What Happens During Developer Due Diligence?

What Due Diligence Actually Means

In a Brisbane development site contract, "subject to due diligence" gives the developer a defined window — typically 30, 60, 90, or sometimes 120 days — to investigate the site at their cost and either confirm the contract, terminate, or negotiate revised terms.

It is not a "free option". Reputable developers commit real spend during DD (often $50k-$250k on consultants). But they do retain the right to walk away if findings materially change feasibility.

The Six DD Workstreams

1. Town Planning The planning report confirms zoning, overlays, height limits, plot ratio, setbacks, and likely DA pathway. Often run by a senior planner or a consulting firm like Urbis, Place Design Group, or RPS. Looks for: rezoning risk, character overlays, flood overlays, biodiversity, heritage, infrastructure charges.

2. Geotechnical Soil testing, rock depth, slope stability, fill/cut estimates. Brisbane sites with rock close to surface or significant slope can add $500k-$3m to construction. Usually 2-4 boreholes per site.

3. Contamination (Environmental) Phase 1 desktop review (historical land use). If any flag — petrol station, dry cleaner, mechanic, market garden, manufacturing — Phase 2 sampling is triggered. Remediation can cost $50k-$5m+.

4. Services & Infrastructure Sewer, water, stormwater, electricity, gas, telecoms capacity. Council and Urban Utilities pre-lodgement meetings often happen here. Capacity constraints can require costly augmentation.

5. Financial / Feasibility The developer rebuilds their feasibility with refined inputs from #1-#4 above and current builder tenders. Margin must remain above hurdle rate.

6. Legal / Title Easements, covenants, encumbrances, neighbour disputes, lapsed approvals, body corporate complications. Usually fastest workstream but can surface deal-breakers.

What Can Go Wrong

In Brisbane, the most common DD failures we see at ACRES:

• Contamination (especially older industrial / petrol sites)
• Sewer capacity (no headroom, augmentation cost falls on developer)
• Geotechnical surprises (rock far higher or lower than expected)
• Revised feasibility (construction cost or interest rates moved post-contract)
• Easements not disclosed at contract (Energex, services, drainage)

About 15-20% of Brisbane development site contracts fail at DD. The good news: most failures are diagnosable in advance.

How Vendors Should Prepare a "DD Pack"

Sites sold by ACRES typically arrive at market with a pre-prepared DD pack. This compresses the developer's DD by 30-50% and signals professionalism. A solid pack includes:

• Title search & full survey
• Recent contour & detail survey (less than 12 months old)
• Existing planning / zoning summary
• Any prior DA history
• Services check (Urban Utilities, Energex, Telstra)
• Phase 1 environmental review
• Geotech report (if available)
• Disclosure of easements, covenants, neighbours

Pre-prepared packs typically lift offer prices 3-7% because developers price in less DD risk.

Vendor Strategy During DD

While the contract is conditional, the vendor should:

1. Stay on the front foot — respond to information requests within 24-48 hours.
2. Be available — for site visits, neighbour discussions, council interactions.
3. Document everything — every email, request, finding, in case of dispute.
4. Have a back-up — second-best offer should be in reserve in case DD fails.
5. Lean on advisors — your advisor should be reading the developer's consultant reports as they come in.

Daniel McCormack

Managing Director, ACRES — Australian Commercial & Residential Group

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