Main-Land Development’s Blog

Avoid Project Killers

Development Killers

Your land development project is important for many reasons. People need homes to survive. Your product is needed in the market. The community needs your project to grow, and you need to make a living for your family. 

Unfortunately, your project is at risk all the time. Angry abutters, legal challenges, fuzzy critters, interest rates, and economic fluctuations all present critical risks to your important and valuable project.  

Good news! The majority of projects survive to implementation. The odds are in your favor. 

If you prefer not to roll the dice, then this is for you. Here’s the more common reasons a development fails.  

Financials 

Putting a project together takes many players all working symbiotically. Real estate professionals, lawyers, bankers, architects, surveyors, scientists, and engineers all need to get started at the outset and coordinate their work as the project progresses towards concept, permitting, and finally construction. 

We’ve noticed project success is particularly sensitive to finances. A developer may have thought their credit union would finance the project, only to find out they don’t do development projects. Or maybe it turns out the bank’s collateral already had an unknown lien. 

Getting the finances in shape up front is critical to a project surviving to ribbon cutting. 

Partnerships. 

I’ve heard Dave Ramsey say, “A partnership is a sinking ship.” It’s a little tongue in cheek, but there’s truth there.  

We’ve seen projects start strong, only to fall apart later as the owning partnership failed.  

Partnerships aren’t project killers themselves, but they can be risky. Mitigate the risk by identifying each partner’s role up front. As an example, you can create an LLC and a bank account at the start and know who is depositing how much and when.  

Make sure each partner can meet their financial obligation. A partnership can go down in flames when it turns out one of the partners was not straightforward about their finances.  

Finally, write it all down. A partnership on a handshake is especially prone to failure. We all intend to do what we said. But busy people forget what they said and fail to meet their responsibilities which can result in anger, personal conflicts, and separation. If for no other reason, write it all down to remember what was said. Get an attorney’s help on this. Agree to hold each other accountable.  

 

Road Access

We’ve had a few projects with sudden project failure due to unclear or obstructed road access. This happens several different ways. 

First, some state-owned or state-aid roads are “mobility corridors,” which is a state term for getting people from A to B quickly. Access to these roads is restricted.  

Next, sometimes there are sight distance problems. People leaving your project site need to be able to see both ways far enough to make sure they can pull out into traffic safely. If you’re on the inside of a curve or next to a sharp crest hill, you might have a problem. Main-Land can check for this. 

Finally, we’ve had a couple projects fail abruptly when it turns out the road they were using traversed another property before reaching a public road. You may have rights to a private road which crosses other people’s property, however those rights may not include improvement of the road or increasing traffic on the road.  

Roads you need for access but don’t own are tricky. Planning boards often see this as a legal issue they’re unwilling to tackle. Get your attorney involved up front.  

 

The Economy

The economy is a rollercoaster. It’s always been and we suspect it always will be. We think your realtor has a better finger on the pulse of the development economy, but we can help too.

A sudden drop in the economy is a project killer. Developers are right to stop all development efforts when the economy drops because they know it will usually take a year to recover, sometimes longer if Congress tries to help.

Unfortunately, there’s not much we can do about this but watch carefully and adapt.

Agreements

Your partnership agreements aren’t the only agreements to do in writing. If you need an easement from a neighbor, financing from an investor, or access through another property, get it in writing. 

If you’ve approached the town informally for an opinion on how to proceed with your project, get it in writing.  

Whatever someone told you, get it writing. Your project is worth getting it in writing. 

 

Illegal Subdivisions

In Maine, a subdivision is the division of a property into three or more lots in any five-year period. A division doesn’t usually need regulatory approvals, but a subdivision does. There are some exemptions.  

So, perhaps you want to do a project and purchase a piece of property. What if that property was split off another property a year ago? What if that property had another property split off by the previous owner four years ago? Bam! You just bought a property that’s part of an illegal subdivision.  

Because you don’t own the other two properties, it’s tricky to get those regulatory approvals. The costs and delays involved might kill your project. 

Ask us about this before you buy the property. Our surveyors can do the research to show whether this is a problem. 

Un-Permitted Existing Developments 

Some clients bought a developed site and are doing business there. Their new project involves an expansion to their existing facility. 

We’ve sometimes found the original owner didn’t get all the permits needed, especially State permits through Maine DEP. Then our client buys the facility and thinks they’re okay. Turns out, they’re not.   

The larger DEP permits are expensive to obtain. Application fees are double for after-the-fact applications. And the whole thing can take twice or more time to get done, even more if you need to take legal action against the seller. This is an unwelcome surprise and maybe a project killer.  

Before you buy a developed property, ask for the seller to provide verification for all local, state, and federal permits. Bring the permits to us and an attorney and get our opinions on permit veracity.  

 

Setbacks

We all love a vibrant environment full of healthy life. Development projects can be designed and built side by side while protecting regulated natural resources.  

Like it or not, streams and vernal pools in particular have regulatory setbacks which strictly limit development.  A property dotted with vernal pools can end up restricting the entire property. 

One property in particular had this problem with streams. Regulatory streams have a minimum 75-foot no-touch setback on both sides. The property was purchased by a client and we were tasked with producing a concept for development. Once we toured the property, we noticed many small streams occurring on the slope every 100 to 200 feet. Once mapped, a 40-acre parcel was essentially undevelopable. Our client had to sell the property and look elsewhere. 

Natural resource protections aren’t inherently bad, but a developer should have a natural resource expert review the parcel prior to purchase. They can be a project killer. 

 

Getting a project built can be a financial and emotional rollercoaster! Whatever you’re planning, double what you think it’ll cost and time to get it done. Plan to have your patience tested. If you’re persistent, you’ll get the project done. Just identify and avoid the project killers. 

 

Have more questions?