2. Due Diligence – putting it into
perspective
* People pay $20,000 for a 2nd hand car and willingly spend 5% of
the cars value getting the relevant checks.
* People pay $500,000 for a home and without a thought, spend 2%
of the homes value conducting a DDI, but,
* They pay $5,000,000 for the average rural property but are not
required to spend 0.1% of the properties value doing a basic check
that could save them a small fortune: Strange when you consider
they will be relying on that property for an income from the day of
purchase and likely for many years into the future.
2
4. Question 1
Have I done a check of mapping and all the on-line data
bases before disturbing remnant or regrowth vegetation?
Do I really know what defines regrowth and which
legislation should I take the most notice of? The results
might surprise you.
4
5. Question 2
Do I need to do a WON’s survey (what is WON’s?) to make sure
LG don’t enforce a bio-security compliance order on me. Will
enacting that bio-security order from the LG put me in breach of
State and Commonwealth legislation?
In NSW, that is a possibility. How then do I stay inside the law?
5
6. Question 3
I have a PMAV (QLD only) so can clear any regrowth I want to?
Wrong. With some types of vegetation (i.e. TEC, MNES – what
do those letters mean) Commonwealth Legislation and even
Local Government laws can override a PMAV.
6
7. Question 4
Can I continue to cultivate and crop a paddock that’s obviously
an old cultivation paddock? It only has a couple of trees dotted
here and there and it was previously under cultivation, so there
won’t be a problem, right? Wrong! In QLD you will likely be OK,
but the EPBC Act might come into play. In NSW, you may be
breaching the Threatened Species Act 1995 and the EPBC Act.
7
8. Question 5
8
* Have I done a check for contaminated land?
* Did the previous land-owner cover over an old dump site?
* Did the property have an old dip site on it many years ago?
* Will this have implications for cropping and/or grazing?
* Will this have implications on my planned organic
certification?
9. Question 6
The previous landholder gave me paperwork that says I can
pump XYZ mega litres of water from the bore or river.
The paperwork is signed by the Government and says what
water I can use so it must be correct! Not necessarily.
It pays to check because the implications, if you’re wrong, can
be quite serious.
9
10. Question 7
10
Does the property I’m purchasing have an MDL, MT, a PL
or a NTL (what is a MDL, PL, MT or NTL?) showing on the
property search form. Does this mean someone else has
an interest in the property?
11. Question 8
The paperwork says my property is listed as a GHPL, GHFL, and
SL, Freehold or the rarely heard of “Fee Simple”. What do they
mean, do they have any restrictions on development and on
what I can do on the property. Is the property boundary actually
in the right place? This can be quite relevant if you property is
near an escarpment, jump-up or some hard country. What does
this mean for me?
The fence is on the other side of the creek. Does this mean all
this side of the creek is mine? No, it doesn't.
11
12. Question 9
Is the country I’m looking at buying or thinking about
cropping actually suited to the crops I’m familiar
with?
12
13. Question 10
Do those areas of dead grass, wet areas or fleshy plants have
any significance? Should I be concerned? Yes, you should.
Different species composition, decolourisation of the grasses,
the presence of fleshy plants (chenopods) indicate a possible
discharge area (salinity) or a watertable rising to the surface.
What will that mean for future cropping or grazing?
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14. Every one of those 10 questions have
answers that will effect that properties ability
to be financially viable
14
15. Lawyers and Real Estate Agents have a legal
and moral obligation to provide the basic
information,
however, the onus is on the landholder to
conduct the full suite of investigations
themselves.
15
16. Who Does DDI’s?
* A number of consultants, banks, real estates and agricultural groups
conduct DDI’s to some extent, but it would appear none have the same
capacity and in-depth knowledge CROSSROADS - Rural &
Environment Pty Ltd has.
* CROSSROADS - Rural & Environment Pty Ltd have access to
planners, ecologists, surveyors, GIS, hydrologists, soil scientists,
engineers, people with a strong rural background and access to
specialised rural industry personnel who we formed a strong
relationship with over many years. We have the capacity to cover off
on every aspect of the DDI.
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17. What's involved in a DDI?
* To date, there have been over 40 issues identified that
landholders may need to consider with more being identified as
we progress.
* Some issues can be resolved by a desktop search or an
information request, but many require specialist knowledge (i.e.
recognising salinity, contaminated site from an old property
dump) and a site visit.
* The requirements for each property, location or farming
enterprise will be different based on location, farming enterprise
and each landholders plan for the property.
* Each DDI will be tailored to a properties / landholders
requirements with specialist advice on what needs to be covered
during a preliminary meeting.
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18. Examples of issues covered
in a DDI
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* EPBC Search * Essential Habitat * Referable wetlands *
Salinity and erosion hazard mapping * LG Planning *
Environmental Mgt Register * CITEC searches, Register of
the National Estate * Australian Heritage Database *
Current/historic water licences * Land-use planning * State
Koala mapping * LG building searches * Contaminated land *
Local fire plans * WON’s search, Referable wetlands * soil
mapping and analysis * Water quality investigations * Weir
wall heights * Cultural Heritage provisions * Machinery
conditions report * property infrastructure condition report
19. If DDI’s are so important, why
aren't they a mandatory
requirement?
* The NSW State Government indicate it will have legislated in the
near future, that EVERY property must have a DDI conducted pre-
purchase or pre-development.
* Many of the major lending institutions are considering, or have
already implemented, a requirement that a DDI be conducted
before they lend the money.
* Some landholders have already learnt through legal action against
them that the lack of a DDI can be very expensive and should be
mandatory.
19
20. How will the DDI’s be
structured?
* Each properties requirements will be identified by an initial
meeting between CROSSROADS - Rural & Environment Pty Ltd
and the client.
* The DDI will be tailored to each properties / landholders specific
needs.
* Provision of a fixed price quote and detailed proposal, but
dependent on the complexities of the issues encountered (may be
hourly rate)
* Provision of a comprehensive report that is colour coded green
(constraints limited or unlikely), orange (minor constraints that may
require caution or further consideration) and red (Stop – if you
proceed, there may be serious implications) and general information
containing statements of fact (i.e. details of a licence or permit).
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21. Who are the clients and how
will they know about the
service we provide?
* Rural landholders / investors
* Foreign investors
* Land developers
* Anybody investing in land, infrastructure, industry
To this end, contact has been made with FIRB, KPMG
(Chinese Business Practice), Australian / Chinese Business
Council, Banks, Juwai and Wadley Business Consulting
Shanghai/Co Ltd, Suncorp Agribusiness, Westpac, ANZ, QFF,
Agforce, Grain Growers etc.
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22. Summary
* There is a large market for rural risk identification and
mitigation;
* All rural investors should conduct a DDI;
* CROSSROADS - Rural & Environment Pty Ltd can provide
the full suite of services;
* CROSSROADS - Rural & Environment Pty Ltd has the
capacity to be at the front of an emerging market when the
States makes a DDI report compulsory;
* CROSSROADS - Rural & Environment Pty Ltd has the broad
range of specialist skills and the industry contacts to deliver the
suite of Due Diligence Investigative services required;
* To the prospective clients, its all about risk control.
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23. The Final Word
From a Chinese property investor:
“ Nothing in life is to be feared....... It is
only to be understood”
23
24. Do you know where the risks are on your
property and what the implications are if
those risks are not identified?
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Editor's Notes
Came about as a result of Sarons and my own rural background
We became aware that there were a number of landholders in QLD and NSW being prosecuted or were in financial trouble because they didn’t do a few basic checks, didn’t understand the legislation, weren't aware there were issues, bought a property not suited to what they were familiar with or as with the case with a landholder Im working with now, implemented weed control methods that has now landed him in court.
Im not sure if its the fact landholders dont want to pay for a DDI, or whether its a case of landholders not being aware that this service exists.
One of the landholders Im working with commented that if he had of known about what was available, he would have gladly paid for a DDI. When I asked if he would have paid close to $100,000 for a full DDI (he bought 10,000ha and outlaid $15m) he laughed and said of course; my legal bill is now over $200,000 and his land rehab costs from OEH amounts to $1.2m
Trouble is, real estates wont recommend a DDI because it might threaten their sale. Lawyers in most cases simply are not aware of the “other” issues and only check up on the ones they legally obligated to. I spoke to an environmental lawyer last week and asked why he didn't do a few checks for his client. His comment was that it was up to the client to do the checks, not him.
Most landholders cant answer these questions and the landholder Im currently working with didnt have a clue
As an exercise , I’ll go through the 10 questions and put a value on the 10 most important rural issues to compare what it would have cost the landholder if he’d done a basic DDI and what its now costing him because he checked nothing.
A landholder Im currently working with has just been issued with a $1.2m rehabilitation order because he didn't check the mapping; a check Saron just did and it took her 2-3 hrs and a couple of phone calls (perhaps $500 total)
Weeds of National Significance
In NSW, if you broad scale clear a weed and that weed in growing in a veg community and the Commonwealth or State perceive to be a derived grassland or a TEC grassland, the very act of breaking the surface of the soil will have you in breach of the Act.
I called the Local Land Services in Moree NSW to check on the legalities in relation to the weeds on this property. The information was free, but it took me 2hrs of digging and another hour to find the info in the act (3 hrs total) ($700)
2 hrs (another $500)
Phone call to the Local Land Services, a review of mapping and few more phone calls to the relevant Govt Dept (another $700)
In NSW, An old dip site will be on a State register, but a property dump site most likely wont be. How do you identify where they are and where do you start looking unless you know where they are usually located.
Will an old dump site threaten organic certification on cropping land or show up as residual contaminants in cattle bound for the Japanese market.
Search of the database and a few phone calls (2 hrs) and a day spent on the property with costs ($4,000)
There was recently a case where a property was bought was a new landholder. The selling landholder provide a copy of a river pumping permit saying there could be x megalitres pumped from the river. The landholder pumped that amount during irrigation and was subsequently prosecuted for exceeding the designated amount (Fine of $250,000). Turns out the Department had renegotiated a lesser amount to be pumped with the selling landholder who failed to mention that to the new owner. A 20 minute check of the departments database would have revealed the correct amount. It became a very expensive exercise for the new bloke
1.5hrs doing the checks ($400)
I get requests from landholders asking if there are any interests on their property, buts its always after they have purchased the property; never before. When I give them the results, they get cranky and ask why the selling agent, or their legal advisers didn’t tell them.
(1hr = $210)
Boundary fences are rarely where they are supposed to be. And the further you go west, the weirder things become
I was on a property last November where we were standing beside a creek and the fence was on the other side of the creek. The landholder, a foreign investor, commented that while he owned all the creek area, he wondered where the fellow across the river got his water from and wondered why the neighbors' fence further down was on his property . He had no concept of the give /take system of sharing water. He had no idea the actual boundary was down the centre of creek
Property visit and a review of website ($1,000 because most of these costs can be captured when we do the contaminated Land assessment)
Why would you buy a semi trailer to pick the kids up from school (wrong tool for the job)
Likewise, why would you buy a property to crop when the soil types are completely wrong . Ive seen it so often when all it would take is a soil analysis, land review and asking a few questions pre-purchase that would quickly identify that if your looking to grow crops in a poor gravelly sandy soil that is pushed to grow 2 blades of grass in a good season, your not going to grow a good paddock of wheat.
$3,000 to get an ag consultant on site for a day and development of a report
Seen this many times. Ive seen where a landholder was cultivating land that was 14x the salinity of sea water. He commented the “area” was there when he bought a few years ago but thought it was a “spring”. If he had of engaged me, I could have told him that the dead grass, vegetation with burnt leaf margins, the fleshy plants and the tell tale white crystals on the ground was a major salt problem that was going to cost him a lot of money to rectify and a bout 100 years of time.
$1,000 because this can also be done while on the property looking for other issues
For a very inflated estimate, it would have the landholder $12,000 for 10 checks that would have save him $1.188m (that’s good value)
When you buy a house, your legal adviser doesn’t do the white ant checks, plumbing, electricity, etc, just as your legal adviser isnt obligated to do all the property checks. Its up to the landholder and quite often they have no idea what to look for or the questions to ask.
These are just a small number of the checks that might be required. Rarely, if ever, will anybody require the full suite of checks, but the skill is in knowing which landholders require which checks and being able to develop a quote based on a particular farming enterprise or a landholders needs.
The NSW Govt has woken up that it should be legislated that DDI’s be mandatory with a number of LLS people and members of OEH telling me it will legislated in two years . Perhaps they are getting tired of prosecuting people and being tied up in paperwork.
A number of banks now are making it compulsory for checks to be completed before they lend the money. Westpac recently advertised to employ somebody to conduct property checks but couldn't find anybody who had the skills to know what to check for.
We are proposing a 3 stage process or 4 , if you include the initial 1hr free consultation to define their needs.
Hand around our brochure
The current challenge is to get the word out there on what we offer. Ive been in touch with banks, Govt Departments, Foreign Investment Review Board, had meetings with KPMG, the Australian Chinese Business Council, QFF, NSWFF, Graincorp , Agforce etc but still not finding traction or a method that alludes landholders, investors what we can offer
