Just because residential development land prices are so subdued at the moment should not mean that strategic land deals are not being considered.
With the planning process being so long-winded, many of the larger blocks of development have taken or are likely to take at least 10 to 20 years to turn into hard cash.
Against that background, one cannot expect to forecast when a planning permission will actually be achieved and what the state of the market will be at that time. Therefore it is more important to start the process of seeking to obtain the planning permission at the right time ie early enough, quite irrespective of the market at that time.
This uncertainty of when such schemes might come to fruition, is one of many unpredictable factors contributing to the difficulty of covering all eventualities in Option or Promotion Agreements.
The concern about covering all those eventualities in any agreement is a real worry. However, the principle of the developer or promoter bearing what are often very substantial planning costs, and therefore sharing in the spoils, remains a compelling concept to most landowners. It is a very brave and very rich landowner who carries the full costs and therefore all the risk himself.
Fisher German would usually favour Promotion Agreements over Option Agreements. Under an Option Agreement the developer’s objective is to develop the land himself.
Under a Promotion Agreement both parties - landowner and promoter - have a common interest in maximising eventual value by selling the land onto the open market. By so doing, the land is likely to achieve a higher figure than even the best drawn up valuation provision in an Option Agreement will. Also, under a Promotion Agreement the landowner tends to be able to exercise rather more control over the timing of a sale, Section 106 costs, etc.
Recent trends in the market have highlighted one or two particular issues:
For further information, please contact Charles Haselwood on 01295 226289 or email charles.haselwood@fishergerman.co.uk.
