Development Agreements: Title, Approvals and Possession Risks

A land development agreement may promise the landowner a share of future units and the developer a right to build. Without verification of title, approvals and possession, both parties can commit substantial value to a project that cannot lawfully proceed.

Define the property and development rights

The developer should establish that the landowner holds the rights required for construction and disposition of the proposed units. An undivided share, disputed inheritance or incomplete acquisition may undermine the entire scheme. The agreement should describe the land, boundaries, access, encumbrances and the legal nature of the developer's rights. A contractual right to enter the property is not necessarily a conveyance of title or an authority to mortgage it. Any power of attorney should be drafted for defined transactions and checked against legal requirements.

Approvals are project conditions, not routine formalities

Zoning, layout approval, building permissions, environmental conditions and service connections may determine whether the promised development is feasible. The agreement should allocate responsibility for applications and identify who bears cost and delay if approval is refused or amended. A developer should not market units on the assumption that every proposed building plan will be approved. A landowner should consider whether the developer can create third-party commitments before obtaining the necessary permissions. Conditions precedent and staged rights can protect both parties from commitments based on an unapproved plan.

Allocate finance and performance exposure

Development often requires substantial early expenditure and depends on sales proceeds or financing. The contract should identify capital contributions, permitted borrowing, security over land, construction milestones and reporting. A landowner may be exposed if the developer grants financing security beyond the agreed project rights. A developer may be vulnerable if possession can be withdrawn after substantial construction. Insurance, contractor performance, cost escalation and delayed handover should be addressed through measurable obligations and proportionate remedies.

Plan failure and exit before starting

The difficult issues arise when the developer becomes insolvent, approvals are withdrawn or sales fall short. The agreement should set out cure periods, valuation of completed work, ownership of materials, treatment of buyers and how possession or documents will be returned. A general termination clause rarely resolves the rights of purchasers who have paid for units. Independent accounts and a controlled use of sale proceeds can reduce disputes. Parties should establish a record of approvals and progress so that termination does not require reconstructing years of conduct.

Do not develop an assumption

Land development combines title law, regulation, financing and construction. The parties need documents that remain workable when assumptions change. A project should not begin on the strength of a landowner's assurances or a developer's promotional plan alone.