Development site due diligence: what to check before you commit

A development site is bought twice. Once on the day you exchange, and again on the day you discover what’s really on the title, under the ground and in the planning scheme. The aim of due diligence is to make sure those two days are the same day.

Small developers rarely lose money because they misjudged the market by a little. They lose it because a covenant capped the yield, an overlay added six months of reports, or a services upgrade nobody priced turned a margin into a loss. This guide sets out the checks in the order most developers run them, the official sources for each, and how the results feed into funding.

For finance, one principle runs through everything here: our lending partner fundU funds developers against existing, completed property and land, never as a construction loan. That means due diligence is also about knowing exactly what you can offer as security, and what the exit looks like.

What should you check on the title?

Start with a current title search. Titles Queensland, for example, describes its current title search as showing the current owners of a lot and other registered interests, including mortgages, easements, covenants, leases and caveats. Equivalent searches are available from each state’s land titles office.

Then go further than the title page:

• Survey plan. Shows the location, dimensions and area of the parcel. Check that the area matches what you’ve been told.
• Dealings. Order copies of any easement, covenant or lease registered on the title. A one-line notation can hide a document that restricts building materials, dwelling numbers or height.
• Caveats and mortgages. These need to be removed or dealt with at settlement. A caveat lodged by a third party can hold up settlement until it is withdrawn or removed, so ask early who lodged it and why.
• Ownership. Confirm who the vendor is, and that they can actually sell — a company in good standing, a trustee with power to sell, or all owners on title.

What planning checks matter most?

Zoning tells you what is allowed. Overlays tell you what it will cost to get there.

New South Wales. Councils issue planning certificates under section 10.7 of the Environmental Planning and Assessment Act 1979, and a certificate must be attached to the contract for sale. A 10.7(2) certificate covers the planning instruments that apply, zoning and permitted or prohibited uses, heritage, land reserved for acquisition, hazard-related restrictions, contributions plans and contaminated land matters. A 10.7(2) and (5) certificate adds advice on other relevant matters, and is usually worth the extra cost for a development site.

Victoria. The planning property report shows a zone map, a separate map for each overlay affecting the property, links to the zone and overlay provisions, and whether the land is on the Victorian Heritage Register, in a designated bushfire prone area or in an area of Aboriginal cultural heritage sensitivity. The Government describes it as a quick and simple summary, so follow the links into the planning scheme itself.

Other states. Each council’s planning scheme sets the controls. Ask the council or a town planner for the zone, overlays and any development contributions that will apply.

Check	Where to find it	Why it matters
Zoning and permitted uses	NSW 10.7 certificate; Vic planning property report; council planning scheme	Decides whether your product is allowed at all
Overlays (flood, bushfire, heritage, vegetation)	Same sources	Adds reports, design limits and time
Contributions	Council contributions plan	A cost per lot or dwelling that hits your cash flow
Covenants and easements	Title search and dealing copies	Can cap dwelling numbers or block the building envelope
Contamination	NSW EPA record of notices; council certificate; site history	Remediation can cost more than the land
Services	Water, sewer and power authorities	Upgrades can be a large, late cost

What physical and environmental checks should you run?

Walk the site, then get it measured.

• Slope, soil and drainage. A steep or rocky site means retaining walls and bigger slabs. A geotechnical report early is cheap insurance.
• Access. Legal road frontage, sight lines for a driveway, and any trees protected by local controls.
• Services. Confirm capacity for water, sewer, stormwater and power, and who pays if an upgrade is needed.
• Contamination. The NSW EPA publishes a record of notices it has issued over significantly contaminated land, and planning certificates in NSW address contaminated land matters. Former service stations, workshops, dry cleaners and farms deserve a closer look whatever the records say.
• Flood and bushfire. Overlays and hazard notations can change floor levels, materials and insurance.

How do GST and tax shape the deal?

The tax position of the purchase affects your margin on the sale, so it belongs in due diligence, not after it.

• How the vendor is selling. The ATO lists a property bought as fully taxable, without the margin scheme being used, among the situations where the margin scheme can’t be used when you later sell. Ask whether the vendor is registered for GST and how they propose to sell. Our GST and margin scheme guide explains why this matters so much for small developers.
• GST withholding. The ATO includes potential residential land in the sales where the buyer may have to withhold GST at settlement, with exceptions such as potential residential land bought by a GST-registered business for a creditable purpose. Your conveyancer will check the vendor’s notice.
• Land tax. Owning the site at your state’s snapshot date brings it into that year’s land tax. See our land tax guide for developers.

How do you fund the site while the checks run?

Good sites rarely wait. Many developers secure them with a deposit and a due diligence period, or an option, then complete the checks inside that window.

The money for that stage — the deposit, the searches, the consultants, the early design work — is usually the hardest to borrow from a bank, because nothing is approved yet. A private loan secured on existing property fills that gap. Our pages on site deposit funding and pre-construction costs explain how. Smaller amounts from $20k to $250k are possible the same day, and larger amounts within 24–48 hours once documents are in.

Once you own the site, it can be added as security. Vacant land is considered case by case, and the lender will look at the same things you checked: zoning, access, services and how readily it would sell. Our page on vacant land loans covers that assessment. If you’re lining up a site now, see what your existing property could fund.

Illustrative example: a covenant found in time

Illustrative: A Geelong developer agrees to buy a 1,200 square metre corner block for $1.1m, planning four townhouses, with a 21-day due diligence period. The deposit is funded by a private first mortgage over the developer’s debt-free investment unit. On day six, the dealing copies reveal a covenant limiting the land to two dwellings. The developer’s solicitor uses the due diligence clause to renegotiate, and the vendor agrees to $820k to reflect a two-dwelling yield. The developer proceeds, and once settled adds the block as further security so the loan can be increased to carry the site and consultant costs through the planning process. The exit is the sale of the approved site or a construction lender’s refinance.

Which findings should make you walk away?

Not every problem is a deal-breaker. Many can be priced, negotiated or designed around. But some findings deserve a hard stop unless the price moves a long way:

• A covenant or easement that removes the yield your feasibility depends on, with no realistic path to vary it.
• A contamination notice or history that would need remediation you can’t cost with confidence.
• No legal access, or access that relies on a neighbour’s goodwill rather than a registered right.
• Services that need a major upgrade paid by the developer, with no clear figure from the authority.
• A vendor who can’t give clean title at settlement, or won’t explain a caveat or dealing on it.
• A funding plan with no exit. If you can’t say how the deposit loan is repaid — a sale, a refinance, or settlement of another property — the site isn’t ready to buy yet.

A private lender asks the same questions when a site is offered as security. A finding that worries you will worry the lender too, and it is far cheaper to discover it during the due diligence period than after exchange.

Key terms at a glance

• Due diligence period: a contract condition giving the buyer time to investigate before being bound.
• Covenant: a registered restriction on how land can be used or built on.
• Easement: a registered right for someone else to use part of the land, such as for drainage.
• Overlay: a planning layer that adds requirements on top of the zone.
• Potential residential land: land that could be used for new residential premises, relevant to GST withholding.

Check the funding as carefully as the site

A site is only a good deal if you can fund it through to the exit. Before you exchange, know which property will secure the deposit and early costs, what’s owing on it, and how the loan will be repaid.

Enquiring won’t trigger a credit check, your details stay with one direct lender instead of being sent to a panel, and a specialist who knows development reads every enquiry. Give us accurate details — the site, the property you’d offer as security, what’s owing and your planned exit — and the first answer will be one you can plan around. Start your site funding enquiry.