Dozens of legal documents have already shaped a development project long before cranes hit the Sydney skyline. Site agreements, planning submissions, finance facilities, construction contracts and sale contracts need to be aligned and a weakness in any one of them can delay a project for months or make it unprofitable. The physical structure may be the obvious deliverable, yet the legal structure beneath it determines whether the project is completed.
Ownership structure is usually settled first. Development management agreements or joint ventures can be win-win situations in some cases for the landholder and developer with the landholder sharing in profits but not giving up ownership and the developer providing capital and expertise. Specifically, such arrangements should specify decision making authority, funding responsibilities and exit rights, especially if the costs increase or if one of the parties wants to exit the project mid-stream in its execution. Poorly written agreements are often the cause of conflict when projects go wrong.
Planning approval shapes everything that follows. Some modest proposals qualify for complying with development certificates under state policies, standard projects proceed through a development application to council, and major projects may be assessed by the state as state significant development. Local contributions plans can include conditions of consent such as design changes, affordable housing contributions and significant infrastructure contributions. “Developers will seek advice from property lawyers in Sydney on such conditions, negotiate voluntary planning agreements and if necessary challenge unreasonable conditions in the Land and Environment Court.
Within the past few years, there has been a significant tightening of building regulations. The Design and Building Practitioners Act 2020 introduced a statutory duty of care for builders, designers and some developers to present and future owners following a series of high-profile tower construction failures in NSW. The Building Commission NSW now has broad powers to inspect apartment projects, issue rectification orders, and block the issue of occupation certificates. For residential strata buildings, developers lodge a building bond of two percent of the contract price, which is held until the building has been inspected for defects. Construction contracts allocate risk in both directions. Fixed price arrangements shift cost overruns to builders, but repeated builder insolvencies have shown that this protection depends on the financial strength of builders. Security of payment laws allow builders and subcontractors to pursue rapid adjudication of progress claims, which can strain developer cash flow at inconvenient times. Careful treatment of variations, delay damages, latent conditions, and security such as bank guarantees gives developers a clear picture of their exposure.
Selling apartments off the plan brings a further set of rules. NSW off-the-plan contracts must contain certain disclosure statements and purchasers are entitled to be advised of material changes to plans. Reforms to protect buyers mean that vendors can no longer rescind contracts under sunset clauses without purchaser consent or an order from the Supreme Court. This means there is no incentive to cancel sales and relist at today’s market value. For both lenders and developers, enforceable contracts are essential, as the presales they secure are the basis for project finance.
Completion creates its own paperwork such as subdivision certificates, strata plan registration and transfer of common property to the owners corporation. Once the occupation certificate has been issued, experienced property lawyers in Sydney will assist developers with these final steps to ensure settlement with purchasers goes smoothly. They are there to keep all the legal elements aligned through the life of a project until the keys are handed over to buyers.