A solid understanding of the process, costs and risks associated with the land development process in Ontario can help Sellers manage their expectations, understand closing conditions and timelines, and make informed decisions.

Situation

A Seller wants cash with few conditions. The Developer wants a property that they can develop without unexpected costs or project delays outside of their control. The Developer is accountable to various other stakeholders, including the lender, local government councils, end-users, and the community in which the development will occur.

A good Commercial Realtor will strive to bridge the gap between the Developer and the Seller. At Squarefoot, we let the Seller know what to expect from the land buying process. Knowing what a Buyer faces when looking to purchase land, from de-risking (completing required studies) to development, allows our Seller to make an educated response to any offer.

Significance

In Ontario, developing any parcel of land requires a long list of approvals and permits. If the municipality is in favour of a development concept, the next step requires the Developer to carry out a significant number of studies before a permit is even considered. Completing all the required studies is not only an expensive and protracted process, it’s an added risk, because completing them doesn’t guarantee a development permit. In fact, the results may illustrate that the land may not be as suitable for development as initially believed.

The bottom line is that approvals and permits are issued only after completing the required studies, which is time and money that the Developer risks, without a guarantee. The studies and reports required depend on the type of development being considered and may include (but are by no means limited to):

  • Affordable Housing Report
  • Agricultural Assessment
  • Arborist Report
  • Archaeological Assessment
  • Architectural/Cultural Heritage Report
  • Environmental Impact Study
  • Erosion & Sediment Control Plan
  • Functional Servicing Report
  • Geotechnical & Hydrogeological Investigations
  • Planning Justification Report
  • Transportation and Traffic Impact Study
  • Shadow Study
  • Tree Inventory - Analysis & Preservation Report
  • Tree Preservation Plan
  • Odour/Dust/Nuisance Impact Study
  • Servicing Feasibility/Capability Study
  • Stormwater Management Report
  • Noise/Vibration Impact Analysis
  • Urban Design Report
  • Wind and Microclimate Study
  • Parking Study

If these studies and reports suggest that the land is less suitable than initially believed, the Developer must make a tough decision: continue with the development based on revised feasibility calculations, or abandon the Purchase Agreement and walk away from the enormous amount of time and money that’s already been invested.

As you can see, anticipating and mitigating risks before purchasing land is paramount. This is why it’s important for sellers to understand the complexity, time and expense of the due diligence process, or “de-risking” process, and allow a reasonable amount of time to conduct it.

If you’re in a rush to sell, you can be proactive and engage the many QPs required to complete the necessary studies to make your property “shovel-ready,” but this will cost you time and money. Either you pay to play, or you accept that the Developer will need time to complete the process.

Developers will NOT, as a general rule, buy land without first de-risking the property; however, Speculators may do so because their interest begins and ends with holding the land.

Solutions

The most successful agreements occur when both sides understand and compromise. Understanding the process, the cost and the risk allow the Seller to make an informed decision. That’s why Squarefoot Commercial Realtors believe in explaining the process to the Seller.

Understanding the land, the location and the parties involved in the Agreement are critical to creating a fair and balanced Agreement of Purchase and Sale. Squarefoot Commercial Realtors will provide insight into all of these components, as well as any local policies that may have an impact on the development of the land. The Developer then has the confidence to submit an offer knowing the Seller will be reasonable about expectations, terms and timelines.

Results

Squarefoot Commercial Realtors guide Sellers through the process and provide information they need to make an informed decision about the sale of their land. Developers are confident knowing we will work to achieve fair terms to allow for due diligence to be completed.

Squarefoot Commercial Group is specialized in commercial and industrial real estate, and serves Barrie, Simcoe County and some of the fastest-growing cities in Ontario. We believe in honesty, integrity and the power of community, and together we have more than 60 years of experience in commercial real estate.

Contact Squarefoot Commercial Group to learn more about what we specialize in and how we can help you.