Acquiring several adjoining properties can create valuable development opportunities, particularly where the combined land provides greater site area, frontage or development potential than any individual property.
However, purchasing multiple properties involves legal and commercial risks that are not ordinarily present in a single-property acquisition.
One of the main risks for developers is becoming legally required to buy some properties without being able to buy the rest of the land needed for the development. A successful multi-property acquisition requires more than negotiating acceptable prices with individual landowners. Developers need to consider the overall acquisition strategy, the contractual arrangements between the different purchases, due diligence requirements and the consequences if one or more transactions cannot proceed.
This guide explains the principal legal considerations for developers acquiring multiple adjoining properties in NSW.
What Is a Multi-Property Development Site Acquisition?
A multi-property acquisition occurs when a developer purchases two or more properties, usually adjoining, to create a larger development site.
This is commonly referred to as site amalgamation, site assembly or land assembly.
For example, a developer may identify five adjoining residential properties that together could accommodate an apartment development.
Individually, the properties may not provide sufficient land area or frontage for the intended project. Acquiring the properties together may create a commercially viable development opportunity.
However, each property may be owned by a different person and subject to different mortgages, leases, easements, contractual requirements and settlement arrangements.
The developer must therefore consider both the combined site's potential and the legal position of each individual property.
Start by Identifying the Properties the Development Actually Requires
Before approaching owners or entering into an agreement to purchase a particular property , developers should understand which properties are essential to the proposed project.
For example, a proposed development involving six adjoining houses may require all six to satisfy the applicable planning controls.
Alternatively, the development might remain viable with five properties, provided a particular corner lot is included.
This difference can significantly affect the purchase strategy. A developer should consider:
Which properties are essential to achieving the required site area, frontage or access.
Whether the project could proceed without one or more adjoining properties.
Whether alternative site configurations are commercially viable.
Whether the acquisition is dependent on a particular planning outcome.
How much financial exposure the developer is prepared to accept before securing the complete site.
These matters should be investigated with appropriate town planning, design and feasibility advisers.
The relevant zoning, local environmental plan, State environmental planning policies and development controls may affect whether the proposed development is permissible.
Developers can obtain preliminary planning information using the NSW Planning Portal Spatial Viewer, although a detailed feasibility assessment may require professional planning and architectural advice.
The commercial strategy should be established before contractual commitments are made.
The Challenge of Negotiating With Multiple Landowners
Acquiring several adjoining properties often involves negotiating with owners who have very different priorities.
For example:
One owner may be willing to sell immediately.
Another may require a longer settlement period to purchase a replacement property.
A third may be willing to sell only if the price exceeds a particular amount.
Another may prefer an option agreement rather than an immediate sale.
A commercial property owner may have existing tenants and lease obligations.
One of the sellers is an executor acting for a deceased estate.
These differences can make it difficult to secure the entire site on consistent terms.
There may also be practical challenges if some owners are negotiating collectively while others are dealing with the developer independently.
A developer should be clear about who has authority to negotiate for each property and whether any representative is authorised to make binding commitments.
Where several owners have entered into a joint sale agreement, the developer should understand how that agreement affects negotiations and the proposed transaction.
However, the developer should not assume that a person coordinating discussions for neighbouring owners has authority to sign contracts or accept offers on their behalf.
How Can Developers Structure the Acquisition of Multiple Properties?
There is no single acquisition structure appropriate for every development site.
The choice will depend on the number of properties, the certainty of the proposed development, the owners' circumstances and the developer's financing and timing requirements.
1. Separate Contracts for Sale
One option is to negotiate a separate contract for each property.
This may be suitable if the developer is willing to buy each property separately and the contracts can be properly coordinated.
However, using separate contracts can be risky if the development requires every property.
For example, the developer may exchange contracts for four properties but be unable to reach an agreement to buy the fifth property needed for the development.
If the first four contracts are unconditional, the developer may still be required to complete those purchases even if the proposed development can no longer proceed.
This risk should be considered before any contracts are exchanged.
2. Contracts With Interdependent Conditions
Where the commercial viability of the project depends on acquiring the complete site, developers may negotiate terms that link the different acquisitions.
For example, a contract could be made conditional on the developer entering into binding contracts for identified adjoining properties within an agreed period.
Depending on the transaction, the contracts may also address the consequences if another acquisition is terminated or cannot complete.
However, simply stating that the contracts are related may not properly protect the developer.
The agreements should clearly establish:
The properties or contracts to which the condition relates.
What event must occur before the condition is satisfied.
Who may rely on or waive the condition.
The relevant deadlines and extension rights.
What happens to deposits if a condition is not satisfied.
Whether the purchaser remains obliged to complete an individual acquisition.
Careful drafting is particularly important where the contracts have different vendors, exchange dates or settlement requirements.
3. Put and Call Option Agreements
Developers may consider using option agreements to secure rights over several properties without immediately completing the purchases.
A call option generally gives the developer a contractual right to purchase a property during a specified period, subject to the agreement's terms.
This may provide time to complete due diligence, assess feasibility or negotiate with adjoining owners.
However, option agreements can create significant legal and financial obligations.
The developer must consider option fees, expiry dates, extension rights, the requirements for validly exercising each option and whether the options can be coordinated.
An option that expires before the remaining properties are secured could put the purchase strategy at risk. NSW transfer duty must also be considered before using options. Duty can arise on the consideration paid for granting an option, on its exercise and in connection with certain assignments, nominations or transfers.
Revenue NSW provides detailed guidance on transfer duty for option transactions.
Comparing Common Acquisition Structures
Structure | Potential advantage | Key risk |
|---|---|---|
Separate unconditional contracts | May provide certainty over individual acquisitions | Developer could be committed to an incomplete site |
Interdependent conditional contracts | Can align acquisitions with the overall project requirements | Conditions and termination rights require careful drafting and negotiation |
Put and call options | May provide time to secure adjoining properties and assess feasibility | Option expiry, fees, exercise requirements and duty consequences |
Staged acquisition | May allow the developer to secure important properties first | Later owners may refuse to sell or require unacceptable terms |
The best arrangement depends on the proposed development and the developer's commercial objectives.
What Happens if One Landowner Refuses to Sell?
This is one of the principal risks in site amalgamation.
A developer may negotiate successfully with most of the adjoining owners but be unable to secure one property that is essential to the project.
In a normal voluntary transaction involving separately titled properties, a private developer generally cannot force an unwilling owner to sell simply because the land is needed for development. The developer may need to negotiate further, change the proposed site configuration or reconsider the project.
Where an alternative development remains feasible, the developer may decide to proceed with a smaller site.
However, that decision should be informed by updated planning, design and financial assessments.
The legal risks become particularly significant if the developer has already entered into binding contracts for other properties.
If those contracts do not contain appropriate conditions or termination rights, the developer may have limited ability to withdraw.
This is why the possibility of an unsuccessful acquisition should be considered before the first binding contract is exchanged.
How Should Developers Coordinate Settlement Dates?
A developer acquiring several properties may need the acquisitions to complete simultaneously or within a coordinated timeframe.
However, different owners may have different settlement requirements.
One owner may need to discharge a mortgage. Another may need to deliver vacant possession. A third may have an existing tenancy that affects the timing of completion.
If settlement of one property is delayed, it may affect the developer's ability to complete the others or satisfy financing arrangements.
The contracts should be reviewed together to ensure their settlement provisions are commercially workable.
Depending on the circumstances, relevant considerations may include:
Whether settlements must occur simultaneously.
How settlement dates are calculated.
Whether the purchaser has rights to extend settlement.
What happens if one vendor defaults.
Whether completion of one contract is conditional on completion of another.
How deposits, settlement adjustments and discharge arrangements will be coordinated.
Where the acquisition involves multiple vendors, transaction management becomes an important part of the legal work.
What Due Diligence Should Be Completed Before Acquiring Multiple Properties?
A developer should investigate both the combined site's feasibility and the legal issues affecting each individual property.
For example, the developer may need to consider whether an easement across one property affects the proposed building footprint, whether a commercial tenancy affects vacant possession or whether existing covenants restrict development.
The investigations may include:
Title and ownership: Confirming legal ownership, title details, mortgages, caveats and other registered interests.
Easements and restrictions: Identifying rights of way, drainage easements, covenants and restrictions that may affect the intended development.
Planning and zoning: Reviewing applicable planning controls, development requirements and relevant planning certificates.
Leases and occupation: Investigating the rights of existing residential or commercial occupants.
Environmental and physical constraints: Obtaining specialist advice on contamination, flooding, geotechnical conditions and other site risks where relevant.
Contractual obligations: Reviewing the terms of each proposed acquisition, including conditions, termination rights, deposits and settlement requirements.
Importantly, a combined development site can be affected by a problem on just one of the properties.
A development may appear feasible based on its overall dimensions, but an easement, access restriction or tenancy affecting a critical lot could significantly change the project.
Our separate guide to Legal Due Diligence When Acquiring Multiple Properties for Development examines these investigations in more detail.
Transfer Duty and Other Acquisition Costs
When assessing the total cost of acquiring a development site, developers should consider more than the agreed purchase prices.
Transfer duty, financing expenses, legal fees, specialist investigations, option payments and holding costs can materially affect the project's feasibility.
NSW transfer duty is payable on relevant dutiable transactions, and option arrangements can give rise to additional liabilities.
The aggregation rules in section 25 of the Duties Act 1997 (NSW) may also be relevant where multiple acquisitions form part of one arrangement.
However, the fact that a developer is acquiring several adjoining properties does not automatically mean the transactions will be aggregated for duty purposes.
The legal requirements include the relationship between the sellers and buyers and whether the transactions are essentially one arrangement.For example, Revenue NSW's published guidance identifies a scenario involving five unrelated adjoining homeowners and a single developer in which the acquisitions are not aggregated, despite contractual interdependencies.
The position should be assessed for the actual transaction. Developers should not assume that all multi-property acquisitions are either aggregated or exempt from aggregation.
GST treatment and other taxation issues may also require specialist advice, particularly where commercial premises, development land or different selling entities are involved.
These costs should be considered when selecting the acquisition structure, rather than after contracts have been signed.
Example: Acquiring Five Adjoining Properties for an Apartment Development
Consider a hypothetical developer interested in buying five adjoining residential properties.
A preliminary planning assessment indicates that the combined site may be suitable for an apartment development.
However, the developer's advisers identify that the corner property is especially important because it provides the frontage and access required for the proposed design.
Three owners are prepared to sell under conventional contracts. The fourth prefers an extended settlement, while the owner of the corner property is uncertain about selling.
Before exchanging contracts, the developer considers whether the project could proceed without the corner property.
The preliminary assessment indicates that a smaller development may be possible, but its commercial viability would be significantly different.
The developer therefore needs to decide whether to proceed with any acquisitions before securing the corner property.
Possible approaches include negotiating conditional contracts, seeking options over some properties or postponing binding commitments until the critical negotiations have progressed.
Each approach involves different risks and costs.
The key legal question is whether the developer can structure the proposed acquisitions so that its contractual commitments remain consistent with the project's commercial requirements.
This is a hypothetical example and does not describe a particular Thornton + King client transaction.
Frequently Asked Questions
Can a developer buy several properties under separate contracts?
Yes. A developer can acquire adjoining properties through separate contracts. However, the agreements should be reviewed together where the development depends on acquiring the complete site. Appropriate contractual protections may be needed to address incomplete acquisitions.
Is a put and call option better than a contract for sale?
Not necessarily. Options can provide flexibility, but they also create obligations and may have significant transfer duty consequences. The appropriate structure depends on the developer's intended project, financing, timing and risk tolerance.
Can a developer make the purchase of one property conditional on acquiring the others?
Depending on the circumstances, yes. Contracts may include carefully drafted conditions linking acquisitions. The provisions should clearly establish the required events, deadlines, termination rights and consequences if one acquisition does not proceed.
What if one owner wants a different settlement date?
Different settlement requirements can sometimes be accommodated through appropriately negotiated contracts. However, the developer should consider the effect on financing, other acquisitions and any requirement for simultaneous settlement.
Does a developer need to consolidate the land titles before buying?
Not necessarily. A developer can often acquire adjoining properties under their existing titles and address formal lot consolidation later, if required for the development. The appropriate timing depends on the titles, planning requirements and transaction structure.
When should a developer engage a property lawyer?
Ideally, before entering into heads of agreement, option deeds, exclusivity arrangements or contracts. Early legal advice can assist with choosing the acquisition structure and identifying risks before binding commitments are made.
How Thornton + King Can Assist With Multi-Property Acquisitions
Thornton + King's property lawyers advise developers on development site acquisitions, site amalgamation and complex property transactions throughout NSW.
Our property team assists developers with acquisition strategies, contracts for sale, put and call option agreements, legal due diligence and the coordination of transactions involving multiple vendors.
We work with developers to understand the proposed acquisition and identify the legal arrangements needed to manage contractual and commercial risks.
If you are considering buying multiple adjoining properties for development, contact Thornton + King's property lawyers to discuss the proposed transaction before entering into binding agreements.
This article provides general information about NSW property law and does not constitute legal, taxation or financial advice. Acquisition structures, transfer duty liabilities and contractual obligations depend on the circumstances of the transaction. Obtain professional advice before making binding commitments.
