The days of a property developer approaching individual owners to purchase their properties is fast becoming a distant memory. Increasingly, owners are taking the initiative and joining forces to offer their properties as a package deal.
This is particularly the case in areas where the land is or has been rezoned, as well as areas where new infrastructure such as railway stations are being installed. This type of arrangement has become a popular way for owners of individual properties to maximise their sale price by becoming part of a larger site offering, and consequently, typically a more attractive proposition for developers.
What to do first?
Firstly, you need to know developers won't always bite just because there is a group of properties. The properties that are most sought after, are those that have a rezoning potential or have been rezoned, and are close to services such as transport. If there is a group of property owners that fit the bill, then it's best that a joint sales agreement document is prepared by an experienced property lawyer.
What is a joint sales agreement?
This document sets out the rules and structure by which the group will operate. This includes setting up a structure which is a bit like a club, so that there is an Executive group to hold meetings. Instructions then come to the lawyer from the Executive so that both parties don't have to deal with a multiplicity of contacts. This of course, also saves the group money by having an efficient line of communications.
It's also a good idea for the solicitor acting for the group to review other required documents such as the real estate agent's agency agreement (where applicable) to ensure that it properly reflects what has been agreed in such a complex, and possibly long-term group of transactions.
Each property owner within the group sells their property subject to an interdependency clause. In simple terms, this means that all the properties must be exchanged and settled at the same time. However, we always require each individual owner who is a party to the group transaction to complete an individual questionnaire about their particular property as properties within the group will vary – for example, not all will have a swimming pool or be rented. In this instance, individual special conditions would need to be tailored into the contract to cover these situations. In addition, some property owners may need to adjust land tax whilst others would not.
The other important issue that needs to be considered in group sales is how the sale price will be split between the parties to the group. Will it be based proportionately upon the size of the properties or split equally between all members of the group, regardless of their property size? It's an important question to consider.
Coleman Greig is experienced in acting for groups in these situations with highly skilled Property Lawyers ready to advise the best way to assist the group.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
