classification of the property; and
    • any known violations of applicable zoning and municipal ordinances and regulations.
  • Determine whether:
    • any zoning approvals or variances are required from governmental authorities for the proposed development and understand the process and time period involved; or
    • transfer of development rights is required to construct the proposed project and the necessary development rights are available for purchase.
  • Review copies of any notices from governmental authorities regarding violations or noncompliant conditions at the property.
  • Confirm that the property has adequate legal access.
  • Confirm if there are parking requirements under applicable zoning laws and how the development will comply.
  • Evaluate neighboring properties for:
    • existing and proposed uses; and
    • neighborhood reaction to prior development plans.
  • Determine if there are any physical encroachments from neighboring properties.
  • Review materials submitted by seller regarding land use.
    Review current agreements affecting the property, if any, including leases, licenses, and service contracts, to ensure that the agreements terminate (or can be terminated) before the closing.

Title and Survey Review

  • Title and survey review for a vacant land transaction does not typically differ from that undertaken for developed property.
  • Particular attention should be paid to any existing easements and covenants, conditions, and restrictions and whether they affect the intended development of the property.
  • All easements should be identified and located on the survey.

Environmental Due Diligence

  • If the purchaser is obtaining financing, it should consult its lender for specific environmental due diligence requirements.
  • The types of due diligence a purchaser undertakes often depends on the type of property it is developing and where the property is located. In most vacant land transactions, purchasers typically:
    • request and review the seller’s existing environment studies, if any;
    • perform a Phase I Environmental Site Assessment Report (Phase I Report) of the property;
    • perform a Phase II Environmental Site Assessment Report (Phase II Report) if necessary;
    • determine if a federal environmental review is required;
    • order an environmental impact statement;
    • determine if any federal environmental permits are required;
    • perform an endangered species study (see Practice Note, Endangered Species Act Considerations for Developers);
    • order a wetlands delineation (see Practice Note, Navigating Wetlands Regulations for Project Developers: Overview);
    • review any conservation easements to confirm that the intended development of the property is possible (see Practice Note, Conservation Easements: Overview and Standard Document, Conservation Easement (Medium Form));
    • perform a historic resource survey;
    • perform a stream disturbance study;
    • perform a geotechnical analysis; and
    • order seismic reports.

Water, Sewer, and Utilities Due Diligence

  • Determine the status of utilities serving the property, including:
    • the availability of utilities from government entities; and
    • whether utilities currently service the property and, if so, whether they need to be moved or extended to serve the proposed development.
  • Review any legal issues involved with the utility planning, including:
    • how the utilities may affect or be affected by water rights; and
    • how the utilities may impact existing easements and other third-party rights.
  • Assess whether there is sufficient access to water supplies or if additional access must be procured.
  • Analyze whether the following are necessary:
    • wastewater facilities; and
    • stormwater drainage facilities.
  • If there is not already a sufficient sewer system servicing the property, perform a percolation test to determine septic feasibility, sewer line location and nearby plant capacity.

Development Due Diligence

  • If the seller has already started the development process, review all contracts, permits, licenses, approvals, applications, and all correspondence regarding any of these items.
  • Review site characteristics, including:
    • flood plains;
    • wetlands, ponds, and jurisdictional streams;
    • water table and drainage patterns;
    • soil types and characteristics that may affect development, including soil erosion and sedimentation issues;
    • property configuration that may impact development; and
    • topography and slope analysis.
  • Determine if the property needs regrading or reshaping and identify any permits necessary to do so.
  • If the purchaser intends to subdivide the property for development, identify issues associated with subdivision or developing a plat for the property.
  • Understand the approvals, permits, and requirements necessary for the proposed development.
  • Identify any state and local agencies that must approve the project, including the design of the project, and budget for fees or other required expenditures or commitments associated with getting those approvals, including:
    • requirements for posting bonds;
    • development deposits;
    • infrastructure improvements;
    • dedicated public space requirements; and
    • required letters of credit.
For more information on commercial real estate development please contact The GeoFocus Group.

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