Buyer Beware

The law in New South Wales (and generally, across Australia) in relation to the purchase of real estate is undoubtedly still “caveat emptor”, meaning “let the buyer beware”. In practice, this means the onus is on the purchaser to complete its due diligence and ensure that the property, in their terms, is satisfactory. Vendors are required to disclose certain information and documents pertaining to the property but, unfortunately, many purchasers fail to realise that proper interpretation of this information and these documents, particularly in relation to planning issues, is crucial in completing their due diligence.

Whilst a diligent review of the contract and associated documents is crucial each and every time property is purchased, this article focuses on why seeking proper advice on the planning issues pertaining to the property is an exercise that should be undertaken by diligent purchasers (and why such an exercise may result in significant cost-savings to the purchaser).

A recent example of circumstances where we were engaged to review the planning legislation after land had been purchased is a purchaser exchanged and settled contracts for a block of land that, when the contracts was exchanged, was zoned part general industrial and part environmental conservation under the local environmental plan. The purchaser bought the land with the intention of erecting a dwelling on it. Since settlement, a new local environmental plan has been introduced which now prohibits residential dwellings. The planning certificate contained in the exchanged contract was nearly a year old, and did not disclose that the relevant Council was considering a new local environmental plan. Additionally, there was a lengthy delay between exchange and settlement, during which time the proposed consolidated local environmental plan (which is the first step in preparing a comprehensive consolidated local environmental plan) had been advertised. There are savings provisions which mean that if a development application is made before a new plan commences, then the assessment and determination is made in accordance with the repealed plan (rather than the newly introduced plan). The purchaser’s representation did not undertake any updated searches in relation to the planning legislation, did not provide the purchaser with any further planning advice and did not advise the purchaser about the new plan or the savings provisions. No development application was made under the saving provisions, and the purchaser is now left in the unenviable position of being unable to use the land as they had initially intended when it was purchased unless they seek a spot rezoning, which is a time-consuming, expensive and has no guarantee of a favourable outcome.

Other planning issues we have been required to advise on after a property has been purchased including the clearing of native vegetation, bushfire risk and problems with reasonable vehicle access. All of these issues are side issues, however, if the fundamental use of the property is not permitted.

It is always prudent to obtain planning advice when purchasing a property, however, this is particularly so if you are purchasing vacant land with the intention of erecting a dwelling, or in circumstances you plan to use the property in a specific way.