Property development myths

I have been asked to assist a few clients who have purchased land, properties off plan or who have invested in property developments of their own and while I am not a property lawyer, I have been asked to review offers to purchase and agreements which have formed part of these deals. It seems to me that there are a number of property experts who promote property developments and property investments as a sort of holy grail for small businesses and individuals who are hoping for a solid investment that yields tremendous profits with ease. There are obviously a number of lucrative opportunities in the local property market because many developers have made a lot of money from them. At the same time there are some lousy opportunities that just land their investors in hot water.

Leaving aside the quality of the developments concerned (I have no opinion on these because I have no knowledge or experience with these developments directly) there are a couple things that investors can do to decrease their risk in these deals and they are largely good commercial sense. The first thing to do is appoint your own lawyer and make sure you have the money for a decent lawyer. It is tremendously frustrating as a lawyer to be presented with an agreement that is blatantly biased against the client in favour of the seller/developer that it should be rewritten and then be informed that the client can’t afford to have a proper agreement drawn up. If you can’t afford to pay your attorney a reasonable fee to help you put into place the legal foundation of your deal, perhaps you should reconsider and invest your money elsewhere.

If you don’t brief an attorney to assist you at the inception of a deal (which I recommend you do), at least read the agreement before you sign it. Preferrably have a lawyer read it to and give you a breakdown of your risks so you know what you are agreeing to. Paying an attorney to review a document is not necessarily an expensive process and which this is of limited value without being prepared to renegotiate the agreement, at least you are better informed about your risks.

Simply signing a document presented to you without reading it and making sure that it accords with what you have discussed with the other party is a recipe for disaster and could mean your financial demise or the liquidation of your trading entity if you charge ahead regardless.

Property investments may work for many people but they probably work for those people because they make sure they have all their ducks in a row before they sign anything. Of course a well drafted contract is not a recipe for success either. You have to make sure that your investment is sound and that takes plenty of good research. Don’t believe all the hype you are fed. Much of it is just that, hype. At the very least, make sure you have a sound legal framework for your deal in case something goes wrong. It is the responsible thing to do.

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