U.S. Real Estate Investment – Consider the Legalities of Starting a Luxury Home Development

U.S. Real Estate Investment - Consider the Legalities of Starting a Luxury Home Development

In 2017, there was a spike in demand for luxury housing across America, home to one of the wealthiest populations in the world. The appeal for luxury estates continues to grow, creating a need in the high-end real estate market that developers and investors are determined to fill. The development of these property investment parcels takes attention to detail, careful planning skills, and a comprehensive knowledge of town planning and real estate legalities. 

Over the years, Dennis DeGrazia has obtained extensive experience in the development of gated communities. Currently, as managing partner at Highridge Development, he is working to develop a 33-acre industrial parcel into a community of over 120 homes sites. The homes then will be built by a national builder under contract with an LLC.​ Dennis advises that a successful luxury home development investor must consider the following key legal factors.

Comply with Local Regulations

A luxury home development’s selected site will determine the building codes, town planning regulations, and limitations it must abide by. Finding an area that has regulations which are compatible with an investors vision is the first major step in the development process. Dennis advises potential investors never to rely on surrounding developments as models; they may have been created under outdated town planning regulations. Instead, it is essential that potential investors understand the intricacies of the area’s building regulations. This includes how many units are permitted, what can be placed on the property, and the extent of all restrictions. You must also be aware of any overlays, easements or covenants on the title which may restrict its development potential. In all cases, consulting with the local council’s planning department may help anticipate future zoning changes and minimize legal problems during or after the building process. 

Hire a Registered Builder

Before moving forward on the property, you should find, hire or partner with a builder. As per legal standards, developers must employ a registered building practitioner. For good measure, it is essential to request a copy of all builder’s insurance certificates prior to moving forward with the process. Before signing any binding contracts with a building practitioner, confirm its public liability insurance, WorkCare insurance, and completion guarantee coverage. 

Establish Explicit Contracts

To avoid future legal complications, you must draft specific established contracts that outline in explicit detail the terms agreed to between the builder and the developer. As a form of legal precaution, contracts should leave no “gray area” or room for interpretation. Additionally, they should dictate in a straightforward, definite language all the price and payment arrangements, the project details and scope, what parties are involved, and what course of action should be taken in the event of a dispute. The developer must also clearly state the building practitioner’s obligation to follow all relevant building regulations in clear, concise language. 

Hire a Land Surveyor

Often, investors purchase two or more separate parcels of land for the purpose of building a single development. In this case (and for several other reasons) you must hire the services of a land surveyor. Because land must usually be consolidated into a single title before it can be developed, purveyors can work to legally combine titles. It is also the purveyor’s job to establish the official legal boundaries of the property before any development takes place. 

Anticipate all Costs

All successful business ventures begin with a well-crafted financial plan which highlights an understanding of all the budget details. All costs must be analyzed and understood as a critical piece of the puzzle before any plans may be finalized. Conveyancing, for example, is a frequently under looked factor in developer’s cost assessments. The process of transferring a legal title of a parcel of land may initially seem like a straightforward, painless process, but it is often an ordeal that can take significant time, resources and additional incurred costs to complete. Novice investors can easily go bankrupt on a new development before completing a project because they fail to accurately consider all the impending and unexpected additional costs.


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