Understanding The Best Legal Arrangements For Developing Land

Landowners are increasingly looking at ways to unlock additional revenue from their land, and often, one way to do this can be through development.

Time constraints, lack of experience and cost can often put landowners off developing the land themselves. When this is the case, they may consider entering into an arrangement with a developer or an agreement with a planning specialist called a promoter who will work with the landowner to sell to a developer.

The two most popular agreements for landowners looking to develop their land by selling to a developer or using a promoter are an option agreement and a promotion agreement.

1. Option Agreement

What is this?

This agreement is typically between a developer and a landowner, where the developer can purchase the land from the landowner once certain conditions are met. This can be, for example, gaining specific planning permission.

The price for the land may be set before the conditions are met, or it may be assessed at the date the planning permission is granted, for example, so it reflects the market value at that time.

Pros

• It is down to the developer to gain the necessary permissions.

• The price can be negotiated once planning permission is granted or fixed at an agreed price.

• Working with a reputable developer can often help the planning process as they can often prove the deliverability of a scheme to the local authority.

Cons

• Usually, a pre-agreed percentage is deducted from the sale to reflect and reward the developer’s efforts in gaining planning permission for the land.

• Pricing can be more difficult as the price is often set via a negotiation, not on the open market.

2. Promotion Agreement

What is this?

A promotion agreement usually involves a planning specialist that is not the developer. Once planning permission is granted, they will usually look to sell the land on your behalf to a developer. The proceeds of the sale are then split between the landowner and developer at a pre-agreed split.

Pros

• Can sometimes favour the landowner as it is in both parties’ interest to achieve the maximum amount of money for the land.

• Land can achieve more as is sold onto the open market, not via a negotiation process.

Cons

• The promoter may not understand what local developers are seeking. This could mean planning permissions are granted for something local developers are not interested in. When this is the case, vast amounts of money can be lost through the planning process.

Both option and promoter agreements can work well. However, the type of land, local market conditions and constraints and location will all dictate the best approach. If you have some land with development potential, please contact:

Charlotte Shepherd (Shrewsbury) on 01743 290642 or email charlotte.shepherd@berrys.uk.com

Joanna Gardner (Towcester) on 01536 213157 or email joanna.gardner@berrys.uk.com