The short answer
What should I check before agreeing to a long settlement on development land?
A long settlement gives you time to investigate the site and arrange finance, but does not guarantee the loan or consent will be available on settlement day. Confirm your contract obligations now, when finance will be reassessed and how the purchase and later build will each be funded.
Separate contract dates from lender dates
Your lawyer should explain when the deposit is due, when conditions must be satisfied, whether settlement can move, and what happens if finance or consent is delayed. A long gap can outlast a lender's initial offer or valuation. Ask what must be refreshed closer to settlement.
Do not assume design progress or a pending consent lets you leave an unconditional agreement. The wording of finance, due diligence and consent conditions is a legal matter to resolve before signing.
Fund the purchase and build independently
Work out cash needed for the agreement deposit, settlement, legal work, investigations and holding costs. Then cost construction and contingency separately. An acquisition facility may need to be refinanced or expanded once the project is build-ready.
Possible sources include cash, equity in another property, a land or bridging facility and a staged construction loan. Each brings different security, interest, fees and repayment dates. The lender needs a credible way for the facility to be repaid if the build cannot begin as planned.
Test a delayed project
Ask what happens if consent, the builder or sale of completed units takes longer. Facility extensions can cost more, and interest continues while land is held. Test the budget without relying on a speculative sale price or a GST refund that has not been confirmed by an accountant.
Send the proposed agreement, title, intended build, budget and timeline to your lawyer, accountant and finance adviser so they can check the same assumptions.
For your own situation
What to have ready
- Agreement deposit, conditions and settlement date
- Lawyer's review of extension and default terms
- Lender approval expiry and valuation
- Purchase funding and later construction funding
- Holding cost and delay contingency
- Exit if the build cannot proceed
Explore the detail
Independent tools and reading
Talk through the numbers
Get a clear next step.
Nathan can review your lending position and the options relevant to you. Start with the question you are trying to answer; there is no need to send sensitive documents through the public enquiry form.
Send an enquiry Or email Nathan directlyUseful sources
- Settled: sale and purchase agreements
- BNZ: applying for a build loan
- Business.govt.nz: borrowing for business
General information only. Rates, policies and eligibility can change. Personal advice depends on your circumstances and the terms actually available.