Contract of Sale for Property Developers in Australia

A contract of sale is the document that fixes what you are buying, what you pay, and when you pay it. On a development site it also decides something the standard form barely contemplates: whether you can walk away if the approval does not come, whether you can get onto the land to test it before you are committed, and whether the entity that signs is the entity that ends up on title.

Before signing a contract of sale for a development site, you’ll need professional advice from a property lawyer, and usually from your accountant as well. The consequences of the terms sit with you, not with the agent who handed you the contract and not with the vendor’s solicitor who drafted it. A deposit forfeited on a failed condition, a second lot of transfer duty triggered by a nomination, a withholding obligation missed at settlement, or an approval condition that turns out to be unenforceable are all outcomes the buyer wears. This guide is written to make that conversation with your lawyer shorter and sharper. It does not replace it, and there is a section near the end setting out the questions worth putting to them.

Rules, thresholds and figures below were current at the date of writing and change regularly. Each is linked to the primary source, which is where to confirm the current position before you rely on it.

What does a contract of sale actually decide on a development site?

On a development purchase, the contract of sale generally decides five things that flow straight into feasibility: the price, the risk you carry between signing and settlement, how long your capital sits idle, which entity acquires the land, and what happens to the deal if the planning outcome differs from your assumption.

Everything else in a contract, and there is a lot of it, is machinery around those five. A home buyer signs a contract of sale to acquire a finished thing at a known price. A developer signs one to acquire an assumption: that the site can carry a certain yield, at a certain cost, on a certain programme. The contract is where that assumption is either protected or left exposed.

The practical version of the question is this. If the site turns out to be contaminated, if the council refuses the application, if the sewer runs where the basement was going, or if the acquiring entity needs to change because a capital partner joins, does the contract let you deal with it, and at what cost? A standard contract of sale, unamended, generally answers “no” to all four.

Why does the standard contract of sale not suit a development purchase?

The standard forms are drafted for a completed dwelling changing hands with a short settlement, and the statutory disclosure regimes behind them were designed with the same buyer in mind.

Each jurisdiction has a widely used base contract: the Law Society and Real Estate Institute contract in New South Wales, the Law Institute of Victoria and Real Estate Institute of Victoria contract of sale of land in Victoria, the Real Estate Institute of Queensland contract in Queensland, and the joint form of general conditions in Western Australia. These are sensible documents. They are also built around assumptions a developer does not share: that the buyer wants the property as it stands, that six weeks is enough, and that the physical condition of the land is somebody else’s problem once the hammer falls.

Three gaps tend to show up on a development acquisition:

The base contract usually contains no condition allowing you to terminate if a planning approval is refused or granted on unacceptable conditions. Without one, refusal is your loss.

It usually gives you no right to enter the land for geotechnical boreholes, contamination sampling, survey or service investigation before you are bound. Vendors are often willing to grant that access, but only if the contract or a separate licence says so.

It usually assumes the buyer named on the front page takes title. Development structures rarely work that way, and the substitution of one entity for another is not a neutral administrative act. In some states it can trigger duty a second time.

The developer’s work is not to rewrite the base contract but to add special conditions that close those gaps, and to understand the statutory disclosure that sits underneath.

What does a vendor have to disclose, and how does it differ by state?

Every Australian jurisdiction now imposes some form of pre-contract or pre-settlement disclosure on the vendor, but the timing, the content, and the buyer’s remedy differ enough that the same defect can be fatal in one state and irrelevant in another.

For a developer, disclosure matters less as consumer protection and more as free due diligence: the vendor statement is often the first place an easement, a planning overlay, a heritage listing or a contamination notice surfaces. It tends to be the cheapest source of that information on a site, and it arrives before you have paid anyone.

Victoria

A vendor must give the purchaser a signed statement before the purchaser signs the contract, containing the matters and attaching the documents specified in Division 2 of Part II of the Sale of Land Act 1962 (Vic). This is the section 32 statement. It covers matters including title particulars and restrictions, planning information, outgoings, services, and building permits issued in the preceding seven years. The statement may be signed electronically.

For a development site, the planning and title schedules in the section 32 statement are the working documents. A restrictive covenant, a section 173 agreement or an easement disclosed there can reshape the envelope before you have paid for a single consultant.

New South Wales

Under section 52A of the Conveyancing Act 1919 (NSW), a vendor cannot offer residential property for sale without a contract that attaches the prescribed documents. Those documents are listed in Schedule 1 of the Conveyancing (Sale of Land) Regulation 2022, and the prescribed warranties are in Schedule 2 of the same Regulation. The prescribed documents include a planning certificate for the land unless the land is not within a local government area.

That planning certificate is the section 10.7 certificate, and on a development site the standard certificate and the fuller version with the additional matters do not carry the same information.

Queensland

From 1 August 2025, Queensland operates a mandatory seller disclosure scheme under the Property Law Act 2023 (Qld). The Queensland Government states that a seller must give the buyer a completed seller disclosure statement, known as form 2, together with the prescribed certificates, before the buyer signs the contract, and that this applies to residential properties, commercial properties and vacant land.

The remedy is significant. According to the Queensland Government, even if the failure was unintentional, the buyer may have a right to terminate the contract at any time up to settlement where the seller does not give the disclosure documents at all, or provides inaccurate or incomplete information. For inaccurate or incomplete disclosure the buyer must show the issue was material, that they were unaware of it when they signed, and that they would not have signed had they known.

Several exceptions are relevant to developers. The Queensland Government lists exceptions including where the buyer is the State, a government body, a constructing authority or a listed corporation, where buyer and seller are related parties, and where the sale price is over $10 million and the buyer waives disclosure. A developer buying a large site above that threshold may be asked to waive, and waiving removes a termination right that could otherwise be worth a great deal. Details are on the Queensland seller disclosure scheme page.

Notably, the Queensland Government lists structural soundness, flooding history, and previous building or development approvals among the details a seller is not required to include. A developer relying on the disclosure statement to tell them about a prior approval will be disappointed.

South Australia

A vendor is required to give the purchaser a vendor’s statement, the form 1, under section 7 of the Land and Business (Sale and Conveyancing) Act 1994 (SA). The South Australian Government states that the cooling-off period of two clear business days begins when the buyer receives the form 1 or from the date the contract of sale was signed, whichever happens last, which means a late or corrected form 1 pushes the date out. General information is available from the South Australian Government.

Australian Capital Territory

The Civil Law (Sale of Residential Property) Act 2003 (ACT) requires a seller to make the required documents available for inspection by a buyer before the property is offered for sale, and provides a statutory cooling-off period exercised by a rescission notice. The Act sets the length of that period and the amount forfeited, and both are worth confirming against the current version of the Act rather than a summary.

Western Australia, Tasmania and the Northern Territory

Buyers in Western Australia do not generally receive a prescribed vendor statement of the kind used in Victoria and South Australia. Sales are commonly made by offer and acceptance using the joint form of general conditions, and the practical disclosure tends to come from searches the buyer commissions. Consumer Protection Western Australia sets out how the offer and acceptance process works.

Tasmania and the Northern Territory sit closer to Western Australia than to Victoria on disclosure. In each, a buyer’s protection tends to come from contractual conditions and from its own searches rather than from a prescribed vendor statement, and the position is worth confirming with a local lawyer before you rely on it.

The lesson for a developer buying across borders is that the amount of work you have to do before signing varies enormously. In Victoria and Queensland a meaningful package arrives with the contract. In Western Australia it does not, and the due diligence condition has to do all the work.

Does a cooling-off period protect a developer buying through a company?

Usually not. The statutory cooling-off regimes were built for individual buyers of residential property, and several of them exclude corporate purchasers, commercial and industrial land, or auction sales, which between them cover most development acquisitions.

Victoria is the clearest example. Section 31 of the Sale of Land Act 1962 (Vic) gives a purchaser three clear business days after signing to terminate, and on termination the vendor may retain “the sum of $100 or 0·2 per centum of the purchase price (whichever is the greater)”. But subsection (1) provides that the section applies to a contract for the sale of land “other than (a) land used primarily for industrial or commercial purposes; and (b) land which is more than 20 hectares and is used primarily for farming”. And subsection (5) provides that the section does not apply where “the purchaser is an estate agent within the meaning of the Estate Agents Act 1980 or a corporate body”, or where the sale is by publicly advertised auction, or within three clear business days either side of one.

Read those together and the position for a Victorian development purchase is narrow. Where the purchaser is a special purpose vehicle, which is how most development acquisitions are structured, section 31 does not apply at all.

The position across the other jurisdictions, current at the date of writing:

New South Wales. The NSW Government states there is a 5 business day cooling-off period after exchange for residential property, extended to 10 business days for off the plan contracts, and that a buyer who withdraws pays the vendor 0.25% of the purchase price. It does not apply where the property is bought at auction or where contracts are exchanged on the same day as an auction after the property is passed in, and it can be waived by a section 66W certificate. See the NSW Government page on contracts and deposits. In practice, vendors of development sites routinely require a section 66W certificate on exchange, so the period is often gone before it starts.

Queensland. The Queensland Government states that a 5 business day statutory cooling-off period applies to contracts for residential property, that the seller may deduct a penalty of up to 0.25% of the purchase price from the deposit, and that it does not apply to auction sales. See the Queensland Government page on cooling-off periods.

South Australia. The South Australian Government states the cooling-off period is 2 clear business days, beginning when the buyer receives the form 1 or from the date the contract was signed, whichever is later. There is no cooling-off period if the buyer buys at auction, or after the auction on the same day it was held. Where a successful offer is made before an auction, cooling-off applies unless waived, and waiver requires an independent legal practitioner to sign a prescribed form confirming the buyer has been advised of the rights being given up.

Northern Territory. The Northern Territory Government states that contracts for the sale of property not sold by auction must provide a cooling-off period of four business days, starting the day the contract is last signed and exchanged, and that it may be waived, reduced or extended by agreement. See the Northern Territory contract of sale page.

Western Australia. Consumer Protection Western Australia states there is no cooling-off period for real estate contracts made in Western Australia unless the parties agree to have one inserted into the contract.

Tasmania. Cooling-off is not a requirement under the Property Agents and Land Transactions Act 2016 (Tas). It is available as an option the parties may include in the contract for the sale of residential property if both agree. Consumer, Building and Occupational Services publishes guidance on the process.

Australian Capital Territory. A statutory cooling-off period applies under the Civil Law (Sale of Residential Property) Act 2003 (ACT).

The practical conclusion for a developer is that cooling-off is not a due diligence tool. Three to five business days would not be enough to complete a geotechnical investigation even if it did apply, and on a corporate purchase of commercial land it usually does not. The protection has to come from a negotiated condition.

How does a due diligence condition work in a contract of sale?

A due diligence condition typically gives the buyer a defined period after signing during which the buyer may terminate the contract, on notice, if not satisfied with the results of its investigations, with the deposit returned.

The drafting choice that matters most is the satisfaction standard. A condition that lets the buyer terminate “if the buyer, in its absolute discretion, is not satisfied” behaves like an option: the buyer can walk for any reason or none. A condition qualified by reasonableness, or tied to specified investigations producing a specified adverse result, gives the vendor an argument that termination was not validly exercised. Vendors of good sites push hard against absolute discretion, and what you end up with is usually a function of competitive tension rather than drafting skill.

The second choice is length. Development due diligence commonly involves a title and dealings search, a survey and identification survey, a planning assessment, geotechnical investigation, a contamination assessment, service authority enquiries, and a preliminary cost plan from a quantity surveyor. Several of those have lead times measured in weeks, and some depend on the results of others. A 21-day condition on a site needing a Phase 2 contamination assessment is a condition that will need an extension, and the extension is usually not free.

The third is what the buyer pays for the time. Common structures include a non-refundable portion of the deposit, an increased deposit on satisfaction of the condition, or a fee paid to the vendor for the exclusivity. Whichever applies, that amount is a real acquisition cost rather than a rounding item, and it tends to be understated in early feasibility.

The trap is the interaction between the due diligence period and the finance approval. A buyer whose due diligence condition expires before the financier’s credit approval is unconditional has moved the site risk onto its own balance sheet without knowing it.

What does a contract subject to development approval look like?

A contract subject to development approval defers completion until a planning authority determines an application, and allows one or both parties to terminate if the determination does not arrive, or does not arrive in an acceptable form.

The drafting problem is that “acceptable” has to be defined at signing, before anyone knows what the authority will do. Conditions that are left vague tend to be litigated. The elements that usually need to be specified are:

What counts as the approval. Which application, lodged with which authority, for what development. A definition tied to a yield and a use, for example “an approval permitting not fewer than 24 dwellings with not fewer than 30 car parking spaces”, gives both sides something objective. A definition tied to “a development approval satisfactory to the buyer” gives the buyer a walk-away right the vendor may not have intended to grant.

What counts as an unacceptable condition. Authorities routinely approve applications subject to conditions that change the economics: reduced yield, additional contributions, affordable housing requirements, upgraded infrastructure works, or design changes that push construction cost up. A workable clause usually sets a threshold, for example any condition requiring a monetary contribution above a stated figure, or any condition reducing the approved yield below a stated number.

Who runs the application, and who pays. Most commonly the buyer prepares and lodges at the buyer’s cost, with the vendor obliged to sign the owner’s consent promptly and not to interfere. How the vendor’s obligation to consent is expressed matters, because an owner’s consent withheld for three weeks is three weeks of programme.

Diligence obligations. The vendor will usually want the buyer bound to lodge by a date, to prosecute the application diligently, and to keep the vendor informed. The buyer will usually want the right to modify the application, and clarity on whether appealing a refusal is permitted or required.

The long stop. A date by which the condition must be satisfied, and what happens if it is not. Determination timeframes vary widely by jurisdiction, authority and pathway, and a long stop set on optimism rather than on the authority’s published performance is the most common cause of a deal falling over on a technicality.

Interest and adjustments. On a long conditional period, the vendor will often want interest on the balance of price, or an adjustment mechanism, in exchange for taking the land off the market. That interest is a holding cost, and it sits alongside the other land holding costs in a feasibility.

There is a structural point worth noting in Victoria. A contract that obliges the purchaser to make two or more payments (other than a deposit or final payment) before becoming entitled to a transfer, or that entitles the purchaser to possession or to the rents and profits before becoming entitled to a transfer, may fall within the definition of a terms contract as defined in section 29A of the Sale of Land Act 1962 (Vic), which attracts its own statutory regime. Long conditional settlements with staged payments can drift into that definition without anyone intending it, which is one of the reasons the structure gets checked by a lawyer rather than assembled from a precedent.

What access does a buyer need for site investigations before settlement?

A buyer generally has no right to enter land it has contracted to buy beyond an agreed inspection, so any invasive investigation before settlement needs an express licence to enter.

This is the clause most often left out and most often needed. Geotechnical boreholes, contamination sampling, service potholing, arborist assessment and detailed survey all involve going onto the land and, in most cases, disturbing it. A licence to enter typically covers who may enter, for what purposes, on what notice, what insurance the buyer and its consultants must hold, the buyer’s obligation to make good, an indemnity in favour of the vendor, and the treatment of any tenants in occupation.

Two points tend to be contested. First, contamination reporting. If sampling finds a problem, the vendor may face a notification obligation to the environmental regulator and a diminished asset even if the sale does not proceed. Vendors often ask for confidentiality and for control over any reporting, and buyers often resist because their own obligations and their financier’s requirements may pull the other way. This is a point to raise with your lawyer before sampling, not after.

Second, tenants. Where the site is occupied, the vendor may simply not have the right to grant the access the buyer wants, and existing leases may need to be read before an investigation programme is set.

When is a put and call option used instead of a conditional contract of sale?

An option structure and a conditional contract of sale can achieve similar commercial outcomes, and developers use both. The choice usually turns on duty treatment, on whether the buyer wants the flexibility to on-sell the benefit, and on how the parties want the exclusivity paid for.

The mechanics, the duty position and the traps are covered in the guide to put and call options for property developers. The short version is that an option defers the contract rather than conditioning it, which changes when duty is assessed and changes what happens if the developer wants a different entity to complete. It is not automatically cheaper or safer, the duty treatment differs between states and has been amended in several of them, and the structure generally needs current advice rather than a precedent from a previous deal.

What does the deposit clause decide?

The deposit clause decides how much capital is locked up, when it stops being refundable, and whether the vendor can spend it before settlement.

Ten per cent is conventional. On a development purchase it is frequently negotiated down, or split into an initial deposit payable on signing and a balance payable on satisfaction of the conditions. Each dollar of deposit paid early is a dollar of equity that sits in a trust account earning little while your feasibility assumes it is working, and on a long conditional settlement that drag is not trivial.

A deposit bond or bank guarantee can preserve the cash, at a cost. Whether the vendor will accept one is a commercial question, and the cost of the instrument is itself an acquisition cost.

Release of the deposit to the vendor before settlement is a separate question again. In Victoria, section 27 of the Sale of Land Act 1962 (Vic) sets out a process where a vendor may obtain release of deposit moneys: the vendor gives the purchaser particulars of any mortgage over the land, and the purchaser has a limited period to give written notice that it is not satisfied that the particulars are accurate or that the price is sufficient to discharge the mortgages. The Act provides that a purchaser who does not respond within the time limited is deemed to be satisfied and deemed to have given the authorisation. A buyer who lets that notice sit in an inbox has released its deposit by inaction.

The reason a developer cares is recovery risk. If the vendor holds your released deposit and the deal later collapses through the vendor’s default or insolvency, you are an unsecured creditor for that money. Whether to consent, and what security to ask for, is a question for your lawyer on the facts of the particular vendor.

How do settlement terms change what the land is worth?

Settlement timing changes the price a site can support, because every month between exchange and settlement is a month you are either funding land you cannot build on, or not funding it at all.

An unconditional 42-day settlement puts the land on your balance sheet immediately. From that date you are paying interest on the land facility, council rates, land tax where it applies, insurance and site security, all before a single approval exists. A 12-month conditional settlement removes that carry entirely, at the cost of a deposit, some drafting, and whatever the vendor charges for the time.

The difference is large enough to change what you can bid. The worked example later in this guide sets it out with numbers.

Three settlement mechanics are worth attention:

Adjustments. Rates, land tax, water and any rental income are adjusted at settlement. On a site with existing tenancies, the adjustment can be meaningful, and the treatment of arrears and outgoings recoveries often differs from what the parties assumed.

Simultaneous settlement and licence back. Vendors sometimes want to stay in occupation after settlement, or the developer may want early access to start demolition or site establishment before settlement. Either arrangement needs its own clause covering insurance, risk, outgoings and a hard end date.

Electronic settlement. Settlements in the eastern states are conducted through an Electronic Lodgment Network, and both parties need a subscriber. The NSW Government notes that cheques and paper documents are no longer required for settlements in New South Wales. This mostly affects mechanics rather than economics, but a counterparty who is not set up can cost you a settlement date.

What does a nomination clause do, and when does it cost a second lot of duty?

A nomination clause lets the buyer named in the contract direct that the transfer be made to a different entity at settlement. It is standard practice in development, and in some circumstances it triggers duty twice.

The reason developers nominate is ordinary commercial reality. The site is put under contract quickly, often by an individual or an existing company, before the capital structure is settled. By the time a capital partner has committed and the financier has confirmed its lending entity, the correct owner is a special purpose vehicle that did not exist when the contract was signed.

The duty risk is real and it is not uniform across states. In Victoria the State Revenue Office states that the sub-sale provisions in the Duties Act 2000 (Vic) can charge a transfer with two or more lots of duty where there is a sub-sale, such as a nomination, involving either additional consideration or land development. Critically, the State Revenue Office states that land development is not limited to physical changes to the land and includes preparing a plan of subdivision or taking steps to have it registered under the Subdivision Act 1988 (Vic), and applying for or obtaining a permit under the Planning and Environment Act 1987 (Vic) in relation to the use or development of the land. See the State Revenue Office guidance on sub-sales and duty.

The consequence for a Victorian developer is uncomfortable and easy to miss. Lodging a planning permit application between contract and transfer is exactly what a developer does during a conditional settlement period. If a nomination then occurs, the sub-sale provisions may be engaged, and duty on a $5 million site is not a rounding error. The sequencing of the nomination relative to the planning application is a question to put to your lawyer before the application is lodged, not after settlement.

Other jurisdictions have their own sub-sale, double duty and apparent purchaser rules, and they do not mirror Victoria’s. The general point tends to hold everywhere: a change of acquiring entity is a duty question rather than a paperwork question, and the answer usually depends on what has happened to the land in the meantime.

Which tax and withholding clauses appear in a development contract of sale?

Three federal regimes commonly appear in the special conditions of a development contract, and each shifts money or risk at settlement.

Goods and services tax and the margin scheme. Whether the sale is taxable, input taxed, GST-free as a going concern, or eligible for the margin scheme is determined by the facts, but the contract records the parties’ positions and the price consequences. Applying the margin scheme generally depends on a written agreement between the parties, and a buyer intending to use the margin scheme on the eventual sale of the completed product may need the acquisition structured with that in mind. The mechanics are covered in the guide to GST on property development in Australia.

GST at settlement. The Australian Taxation Office (ATO) states that most purchasers of new residential premises or potential residential land are required to withhold an amount from the contract price and pay it directly to the ATO, that the supplier must notify the purchaser in writing whether a withholding obligation exists, and that the purchaser lodges a withholding notification form and a settlement date confirmation form. The ATO also states that withholding does not apply to potential residential land supplied to a GST registered business that acquired it for a creditable purpose. That exclusion is the one that usually applies to a developer buying englobo land, but it depends on registration and purpose, both of which are facts about your entity. See the ATO guidance on GST at settlement.

Foreign resident capital gains withholding. The ATO states that from 1 January 2025 the foreign resident capital gains withholding rate increased to 15% and the threshold was removed, so a rate of 15% applies to the value of all property. Australian resident vendors must obtain a clearance certificate and give it to the purchaser at or before settlement; without one, the purchaser must withhold. The ATO states that applications can take up to 28 days to process. See the ATO guidance on clearance certificates.

The trap here is timing rather than substance. A vendor who applies for the clearance certificate a week before settlement, on a site being bought by a developer with a construction facility timed to the day, can force a delay or a withholding that nobody budgeted for. A special condition requiring the certificate to be produced by a date well before settlement is one of the cheaper ways parties deal with that.

Where the buyer is a foreign person, the foreign investment framework adds a further layer. The Foreign Investment Review Board states that section 58 of the Foreign Acquisitions and Takeovers Act 1975 (Cth) allows a foreign person to apply for a certificate covering acquisitions of one or more kinds of interests in Australian land, that such a certificate generally specifies a maximum value and a period, and that it is intended for foreign persons with a high volume of acquisitions rather than for individuals. See the Foreign Investment Review Board page on land exemption certificates.

The position also runs the other way, and this is the part most often overlooked when a developer is drafting its own sale contracts for the finished product. The ATO states that developers with multiple new or near-new dwellings in a development can apply for a New or near-new dwelling exemption certificate, which removes the need for their foreign buyers to apply for individual approval up to a value of $3 million per foreign person. Per the ATO, the development must have 50 or more dwellings and development approval, and the developer must market the dwellings in Australia, sell no more than 50% of the dwellings to foreign persons under the certificate, provide a copy of the certificate to each foreign purchaser, report sales every six months until all dwellings are sold, and pay a fee per sale. The ATO also states that non-compliance may attract civil and criminal penalties and revocation of the certificate. See the ATO guidance on exemption certificates for property developers.

Those conditions are contract terms in disguise. If a scheme’s presales strategy assumes offshore buyers, the 50% cap and the $3 million per-person limit shape how many contracts can be written that way, and the reporting obligation attaches to the developer for the life of the project.

Separately, state foreign purchaser surcharge duty and absentee owner land tax surcharges may apply depending on the ownership of the acquiring entity, and those are generally assessed on the entity as it stands at the relevant date rather than on the developer’s intention.

What title and warranty clauses matter on a development site?

The title clauses that matter to a developer are the ones dealing with interests that constrain the envelope: easements, restrictive covenants, caveats, leases and statutory agreements.

An easement in gross for a sewer or drainage main can rule out a basement in the only place a basement works. A restrictive covenant limiting the land to one dwelling survives a rezoning and needs to be dealt with separately. A registered lease with an option to renew can push your programme out by years. A caveat on the title may reveal a competing interest the vendor has not mentioned.

The contract usually deals with these in two places. The property description and the schedule of encumbrances record what the buyer takes subject to. The special conditions may then require the vendor to procure the removal of specified interests before settlement, or entitle the buyer to terminate if a specified interest cannot be removed.

The statutory warranties are the second layer. In New South Wales the prescribed warranties in the Conveyancing (Sale of Land) Regulation 2022 operate automatically unless disclosed against. Vendors of development sites often seek to exclude or qualify warranties, and a contract that disclaims everything and provides the buyer with only a right to inspect is a contract in which every physical risk has been transferred to the buyer.

Where the site has an existing approval that the buyer intends to use, the contract may need to deal with what happens if the approval lapses, is modified, or is challenged before settlement, and whether the vendor is obliged to preserve it. Whether an approval survives the sale and remains usable by the buyer is a question for a lawyer on the particular approval, and a contract silent on the point leaves that risk with the buyer.

How does the equivalent contract work in New Zealand?

New Zealand uses an agreement for sale and purchase of real estate, most commonly the standard form published jointly by the Auckland District Law Society and the Real Estate Institute of New Zealand, with further terms of sale added for anything unusual.

New Zealand practice relies on conditions written into the agreement rather than on a statutory cooling-off period of the Australian kind, and conditional agreements are used more heavily than they are in Australia. Conditions commonly include finance, a builder’s report, a land information memorandum from the council, title approval, and for a development purchase a resource consent condition and a due diligence condition.

For a development purchase, the resource consent condition is the equivalent of the Australian subject to approval clause, and the same drafting questions apply: what consent, granted by whom, on what conditions, by when. The framework is covered in the guide to resource consent in New Zealand, and the resource management framework itself is undergoing replacement, so consent pathways and timeframes should be checked against the current position.

Overseas purchasers face a further condition. Land Information New Zealand states that an overseas person can sign a sale and purchase agreement before obtaining consent, but the agreement must be conditional on obtaining consent under the Overseas Investment Act 2005, and that significant penalties may apply and the property may have to be sold if the agreement does not include that condition. Consent is generally required before an overseas person acquires more than a 25% ownership or control interest in sensitive New Zealand assets, including sensitive land. See the Land Information New Zealand overseas investment guidance.

The goods and services tax position on a New Zealand development purchase is governed by New Zealand law and does not follow the Australian treatment, so the tax schedule in a New Zealand agreement generally will not mirror an Australian precedent.

Worked example: what a conditional settlement does to the land price

The clearest way to see why contract terms belong in a feasibility is to hold the return fixed and let the land price move.

Take a metropolitan apartment site. The scheme is 24 dwellings. Assume a target development margin of 20% on total development cost, and assume for simplicity that the target margin, the gross realisation value and the construction cost are the same under both scenarios.

The figures exclude Goods and Services Tax (GST) and are illustrative. Transfer duty is left out of both scenarios deliberately. Duty is a function of the land price the example is solving for, and the rate differs by state, so on a live feasibility it would be modelled as a formula driven by the land line rather than as a fixed dollar amount. Adding it in changes the absolute numbers below but not the direction of the comparison.

Scenario A: unconditional contract, 42-day settlement, 12-month approval period after settlement.

At a 20% margin on total development cost, net realisation equals 1.2 times total development cost. So total development cost is $18,720,000 divided by 1.2, which is $15,600,000, and the profit is $3,120,000. Check: $15,600,000 plus $3,120,000 equals $18,720,000.

The land the deal can support is total development cost less the costs other than land: $15,600,000 less $12,870,000, which is $2,730,000.

Scenario B: settlement deferred until 30 days after determination of the planning application, roughly 12 months.

Two inputs change, and only two:

• Finance and holding costs fall from $1,500,000 to $1,150,000, because the land is not funded during the 12-month approval period. Saving: $350,000.
• Acquisition costs rise from $170,000 to $215,000, reflecting more legal work, a longer due diligence programme and the drafting of the conditional structure. Increase: $45,000.

Costs other than land become $12,870,000 less $350,000 plus $45,000, which is $12,565,000.

Net realisation and the target margin are unchanged, so total development cost remains $15,600,000. The land the deal can support is $15,600,000 less $12,565,000, which is $3,035,000.

The conditional structure lets the same developer, at the same return, bid roughly $305,000 more for the same site, around 11% above the unconditional number. That is not a clever trick. It is simply the value of not carrying land you cannot build on, net of the cost of the paperwork that makes it possible.

Two caveats a lawyer would add. First, the vendor is not giving that time away, and whatever the vendor charges for it, whether through price, interest on the balance, or a non-refundable deposit, eats into the difference. Second, the scenario assumes the approval arrives within 12 months. If it does not, the long stop date decides whether you have a deal or a dead one, which is why that date is worth more attention than it usually gets. Modelling both cases side by side, and testing what a six-month delay does to the same numbers, tends to tell a developer more than a single land figure does.

What to ask your lawyer

These are the questions your lawyer can answer on your facts, and this guide deliberately does not.

On the condition structure

• Does my termination right under the due diligence condition operate at my absolute discretion, or is it qualified? If it is qualified, what would I need to show to exercise it validly?
• If the planning authority approves the application with conditions I do not want, does the contract let me terminate, and what exactly is the threshold?
• Who is obliged to do what if the application is refused? Am I required to appeal, permitted to appeal, or neither?
• Is the long stop date realistic against this authority’s current determination timeframes for this pathway, and what happens on the day after it passes?
• Could this structure fall within the terms contract or instalment contract provisions in this state, and if so what follows?

On entity and duty

• If I nominate a different entity at settlement, is there a risk of duty being charged twice in this state, and does lodging the planning application before the nomination change that answer?
• When do I need to have the acquiring entity settled, and what is the latest safe point to change it?
• Will surcharge duty or an absentee owner surcharge apply given the ownership of my acquiring entity, and is that assessed on the position at contract date or at settlement?

On disclosure, title and access

• What in the vendor disclosure materials constrains what I can build, and what is missing that I should search for separately?
• Which encumbrances on the title is the vendor obliged to remove before settlement, and what is my remedy if they cannot?
• Does the licence to enter cover invasive investigation, and what am I obliged to do if sampling finds contamination? Who controls reporting to the regulator?
• Have the statutory vendor warranties been excluded or qualified, and what physical risk have I accepted as a result?

On settlement and deposit

• If the vendor asks for release of the deposit before settlement, what is my exposure if the vendor defaults or becomes insolvent, and what security could I ask for?
• What is the process and the deadline for objecting to a release of deposit request, and what happens if I do nothing?

What to ask your accountant

• Is the acquisition taxable, input taxed or GST-free as a going concern, and does the contract reflect that correctly?
• Should the margin scheme apply, what has to be agreed in writing and by when, and what does that mean for goods and services tax on the eventual sales?
• Will a GST at settlement withholding obligation arise on this purchase, and does the creditable purpose exclusion for potential residential land apply to my entity?
• Am I holding this land on capital account or as trading stock, and what does the contract structure do to that characterisation?
• What deposit and holding cost treatment applies for tax while the contract remains conditional?

On both sides of that conversation, the draft contract and the feasibility model tend to be more useful read together than separately. Most of the clauses above have a number attached, and a term that reads as harmless in the special conditions can be the difference between a deal that clears your return and one that does not.