Commonly Overlooked Liabilities to look out for When Purchasing Land
There are many things to consider when buying a property and the issues that are most commonly considered relate to a person’s motivations for buying the particular property, For instance, is it a family home? Are the needs of a growing family the reason you’re buying. If so considerations like closeness to schools, access to transport and good amenities or travel time to work are important. Or it could be that you are purchasing an investment property. In situations like this all of the above will be important to ensure rental demand, but a myriad of other considerations come into play like ownership structure (personal, family trust, company, or personal super) plus growth prospects for the suburb, the street and the capacity to perhaps add value to the property through subdivision or renovation. With so many issues competing for a potential buyers attention, it’s little wonder that some less obvious and yet extremely important issues can easily be overlooked, with possible disastrous consequences for the buyer, and in this article, we discuss two commonly overlooked issues – 1. Properly screening a property for any environmental liabilities, and 2. Properly screening a property for any risks associated with the risk profile of the area, with relation to natural hazards issues like floods, bush-fires or cyclones.
Screening for environmental liabilities
When you purchase a piece of land, the environmental liabilities associated with the land are transferred to you alongside the property deed, whether or not you were aware of their existence at the time of purchase. It is possible to buy land without knowing that it is contaminated, or without fully understanding the extent of the contamination or the financial implications. If you don’t do your due diligence, you could end up with an unexpected financial burden. You could be sued by people who are affected by the contamination on your property, or you could spend a fortune trying to clean up the land so as to comply with statutory requirements. Even if a seller is prudent enough to disclose the presence of contaminants on a piece of property, you should still take the initiative to ensure that their assertions are accurate and comprehensive. Only buy a piece of land if you are sure that you can deal with the environmental liabilities that are associated with it.
In order to avoid contaminated land liabilities, you should hire an environmental consultant. An environmental consultant is a professional who assesses a piece of property, identifies any environmental liabilities, and estimates the cost of fixing those liabilities. Environmental consultants usually come up with comprehensive reports which can help you decide whether or not to purchase a piece of land. The consultant will also help you control costs should you choose to invest in a property with manageable levels of contamination. You should involve an environmental consultant before you buy or start developing a property. If environmental liabilities come to light late in the game, you could end up losing a lot of money because of stalled projects, civil lawsuits, or even sanctions from environmental regulators.
Screening for natural hazard risks
The natural hazard risk profile of a place tells you if that place is prone to one or more forms of natural hazards. Whether you are buying a piece of land for commercial development or to build your own home, you need to know if the area where the property is located is prone to natural disasters such as floods or bushfires. If you want to develop a property in an area that is susceptible to natural hazards, your insurance premiums will be higher, you will have a more difficult time getting funds for your project, you will have to deal with restrictive building codes, and as a result, the total cost of development will be much higher.
Some areas in Australia are prone to floods. NSW and Queensland have experienced floods in recent years, while the Hawkesbury-Nepean valley in Sydney has endured many devastating floods in the past. Governments have difficulty resisting development pressures after mitigation infrastructure like dams or levees are built. In the United States inappropriate development behind levees is rife and some consider it to be the driving factor behind increasing flood losses Throughout Australia, different areas are classified according to their flood risk levels. You can use online resources or local council records to find out if a property you intend to purchase is located in a potential flood zone. Banks are usually overly cautious when it comes to giving out loans that are secured by properties in flood zones, but it is still possible to get loans, albeit at higher interest rates.
Bushfires are common in Australia, and there are interactive maps that can tell you if your property is located in an area that is prone to such fires. Properties that are located in areas with massive bushes, shrubs, trees, or even grasslands, may be at risk of burning down due to bushfires. Try to avoid purchasing property in areas that are prone to natural hazards such as floods or bushfires, but if you must, then ensure that your property is properly insured and that you strictly adhere to the recommended building codes when you are developing and maintaining the land.