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Insights – A Legal Perspective

We recently caught up with Peter Foskett, Partner at Royd Withy King and asked him to share his insights.   Take a look at his thoughts.

If we can help you unlock the development potential of your land in 2020, then we’d be pleased to hear from you.

Peter Foskett, Partner, Royd Withy King 

Whatever happens on 29th March 2019 there is one certainty, we need more new homes to be built. This means that if you have land with development potential, there is a potential deal to be done. The essential point is to make sure that the deal which is done is the best for you. To achieve that you need to take advice from professionals who are well versed in development work. As well as securing the best price for you, they will make sure that the agreement you enter into contains key provisions to promote and protect your interests.

Each transaction has some factors that are unique to it but some typical key provisions are the following:

  1. Planning is unpredictable but you should require the developer to commit to submitting its planning applications by fixed dates; this may involve an initial planning pre-application before subsequently the actual formal application. This may extend to other obligations of the developer in the agreement. This way if the developer loses interest in your land but wants to keep it on the back burner, there will be a time when you can end it in a very simple way.
  2. Keep the time the agreement subsists as short as is commercially sensible. No one can predict how long obtaining planning permission will take but you want to guard against tying up your land with one developer for longer that is really necessary.
  3. Keep the commercial terms as simple as possible so that the legal document that follows it is not unduly complex or long. The clearer the developer’s obligations are, the easier they will be to monitor and enforce. Also the simpler the terms the more quickly a legally binding agreement can be entered into.
  4. Where you can, agree a fixed price or open market sale. Try to avoid what you are paid being based on a market valuation appraisal. This will add time, cost and frustration to the transaction; both in negotiating the wording in the agreement and fixing the price at the end. Some deals will only work on this basis; if that is the case you need to be aware of the consequences of that.
  5. Where there is not a fixed price, make sure there is a minimum figure and/or minimum area of land that must obtain planning permission. This was you have control over the minimum sum you will be paid. You can still sell below this minimum if you wish to, but you cannot be compelled to do so.
  6. If the formula for calculating the purchase price is complex, then the agreement should contain worked examples. Worked examples are usually easier to understand than complex formulae which can be very useful where the agreement is intended to last for many years.
  7. Also where there is no fixed price, you need assurance that the planning permission used to determine the price is the best possible one that can realistically be obtained. You do not want to find that after selling the land a replacement and better planning permission is obtained. The developer may agree to an obligation to build out in accordance with the planning permission in which case he should be focussed on getting the best permission before buying. An alternative approach is to impose overage on the land so that if an alternative planning permission is obtained or the current one varied, an additional payment will fall due. Whilst ensuring you receive your true entitlement, you should not underestimate the complexity of such arrangements and the need to allow additional time and cost for these arrangements being agreed.
  8. Consider whether if your land is developed, it will lead to adjoining land also being developed with that adjoining land taking access through yours or connecting into services on your land. If this is a possibility, you should retain a strip of land (known as a ransom strip) along the boundaries with that land. Then if this happens, you will be able to obtain a payment for granting rights over the land or selling the land outright.
  9. If the developer is unsuccessful in securing planning, this may be a longer term journey for you. Accordingly you should ensure that the agreement provides for the developer to provide you with copies of all its reports, investigations, etc so that you have the foundations for another application in the future.

 

It will be unusual for development proposals not to trigger opposition. You rather than the developer probably have the local knowledge to try to reduce the scale of that opposition. Therefore alongside negotiating and agreeing terms with a developer, you should consider what actions you could take by yourself or supported by the developer to encourage support for the development and to address local concerns so as to reduce the level of opposition.

 

Peter Foskett

Partner, Royd Withy King 

Telephone:   01793 847777

 

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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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