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Selling land: a closer look

Land tends to be sold in one of three ways:

  1. With planning consent
  2. Without planning
  3. Subject to planning

When a parcel of land is sold “subject to planning”, the interested buyer will agree to buy the site as long as they are able to secure the consent they need to develop on the land. Broadly speaking, there are two types of agreements used in this situation and while many developers will have a preferred route, it is important that landowners seek our advice on the route that will protect their interest and deliver the best possible outcome.

Conditional contract

A conditional contract will typically feature a date by which the land must be purchased. This contract will oblige the developer to submit a planning application by a specified date, and assuming planning is approved, the contract becomes binding and the sale will proceed. If planning is not approved, then most developers will either seek to renegotiate or outline their position.

Option agreement

An ‘option’ is more informal than a conditional contract and the buyer agrees a price which is conditional on a planning application being secured. This option is fixed for a period (agreed by both parties), but can often be extended if the end date of the option is fast approaching.

Typically, any buyer will outline the key timeline for submitting a ‘pre app’ planning application and then define when they would expect to have a planning decision. In the majority of cases, the developer will reserve the right to be able to appeal a planning refusal (and again timescales would be put in place).

The purchaser reserves the right to exercise the option (buy the land) at any time before the contract expires, whether they have achieved the planning permission or not. During the option period, the landowner is unable to sell the land to other parties. This form of contract is widely used across the industry.

Promotion agreement

Promotion agreements are much more common than they used to be and are typically used when seeking to secure land which may have a medium-to-longer-term strategic potential for development.

Unlike the other forms of purchase outlined above, the promoter will undertake the risk of the planning application. Subject to planning being achieved, they will typically seek to find an end user and the promoter will receive a financial uplift, typically a percentage of the land sale. The balance will go to the landowner. This route of sale makes it beneficial to all parties to get the result that will yield a longer-term financial uplift.

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Author: Kevin Ellis

Our company was established in 2014 by Kevin, who previously ran a highly-successful development department for an award-winning property services business. Today, he has grown Thomas Mae into a thriving business, staffed by a trusted team of property consultants who are adept at sharing their knowledge and skills. Kevin’s mission is to foster strategic land investment, to deliver solid, profitable results across the whole of the UK, and to work effectively with both private landowners as well as commercial and institutional landowners.

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