Negotiating Development Land Transactions During COVID-19

These are uncertain times and COVID 19 has impacted all deal sectors.

The buying and selling of development land has not been spared from this uncertainty.  Land development transactions often take years to close. Due diligence in these deals is centered around environmental testing, surveying, market analysis, and most importantly obtaining the necessary entitlements to the land from the local governing body so the land is fit for the development purposes. Given this extended time frame many deals where well along the way when COVID 19 hit and it had an impact on all sides of the deal.

The developer/buyers have had to analyze their internal business structure to determine if they have the financial ability to close on time. They then have to attempt to analyze the market to forecast what the demand for that development will be given COVID 19 impacts. This uncertainty has caused many developer/buyers to attempt to renegotiate any existing contracts on many fronts; pushing closing dates, decreasing purchase price, reducing build-able acres and alike. Particularly those contracts that are still in due diligence.

Agricultural Production 

Often development ground sellers are using the ground for agricultural production, farmers. They have entered into contracts to sell their farm ground to developers and have been planning on closings occurring at a certain time. As a result of  the COVID 19 impact to  the developer buyers strategies, the seller/farmers are put  in a position of not knowing if the sale will occur, if they can farm the ground this crop season and in many cases how these renegotiation's will impact their 1031 exchange options.

The governing bodies are the last players in these deals and they too are not immune from the impacts of COVID 19.

Their budgets and income have been hit as well and they often are taking a very conservative approach to any new projects. In many instances they have negotiated with the buyer developer for certain concessions in the entitlement agreements that the developer/buyers relied on when first analyzing the deal, concessions and understandings that are now uncertain.

As with many other deal sectors COVID 19 has caused uncertainty on all sides of development land deals. If all parties continue to keep open lines of communication, stay positive, stay determined, and most importantly get creative these deals can and should hold together through these trying times.

Goosmann Law is here to guide you through this uncertain time.