Key to securing your project’s financing: Land acquisitions and development of real estate developments
Land acquisitions and the development of real estate developments are strategic decisions that can shape the future of any developer or construction company. Investing in rigorous legal due diligence not only protects your investment but is also the best way to present yourself to banks, partners, and investors. Do you want to avoid surprises and secure financing for your project from day one? Here is a practical and human-centered guide to anticipate risks and gain peace of mind.
Why is legal due diligence essential?
Before embarking on a land purchase or development project, a thorough legal review will allow you to:
Confirm that the land is truly suitable for its intended use.
Detect hidden charges, planning issues, or prior commitments that could hinder the project.
Optimize negotiations with banks and partners, demonstrating solvency and transparency.
Prevent future conflicts and protect the profitability of the investment.
Legal Checklist: Step by Step
1. Review Land Ownership and Encumbrances
Updated Land Registry Certification: Ensure the seller is the legitimate owner and that the land matches the Cadastre.
Analysis of Liens and Encumbrances: Look for mortgages, liens, easements, or any other encumbrances.
Payment of Taxes and Fees: Verify that the Property Tax (IBI) and other tax obligations are up to date.
Impact: Unexpected encumbrances can paralyze the transaction, reduce the appraisal, and complicate financing.
2. Urban planning status and planning
Urban classification: Is the land urban, developable, or rural?
Municipal regulations and partial plans: Analyze buildability, permitted uses, and restrictions.
Licenses and sanctions: Check that there are no open sanctioning procedures.
Impact: An error here can lead to sanctions, forced modifications, or even the demolition of the existing building.
3. Utilities, Infrastructure, and Access
Availability of connections: Water, electricity, sanitation, telecommunications.
Geotechnical and environmental studies: Rule out contaminated soils or those at risk of flooding.
Accessibility: Verify the existence of adequate roads and connections.
Impact: Lack of services or access can increase costs and delay financing.
4. Existing Contracts and Commitments
Option and deposit agreements: Review cancellation clauses, deadlines, and penalties.
Urban development agreements: Confirm commitments with city councils or public entities.
Third-party rights: Analyze whether there are occupants or tenants who may interfere.
Impact: A poorly reviewed commitment can lead to unexpected compensation or block financing.
5. Corporate and financial review of the seller
Corporate analysis: Examine bylaws, administrative bodies, and powers of attorney.
Financial situation: Ensure there are no pending bankruptcy proceedings, liens, or litigation.
Impact: A seller with problems can cause the transaction to be canceled or complicate obtaining credit.
6. Documentation and Compliance
Technical and administrative documentation: Licenses, projects, certificates, insurance.
Regulatory Compliance: Data protection, environmental regulations, anti-money laundering.
Impact: The absence of documents can prevent the signing of the deed, hinder financing, or limit marketing.
Practical Example
Imagine you purchase a plot of land without thoroughly reviewing the deposit contracts, and it turns out there is a prior commitment with a third party. Upon detecting this, the bank freezes the financing, and you face potential compensation. These types of situations, although common, are avoided with well-conducted legal due diligence.
Conclusion: Prevention, Your Best Investment
Comprehensive legal due diligence not only reduces legal and financial risks but also strengthens your image with investors, partners, and banks. Anticipating problems is the best way to ensure the profitability and security of your development from the outset.
Are you acquiring land or planning a new development?
At Cardador & Marín Abogados, we’ll be with you every step of the way, providing detailed analysis and tailored solutions to ensure your project is a success from day one.
Contact us and secure the future of your investment. Let’s build your next opportunity together!