What to check before investing in a new development

A new development is always sold on the future: renderings, plans, indications of growth. What you have to check is the present — what exists today and is backed by documents. Below is a checklist covering six areas.

1. Title to the land and the buildings

Start here. Who owns the site, what encumbrances exist, what may be built on it, and whether the necessary approvals are in place. If the scheme involves converting existing buildings, ask which buildings, what condition they are in and exactly what is confirmed on paper.

A refusal to show title documents is reason enough not to go any further.

2. Who the developer is

• Is the company you sign the contract with the same one that owns the site, or a different one?
• What has this developer already built, and can you go and see it?
• Who carries the obligations if construction stops?

The brand on the hoarding and the company on the contract are often not the same thing. It is the second one that matters.

3. The contract

Read all of it, annexes included. The passages that count:

• The handover date and what happens if it is missed.
• Penalties. Whether they run both ways or only against the buyer.
• Grounds for termination and how money already paid is returned.
• Changes to the design. Whether the developer can alter the layout, the floor area or the materials without your agreement.
• What happens if you are late with a payment.

4. What the price covers

Establish what the quoted price per sqm includes and what is charged separately: the finish, utility connections, a parking space, storage, the service charge for the grounds. The gap between the price per sqm and the sum you actually pay can be considerable.

Check separately how the price can change: on what schedule it is revised, and what fixes yours.

5. Infrastructure and surroundings

Utilities: whether water, drainage and electricity are connected, who carries out the work and who pays for it. Surroundings: what will be built nearby over the coming years, and whether it will block the view or the access. Transport and everyday amenities — schools, shops, roads — are what drive demand both from tenants and from the next buyer.

6. Risk scenarios

Ask the seller three direct questions and write down the answers:

• What happens if the timetable slips by a year?
• What happens if the development is never finished?
• How can I exit before handover if I need to?

A good answer points to a specific clause in the contract. "That will not happen" is not an answer.

A word on promises about returns

Indications of how a property may grow in value are a scenario, not an undertaking. Wording that promises a fixed outcome on a property still under construction should prompt caution rather than interest. What actually happens depends on the market, the stage of the development and a great many things outside the seller's control.

In short

A development that survives this kind of scrutiny does not become risk-free — there is no such thing as a risk-free property investment. But you will know which risks you are taking, and that is the only state in which it is worth signing a contract.