Due diligence on a development site is not a checklist you run through for compliance purposes. It is a risk assessment. Each item on the list is there because it can materially affect the viability of the project — either by reducing the yield achievable, increasing the cost to deliver, extending the timeline, or, in the worst cases, making the development impossible to proceed with at all.
This article documents the due diligence process FWG ran on 82 Station Street, Bonnells Bay before committing to purchase. It is a real account of a real site. The purpose is not to present a perfect example of how everything went right. It is to show the specific issues that emerged on this particular site, how we assessed them, and what our conclusions were. If you are assessing a development site in Lake Macquarie, this is the process you should expect to work through.
The Due Diligence Checklist
Title Search and Encumbrances
The first item. A title search through NSW Land Registry Services confirms ownership, identifies any registered easements (drainage, access, services), covenants, or restrictions on use that attach to the title. On 82 Station Street, the title search identified a standard drainage easement running along part of the rear boundary. Drainage easements constrain building envelope — you cannot build over them — and must be factored into the scheme layout from the outset. The easement on this site was manageable within the concept layout, but it affected where the rear structures could be positioned. Identifying this before exchange, not after, is the point of the exercise.
Zoning Confirmation — LMLEP 2014
R3 zoning was confirmed on the planning portal before any further work was commissioned. The LMLEP 2014 zoning map identifies the site as R3 Medium Density Residential. The development standards applicable to that zone — minimum lot size for multi-dwelling housing, FSR, building height — were extracted from the LMLEP 2014 and the LMDCP 2014 at this stage. Confirming zoning sounds obvious. In practice, zoning boundaries do not always follow street boundaries, and sites that appear to be in a zone on an aerial view can sit on or adjacent to a zone boundary that changes the development potential materially. Check the map specifically for the cadastral lot you are assessing, not for the surrounding street.
Mine Subsidence Area
Bonnells Bay falls within a designated mine subsidence area under the Mine Subsidence Board's jurisdiction. The specific designation for 82 Station Street required assessment against the West Lake Guideline 6 — the standard that applies to residential development in this part of the Lake Macquarie coalfield. West Lake Guideline 6 sets engineering requirements for foundations and structural design in mine subsidence affected areas. It does not prohibit development; it conditions it. The requirements add cost (foundation engineering, a mine subsidence certificate, specific structural design) and must be reflected in the construction cost estimate and the architectural brief from the outset. FWG engaged a structural engineer to confirm the specific requirements applicable to the site early in the due diligence process. That confirmation was a prerequisite for finalising the feasibility model.
Flood Overlay
The flood planning certificate (s10.7 certificate) from Lake Macquarie City Council identifies whether the site is within a flood planning area and, if so, the applicable flood planning level. 82 Station Street was assessed for flood overlay at the time of due diligence. The flood planning level applicable to the site was assessed for its impact on finished floor levels for habitable areas of the proposed development. Where flood planning levels sit significantly above natural ground level, they can affect the internal layout of ground floor dwellings, the accessibility of entry points, and the overall achievable floor area in the ground floor habitable zone. On this site, the flood planning requirements were manageable within the concept design, but they required careful attention in the brief to Shade Architects.
Tree Assessment
Significant trees on a development site, or on neighbouring land within the canopy drip zone, can affect what can be built and where. Tree removal on the site requires council approval under the LMDCP 2014 and the Biodiversity Conservation Act 2016, and the requirements depend on species, size, and whether the tree is listed as a threatened ecological community. An arborist was engaged to assess all trees on the site and the adjacent nature strip before exchange. Several trees on the site required removal to achieve the proposed development envelope. The arborist report confirmed which removals were approvable, identified the protection zone requirements for trees that were to be retained, and provided the documentation required for the development application. This assessment was a prerequisite for the concept design — you cannot design a scheme without knowing which trees you can and cannot remove.
Services — Sewer, Stormwater, and Power
Connection to existing sewer and stormwater infrastructure is a fundamental requirement for residential development. The cost and complexity of that connection depends on the proximity of existing infrastructure, the capacity of the network, and whether any augmentation is required. Hunter Water (the relevant authority for Bonnells Bay) infrastructure maps were obtained to confirm the location of the sewer main, the connection point, and whether gravity connection was achievable for the proposed development levels. Stormwater management — both the on-site system and the connection to the council stormwater network — was assessed in concept at this stage. Identifying a stormwater connection that required pumping, or a sewer connection that required a significant sewer extension, would have been factored into the feasibility cost estimate. On this site, both connections were achievable within normal parameters.
Preliminary Architectural Assessment — Shade Architects
Before any formal offer was made on the site, FWG engaged Shade Architects to produce a preliminary concept assessment. This is not a full concept design — it is a feasibility sketch that tests whether a complying scheme can be achieved on the site within the development standards, subject to the constraints identified in the due diligence process above. The Shade Architects concept for 82 Station Street confirmed that a multi-dwelling scheme was achievable within the relevant development standards. It identified the specific constraints that would require careful design resolution — the drainage easement, the mine subsidence zone setback requirements, the flood floor levels — and confirmed that those constraints were manageable within a quality design outcome. The concept also indicated the approximate gross floor area per dwelling achievable, which was the input needed to confirm the end-value assumptions in the feasibility model.
What the Concept Plans Showed Versus What We Hoped For
The preliminary concept plans confirmed a viable scheme, but they also required adjustment to the initial yield assumptions. The combination of the drainage easement at the rear, the mine subsidence setback implications, and the flood floor level requirements reduced the usable envelope on the ground floor relative to the first feasibility sketch. The scheme was achievable and commercially sound, but the initial gross floor area assumption for the concept had to be revised downward. This is normal in development assessment. The purpose of the preliminary architectural work before exchange is precisely to identify these adjustments before you are committed to the acquisition. The revised feasibility, incorporating the corrected floor area estimates and the mine subsidence engineering cost allowance, still supported a viable project. We proceeded on that basis.
The Negotiation
Due diligence findings affect price negotiation. The mine subsidence engineering requirements, the drainage easement constraint, and the tree removal costs were all quantified and factored into the revised feasibility before offer. The price negotiated reflected both the confirmed development potential of the site and the specific constraints that the due diligence had identified. A development site should be priced to reflect what you can actually build on it, not the theoretical maximum yield before constraints are assessed. Sellers sometimes price for the theoretical maximum. Part of FWG's role in advisory engagements is helping clients understand what a site is actually worth to them, given what the due diligence has revealed, before they commit to a price.
What This Process Tells You
The due diligence process on 82 Station Street took approximately four weeks from the initial site assessment to the point where FWG had sufficient confidence in the viability of the project to proceed with an offer. That timeline is not unusual for a thorough pre-purchase assessment on a development site of this type.
The cost of that due diligence — arborist, structural engineer, preliminary architectural concept, title searches, certificates — was meaningful but not substantial relative to the acquisition price. It is the kind of cost that many first-time developers resist, because the site has not yet been purchased and spending money on something you might not buy feels counterintuitive. The logic is actually the reverse. The due diligence cost is what allows you to make a rational decision about whether to buy. Saving on due diligence and proceeding on incomplete information is where developers lose money.
"The purpose of due diligence is not to confirm your initial enthusiasm for the site. It is to find the constraints before you are committed to the acquisition. If you find them after exchange, they are your problem to solve at your cost."
For first-time developers, the items that most commonly cause problems in this market are: undisclosed easements that constrain the building envelope, mine subsidence designation that is not priced into the acquisition cost, flood planning levels that affect the habitable area on the ground floor, and significant trees that cannot be removed and require protection zones that limit the development envelope. Each of these was present on 82 Station Street in some form. Each was identified, assessed, and managed before exchange. That is what due diligence is for.
For a broader overview of what to look for when assessing a Lake Macquarie development site, see the Lake Macquarie Development Guide. For the site selection process that brought us to Bonnells Bay and Station Street in the first place, see Why FWG Chose Bonnells Bay.