If you think your property and the neighbouring houses could be attractive to a developer, you may be wondering how to approach your neighbours about selling together.
The best starting point is usually an informal conversation to establish whether your neighbours would consider a collective sale. You do not need to have a developer lined up or a formal agreement in place before exploring their interest.
However, there is a difference between discussing a possible sale and committing to one. Before anyone begins negotiating on behalf of the group, it is important to establish what each owner is comfortable with, how decisions will be made and whether legal advice is required.
Here is how to approach the conversation and organise the next steps.
Why Consider Selling Your Properties Together?
Neighbouring properties can sometimes be worth more to a developer when purchased together than when sold individually.
For example, four adjoining houses may provide the land area and frontage required for a proposed apartment development, whereas each individual property may be too small for that development.
A developer may therefore be prepared to pay a premium to acquire the combined site.
However, this is not guaranteed. The value of the combined land depends on its development potential, location, planning controls and market conditions.
Before approaching your neighbours, it is useful to have a general understanding of why combining the properties might be commercially attractive.
You do not need to commission an expensive feasibility study at the outset, but you should avoid making assumptions about what a developer could build or how much they would pay.
How Should You Approach Your Neighbours?
The first conversation should be about exploring an opportunity, not persuading someone to make a commitment.
Remember that your neighbours may have very different financial and personal circumstances. One may be planning to move, while another may have lived in their home for decades and have no intention of selling.
A respectful, straightforward approach is usually the most productive.
1. Start With the Neighbours You Already Know
If you have an existing relationship with your neighbours, a casual conversation can be a sensible starting point.
You might explain that you've been looking into whether the adjoining properties could be attractive to a developer and ask whether they would be open to exploring the possibility.
Avoid presenting the opportunity as a guaranteed way to achieve a higher price.
At this stage, you are simply trying to establish whether there is enough interest to investigate further.
2. Consider a Short Letter if You Don't Know Your Neighbours
If you don't have an existing relationship with the adjoining owners, a brief letter may be more appropriate than an unexpected detailed discussion.
The letter should explain who you are, why you are making contact and that you are simply exploring whether the owners might be interested.
For example:
Dear Neighbour,
I own a property in our street and am considering whether there may be an opportunity for neighbouring owners to sell our properties together to a developer.
Combining several adjoining properties could potentially create a development site that is more attractive to a purchaser than the properties individually.
At this stage, I'm simply interested in finding out whether other owners would be open to exploring the possibility. There is no proposal or commitment being sought.
If this is something you might consider, please feel free to contact me so we can discuss it further.
Kind regards,
[Name and contact details]
Keep the communication factual and low-pressure. If an owner is not interested, respect that decision.
If a developer has already approached you, you can mention this where appropriate, but check whether any confidentiality obligations apply before sharing details of the approach or offer.
3. Find Out Whether There Is Genuine Interest
An owner saying they would consider selling at the right price is not the same as agreeing to participate in a collective sale.
It can be useful to understand what each owner would require before taking the proposal further.
For example, one neighbour might only consider selling if they can achieve a particular price. Another may need a long settlement period to relocate. A third may be happy to explore the opportunity but unwilling to incur substantial upfront expenses.
These issues do not necessarily need to be resolved immediately.
The objective is to establish whether there is enough common interest to justify investigating the opportunity.
What if Some Neighbours Are Interested and Others Aren't?
It is common for neighbouring owners to have different attitudes towards selling.
You may find that three owners are enthusiastic, one is uncertain and another has no interest.
In an ordinary voluntary collective sale involving separately owned houses, each owner is generally free to decide whether to sell.
There is no general rule allowing a majority of adjoining homeowners to compel a reluctant neighbour to participate.
If one property is essential to the proposed development, that owner's refusal may affect the commercial viability of the site.
However, the remaining owners might still be able to explore a smaller development site or alternative opportunities.
The important point is that a collective sale should not be approached as a campaign to pressure unwilling neighbours.
A neighbour who is not ready to sell today may reconsider in the future, but repeated pressure or unrealistic promises are unlikely to produce a good working relationship.
When Should You Arrange a Meeting With Interested Owners?
Once several neighbouring owners have expressed genuine interest, it may be useful to arrange an informal meeting.
The purpose should be to discuss whether the group wants to investigate a collective sale, not to make binding decisions about selling the properties.
At the initial meeting, it may be useful to consider:
Whether the owners are interested in investigating a combined sale.
What information is needed about the potential development value of the site.
Whether independent valuation or town planning advice should be obtained.
How professional expenses would be handled if the investigation proceeds.
Who will coordinate future communications and what authority, if any, they will have.
It is sensible to keep a brief record of what was discussed and any proposed next steps.
However, meeting notes should not suggest that owners have agreed to sell, appoint a representative or incur expenses unless they have actually authorised those commitments.
Should One Neighbour Act as the Group's Representative?
Having one person coordinate communications can make the process easier, particularly where several property owners are involved.
For example, the group might nominate one neighbour to arrange meetings, gather information from professional advisers and circulate correspondence.
However, coordinating communications is not the same as having authority to negotiate or enter into agreements for other owners.
A neighbour should not tell developers that they represent the entire group or that all owners have agreed to sell unless that is accurate and properly authorised.
If the group intends to appoint someone to negotiate on its behalf, the scope of that person's authority should be clearly established.
This is particularly important when discussions move beyond preliminary enquiries to actual offers, proposed sale terms or exclusivity arrangements.
Should You Contact Developers Before Everyone Agrees?
You can make preliminary enquiries about whether developers might be interested in a group of adjoining properties.
However, there are risks in approaching purchasers before establishing what the participating owners have actually agreed.
For example, if a developer expresses interest in acquiring five houses, but only three owners are willing to consider selling, negotiations could become difficult.
You should also be careful about disclosing another owner's private financial circumstances, preferred price or willingness to sell without their permission.
A useful distinction is between asking a developer whether a particular location or site configuration might be of interest and purporting to offer other people's properties for sale.
Before marketing properties or making substantive offers on behalf of a group, obtain the necessary authority and legal advice.
Should the Group Appoint a Real Estate Agent?
A real estate agent experienced in development site sales may be able to help assess purchaser interest, market the combined site and negotiate with prospective developers.
However, appointing an agent is not necessarily required.
The owners should consider whether an agent would add sufficient value and how any commission and marketing expenses would be allocated.
In NSW, an agent must have an appropriate written agency agreement before marketing a client's property. The agreement sets out matters including the agent's services, commission and authority.
If several owners intend to appoint the same agent, it is particularly important to establish which owners are appointing the agent, what properties are covered and who is responsible for the costs.
Owners should also be aware that exclusive agency agreements can create commission obligations even where a property is ultimately sold through another arrangement.
The NSW Government's guidance on agency agreements explains the relevant requirements.
The owners should obtain legal advice before signing agency or exclusivity agreements that may affect their individual rights.
When Do Neighbours Need a Joint Sale Agreement?
You don't necessarily need a formal joint sale agreement merely to speak with your neighbours about the possibility of selling.
However, a written agreement becomes more important when owners intend to act collectively in a way that involves commitments, expenses or legal obligations.
For example, the group may wish to establish rules about who can negotiate with developers, how offers will be considered, whether owners can negotiate independently and how professional expenses will be shared.
The owners may also want to document how the eventual purchase price would be allocated.
These matters can be addressed through a properly drafted joint sale agreement, depending on the proposed transaction.
It is important that each owner understands what the agreement requires and whether they will remain free to withdraw from the process.
A joint sale agreement should not be treated as a standard formality. Its terms may create enforceable obligations between neighbouring owners.
Can All the Neighbours Use the Same Lawyer?
Potentially, but this depends on the circumstances.
Several owners may have a common objective of selling to a developer, but their individual interests may not always be aligned.
For example, owners might disagree about how the purchase price should be divided or have different requirements concerning settlement timing.
Solicitors acting for multiple clients must consider actual and potential conflicts of interest.
Where the owners' interests diverge, separate legal representation may be necessary.
The question of representation should be considered before the group makes important commitments, rather than waiting for a disagreement to arise.
Three Mistakes to Avoid When Organising a Collective Sale
1. Promising Your Neighbours a Particular Sale Price
You might believe the properties will be worth substantially more as a development site, but that does not mean a developer will necessarily pay that amount.
Avoid suggesting that a particular premium is guaranteed.
Independent valuation and planning advice can help establish more realistic expectations.
2. Agreeing to Terms on Behalf of the Group
Even if your neighbours have indicated that they are interested in selling, you should not assume that you can negotiate or accept an offer on their behalf.
Each owner retains control of their property unless they have given someone appropriate authority or entered into a binding arrangement.
3. Committing to Expenses or Exclusivity Too Early
Before appointing agents, commissioning reports or entering into negotiations requiring exclusivity, the participating owners should understand the costs and obligations involved.
It is much easier to address disagreements before financial commitments have been made.
What Should You Do Once Several Neighbours Are Interested?
If several owners are willing to investigate a collective sale, the next step is to obtain appropriate professional advice before formal negotiations progress.
This may involve assessing the site's development potential, obtaining valuation advice and considering whether the owners need an agreement governing how they will work together.
At the same time, the owners should decide whether they intend to approach developers directly or engage an agent.
There is no need to rush into signing agreements simply because several neighbours have expressed interest.
The objective should be to establish a clear and commercially sensible approach that respects each owner's circumstances.
For a broader explanation of the transaction process, see our guide to Collective Sales of Property to Developers in NSW.
Frequently Asked Questions
Can I approach my neighbours about selling our houses together?
Yes. You can ask neighbouring homeowners whether they would consider exploring a collective sale. An informal conversation does not, by itself, require anyone to sell or participate.
Should I approach my neighbours before contacting a developer?
Often, it is useful to establish whether neighbouring owners are interested before presenting a combined site to developers. However, you may also make preliminary enquiries about potential development opportunities without purporting to represent other owners.
Do all neighbours need to agree before we contact a developer?
Not necessarily for an initial enquiry. However, you should not offer another owner's property for sale or claim to represent them without appropriate authority. Whether a proposed transaction can proceed will depend on which properties the developer requires.
Can one neighbour negotiate for everyone?
Only to the extent that they have been properly authorised. An informal agreement to explore selling together does not automatically give one neighbour authority to bind the others.
What if my neighbour agrees initially but changes their mind?
The legal consequences depend on whether any binding agreement has been entered into. A neighbour who has simply expressed interest in discussing a sale will generally be in a different position from someone who has signed an enforceable agreement.
Legal Advice on Organising a Collective Property Sale
Thornton + King's property lawyers advise homeowners on collective property sales, joint sale agreements and negotiations with developers throughout NSW.
We can assist property owners at the early stages of considering a collective sale, including advising on how participating owners can work together, establishing appropriate agreements and negotiating with developers.
If you and your neighbours are considering selling your properties together, contact Thornton + King's property lawyers to discuss how to structure the proposed arrangements before making binding commitments.
This article provides general information about NSW property law and does not constitute legal, financial or taxation advice. The appropriate arrangements depend on the properties, participating owners and proposed transaction. Obtain professional advice before entering into binding agreements.
