Real Estate Development - What's Involved?

Real estate developments run the gamut from small-scale undertakings (like renovating an existing house) to large-scale “greenfield” projects involving the purchase of a vacant site to develop a large commercial project (like an office building, shopping centre or condo tower).

Smaller projects, such as a house reno, may have few regulatory hoops to go through, like the need for municipal permits and inspections of the work.

In contrast, larger projects face a host of additional issues at various different stages of the development process, many calling for experienced legal advice. Some of these issues depend on the type of commercial development. For example, for a residential condo tower development, there are special rules that deal with disclosure documents, deposits and strata documentation.

What are some legal issues typically considered when undertaking a “greenfield” commercial development? Zoning is a big one early on. If satisfied with the market potential and budget for your project, you’ll need to investigate the zoning of the site you want. It may need to be rezoned in line with applicable guidelines such as any official community plan. The rezoning application process requires time and money, including the costs of satisfying any conditions imposed for the rezoning to go through (if approved) – and there’s the risk the application will be turned down.

Consider carefully how you want zoning to be handled in your purchase contract for the proposed site. If rezoning is needed, you may want successful rezoning to be made a condition which the seller has to satisfy before the sale goes through – as you don’t want the property if you can’t build your project. There are many other things the purchase contract should cover, for example, soil and environmental site conditions. This is done by representations, warranties or conditions in the contract – so get legal help up front, don’t just blindly buy the land using a standard printed realtor’s form.

Another issue you typically face involves money – financing the land purchase and the costs to complete the development.

Lenders offer developers many different kinds of secured financing including land acquisition, construction and ultimately “take-out” or long-term financing (once the project is completed and leased). But as they usually put up most of the project money, lenders have strict requirements to ensure all goes according to plan and there’s a clear path for them to get their money back.
So you’ll want good legal help with negotiating the terms of the financing documentation and then navigating the conditions for obtaining initial and subsequent progress advances to complete your project.

Any substantial commercial development involves other legal documentation too, such as municipal and utilities easements or statutory rights-of-way and various project-specific contracts for architectural design services, construction and perhaps project development management. You may also need standard form retail or office leases (for a retail or office project), or maybe both if it’s a mixed-use project – in each case, tailored to your particular project.

Making a go of substantial real estate development takes a team effort, and a good legal team member is key.

Written by Janice and George Mucalov, LL.B.s as part of the YOU AND THE LAW series of articles, with assistance from Davidson Lawyers LLP.

This article provides information only and must not be relied on for legal advice. Please call us at 250-542-1177 for legal advice concerning your particular case. YOU AND THE LAW is a registered trademark.© Janice and George Mucalov

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