Buying Vacant Land in Victoria: What to Check Before You Sign

Buying vacant land can be an exciting first step towards building a new home. However, an empty block is not necessarily a blank canvas. Planning controls, title restrictions, easements, site conditions and service-connection costs can all affect what you can build and how much the overall project may cost.

Before signing a Contract of Sale, it is important to understand exactly what you are purchasing and whether the land is suitable for your intended home.

Check Whether the Title Has Issued

Some vacant land is sold with an existing registered title, while land in a new estate may be sold before the plan of subdivision has been registered.

If the title has not yet issued the Contract will usually be an off-the-plan Contract. Settlement will generally occur after the plan is registered and a separate title is created for the lot.

The Contract should explain matters such as the proposed lot dimensions, the anticipated registration process, when settlement will occur and the circumstances in which the Contract may be ended if registration is significantly delayed.

Because the final registered lot may not be identical to the proposed plan originally shown, these provisions should be carefully reviewed before you sign.

Review the Title, Plan and Restrictions

The title and plan of subdivision can reveal important limitations affecting the land.

Easements may allow councils, water authorities or other service providers to access part of the property. Building over an easement may be restricted or require approval, so its location could affect where a house, garage, shed or pool can be positioned.

Restrictive covenants, agreements under section 173 of the Planning and Environment Act, estate design guidelines and memoranda of common provisions may also control what can be built. These requirements may deal with matters such as:

• minimum dwelling sizes;
• approved building materials and colours;
• setbacks and building envelopes;
• fencing and landscaping;
• the number of dwellings permitted;
• whether caravans, boats or commercial vehicles may be stored on the property; and
• deadlines for commencing or completing construction.

These restrictions are separate from the requirements imposed by the local council and should be considered together with your proposed building plans.

Investigate Planning Controls and the Surrounding Area

The planning zone and any overlays affecting the land may influence its future use and development.

Overlays can relate to matters including bushfire risk, flooding, heritage, vegetation, environmental significance and development design. A Planning Property Report can provide useful initial information, but advice from the local council, a town planner, building surveyor or other relevant professional may also be required.

It is also worth investigating proposed developments and surrounding land uses. Future roads, schools, shopping centres, higher-density housing or commercial development may affect traffic, noise, views and the general character of the area.

Confirm That Your Proposed Home Will Fit

A block may appear large enough when viewed on site but still be unsuitable for a particular house design.

The usable building area can be reduced by easements, setbacks, building envelopes, slope, access requirements and title restrictions. Before committing to the purchase, provide the title, plan and relevant restrictions to your builder or building designer and ask them to confirm whether your preferred home can be constructed on the land.

Do not rely solely on a display-home consultant or an indicative site plan. Any assessment should take into account the actual dimensions and restrictions affecting the particular lot.

Consider Soil, Slope and Site Costs

The purchase price of the land is only part of the cost of building.

Soil conditions, rock, fill, drainage requirements, retaining walls, bushfire construction standards and the slope of the block may substantially increase site and foundation costs. A block that appears affordable may become considerably more expensive once these items are taken into account.

Consider obtaining soil testing, surveying and preliminary site-cost advice from appropriately qualified professionals before the Contract becomes unconditional. If this cannot be completed before signing, you should discuss whether a suitable special condition can be included in the Contract.

Check the Availability of Services

Do not assume that water, sewerage, electricity, gas, telephone and internet services are connected simply because they are available within the estate or surrounding area.

You should confirm:

• which services are available to the lot;
• whether connection points have been installed;
• who is responsible for arranging and paying for connections;
• whether any infrastructure or connection charges remain payable; and
• whether the property is affected by an embedded network or recycled-water requirements.

Service connections can be particularly significant when purchasing land in a rural or regional area.

Understand the Contractual Deadlines

Vacant land Contracts may contain deadlines relating to settlement, design approval and the commencement or completion of construction.

Missing these deadlines could place you in breach of the Contract or of an estate covenant. You should ensure the timeframes are realistic and compatible with your finance approval, builder availability, permit process and proposed construction contract.

If you are purchasing land separately from the building contract, remember that they are usually two distinct legal agreements. A problem with the builder or building contract will not necessarily give you a right to end the land Contract.

Arrange Finance for the Land and Construction

Finance for vacant land can operate differently from finance for an established home.

Your lender may assess the land purchase and construction costs separately, require a signed building contract or impose time limits for construction to commence. A bank valuation may also be lower than the agreed purchase price, leaving you responsible for contributing additional funds.

Finance approval for the land does not automatically mean the lender will approve the proposed building contract or all site costs. Speak with your lender or broker about the entire project before signing.

Allow for Ongoing Holding Costs

Once settlement occurs, you become responsible for expenses associated with the land, even if construction has not commenced.

These may include council rates, owners corporation fees where applicable, land tax and maintenance costs. Depending on the location of the land and how long it remains undeveloped, vacant residential land tax may also need to be considered.

You should obtain financial or taxation advice about the consequences that may apply to your circumstances.

Have the Contract Reviewed Before You Sign

A vacant block can involve more restrictions and unexpected costs than are immediately apparent.

Before signing, I can review the Contract of Sale, Section 32 Vendor Statement, title, plan of subdivision and accompanying restrictions. I can explain the contractual obligations and identify matters that may require further investigation by your builder, lender, council or another suitably qualified professional.

This article provides general information only and does not constitute legal, financial, taxation, building or planning advice. The requirements affecting a property will depend on its location, title, Contract and the purchaser’s individual circumstances. You should obtain advice relevant to your proposed purchase before signing any document.