Bespoke build requirements

Certainty around the bespoke build is of critical importance to a provider as it impacts directly upon the incentive. The bespoke build will likely require modifications to the standard fit-out which are costly and may significantly change the appearance and functionality of apartments.

Whilst the developer may need to be flexible in delivery of the bespoke build, the risk should be shared with the provider. Careful consideration of the contract of sale terms is required. Based on what we are seeing in the market, some key do’s and don’ts include:

• DO: Agree the scope of the modification work with the provider up front and a compensation regime. The more detailed scope the better, and if it is possible to cost that scope with the developer’s builder before contracts are exchanged then that is a preferred approach to reduce uncertainty.
• DO: Agree a regime to deal with variations and additional work which may be required by the provider.
• DO: Ensure you have appropriate flexibility in your construction contracts and consultancy agreements to allow for the provider’s bespoke build scope and requirements.

DON’T: Commit to producing a bespoke build that will guarantee a

certain standard of SDA functionality at settlement. The requirements to

satisfy certain SDA standards of accessibility builds are continually

evolving and this type of arrangement would shift the compliance and

variation risk of the build being assessed as SDA compliant onto the

developer. If such an arrangement is being considered, developers should

consider pricing the risk accordingly and try to build in flexibility to deal

with any change in SDA functionality standards and definitions. When

working through these Do’s and Don’ts developers should consider the

implications of building in these risk management mechanisms into a

contract of sale or whether they should be addressed via an alternative

arrangement.

Disclosure requirements – contract of sale

If you are considering implementing SDA residences into your development or would like the flexibility to do so, the disclosure, flexibility and allowances which are built into sales contracts are essential. Key takeaways include:

• Building in flexibility for the type of product to be incorporated into the development and disclosed to other purchasers in the development, to minimise any risk that other purchasers object to the proposed SDA scheme.
• Providers may require signage, additional accessibility requirements on common property, designated SDA only common areas, etc. The impact on common property and owners corporation requirements should be considered and addressed appropriately both in the contract and again upon owners corporation set up. Turning your mind to these matters early will provide you with the flexibility to incorporate SDA at any stage of the development with minimal impact to the balance of your development and existing pre-sales.

Settlement risks

As providers tend to favour the purchase of multiple apartments, settlement risks are compounded. Whilst there are a number of factors which should be considered in this regard, we draw attention below to some critical considerations:

Risk	What to consider
Limited re-Sale market	Where a sale to provider fails to complete, there will likely be a smaller resale market for the Bespoke Build This could impact developers with either delays in securing a new purchaser or the developer undertaking considerable rectification work to bring apartments back to a typical fitout which would appeal to a greater number of purchasers. As a result, a developer should consider obtaining security that it can draw on in those circumstances towards its loss.
Interdependence	SDA providers may seek a bulk deal, but it is important to provide that the transaction is either documented under one contract or, if multiple contracts, that those multiple contracts are interdependent.