Of all of the legal agreements that you will have to go over in your lifetime, a real estate development agreement is one of the longest and one of the most complicated. Many of the other forms we’ve looked at here are short; usually one or two pages and they can be filled out and read over in only a few minutes. With a real estate development agreement, you will likely need hours to wade through one of these dense, 10-50 page documents. Let’s take a look at what a real estate development agreement is and why they are so lengthy.
A real estate development agreement is just that, an agreement to develop a parcel of land for personal or commercial use. The agreement can be between an individual and a construction company, a commercial builder and a city or town, a city and town and a retail business or other combinations of the above. Some real estate development agreements between large companies like Wal-Mart and a city or between a company that will be dealing with hazardous chemicals, like a gas station and a city, can be extremely long as they need to cover any eventuality that could arise during building or later on if there is an accident.
The typical real estate development agreement starts off with simple definitions of who is involved with the agreement, the date and where the piece of property that is scheduled for development is. The agreement will also spell out the municipality that is in charge of overseeing the development. The next part of the contract is often the “Witnessed” section that lists all of the necessary steps the builder has had to complete up to this point to have the development agreement approved by the city. The city will make sure that the area you’ve chosen to build on is properly zoned for the type of building you intend to do and they will also check that you’ve submitted a development plan, which is different than this agreement, to the city in advance of this form. Once those steps are met, the meat of the contract is spelled out.
The first section is the definitions that simply spell out what each term used in the contract refers to. For example, the city or builder will likely define what “total cost” means so it can be used throughout the contract. If it is a simple home building contract, there will only be two or three definitions, if the contract is for commercial property, there could be dozens.
Next, the development plan sketches out the project. This section is often short and simply lays down the ground rules of the build, such as the time frame, property limits and so on. The improvements section can be quite long as it outlines all of the improvements this development will do with the city like improving sewer lines that it hooks up to.
The final sections of the contract go over deadlines for building and things like landscaping rules, parking rules and what rules are in place for further building on that parcel of land. Overall, a real estate development agreement is often as complicated as your plan is: simple for homes, complicated for commercial properties.