12 Apr Land Purchase Due Diligence

By Deb Purvis

Purchasing land? Have you done your due diligence? …

It could save you thousands.

Land Status

Understand the status of the land you are purchasing. Is it freehold or crown lease? If it is a crown lease, review the terms.

Inclusions and Exclusions

Confirm with the agent or seller what plant & equipment, livestock, water entitlements and other interests they will include/exclude in the sale.

Infrastructure and Equipment Assessment

Complete a detailed inspection of the condition of improvements and inclusions and note any repairs or replacements required by the seller or yourself down the track.   Take pictures and videos as a reminder; you have the perfect piece of equipment to document this in your top pocket.

Water Resources

Check whether the current water resources are in good condition and water quality is suitable for the property’s purpose. If there are water entitlements, understand their rules and regulations.

Location and Market Access

Consider whether the property’s location will affect input costs and farmgate price of outputs.

Environmental & Soils

Establish any parts of the property with soil or landscape degradation. Determine the types, quality and production potential of the soils and consider agronomic limits and remediation requirements. If possible, access past soil test data or do some tests yourself.

Management and Production History

Find out property fertiliser and nutrient history, cropping history, yields and production averages and stock rotations & production history.  Compare these with district averages to assist with financial viability assessment.

Valuation

If you are not familiar with the value of the asset you are purchasing, an independent valuation would be a good starting point for determining your purchase price.

GST, Stamp Duty and Land Transfer Costs

Seek advice on the GST implications and other costs associated with the purchase of farmland.

Finance

Ensure that you allow plenty of time to get your finance in order. Financial institutions turnaround time for approvals is longer than it used to be.  Rushing your finance can mean you do not have the correct structures and repayment terms in place, or you may be paying higher interest than you should be.  We spend many hours working with our clients to present their business plan to lenders to ensure that they capture competitive rates, capital flexibility and minimise the turnaround time for loan approval.