10 news/legal expert
Land promotion agreements v option agreements
Land promotion agreements have become a popular form of agreement to be used where a landowner has land that is suitable for development and requires a third party to use their time, money and expertise to obtain planning permission. Glanvilles partner and development agreement specialist Damien Newton looks at the advantages
Unlike an Option Agreement, the developer is not required to purchase the land if and when planning permission is obtained; instead the land is sold on the open market to a third party who is usually a house builder and the profits are split in a pre- agreed percentage between the landowner and developer.
This can be a benefit to strategic land companies who have no interest in building on the land as they do not need to go through the expense and worry of having to acquire the land and then finding a house builder to sell the land on to.
Another advantage of a Promotion Agreement over an Option
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THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – SEPTEMBER 2014
Agreement is that the conflict of interests between the landowner and developer is removed as they both have the same interest in maximising the value of the land for sale on the open market.
An Option Agreement comes with the risk that one of the parties will receive a bad deal if the agreement is not worded to their advantage – which can lead to extensive and lengthy negotiations between the parties’ solicitors. In the current planning environment, speed is crucial to ensure that the developer can get on and promote the land in question to ensure that the opportunity for a site to be
allocated for development is not missed.
In return for being given the opportunity to promote a site, the developer will normally bear the risk relating to the planning costs and these will be reimbursed out of the proceeds of sale if planning permission is obtained.
If planning permission is not granted during the promotion period then the developer will lose the right to a share of the profits and will not be reimbursed their promotion costs. A developer or landowner considering any form of agreement contingent on planning permission being granted for land should always
seek specialist legal advice to ensure that they are adequately protected.
Damien Newton is a partner at Glanvilles LLP and specialises in all forms of development agreement.
Details: Damien Newton 01329-282841
damien.newton@
glanvilles.co.uk www.glanvilles.co.uk
New force in claims launched
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