THE ESSENTIAL GUIDE: Land Promotion Agreements explained

Land Promotion Agreements, sometimes known as Planning Promotion Agreements, are an increasingly common way for land owners to get the expertise and financial support they need to secure planning permission for development on land they own.

Promotion Agreements

A Promotion Agreement is a legally binding contract between the land owner and their partner – usually a land promoter. They can be applied to any type of site, but are typically used where securing planning permission is not straight-forward and may take several years to achieve.

The land promoter will commit to using their funding, experience and expertise to secure planning permission on the piece of land – efforts which are usually at the promoter’s risk since the land owner isn’t expected to provide any of the funding needed to progress planning.

In return, the land owner will commit to selling the site once planning permission is secured, with the promoter taking a share of the actual sale price for the site. The size of the promoter’s share varies depending on the size and location of the site as well as the chances of success. The exact figure will be agreed at the outset and written into the agreement.

The agreement will be tailored to the land owners’ individual circumstances, but will include:

  • the length of time the promoter has to successfully secure planning permission;
  • an obligation on the promoter to work diligently;
  • a limit to the costs incurred by the promoter to only those that are reasonable, and;
  • the share of the eventual sales price the land promoter will receive.

There are numerous benefits to this approach for land owners:

1. Your interests are aligned

Because the promoter’s return is a share of the selling price for the site, their motivation is the same as the land owner’s – to maximise the value of the land. As the promoter only makes a return if they succeed, you can be certain they’ll work hard to secure planning permission.

2. The promoter funds the whole process

It doesn’t cost the land owner anything.

The promoter will fund the whole process – even covering your legal costs for entering into the agreement in the first place. This means that, if for some reason the promotion is ultimately unsuccessful, the land owner isn’t out of pocket. The promoter’s return is paid out of the selling price for the site when it is eventually sold.

3. The price of the site is determined via a competitive bidding process

Once planning permission is secured, the promoter will put together a detailed information pack and make sure the site is “shovel ready” before marketing it for sale. Because so much risk has been removed and construction can start on site quickly, developers are prepared to pay a premium. Marketing sites in this way helps to secure the best possible value for the land owner.

4. The promoter will take the hassle away from you

The land promoter will run the whole process. They’ll develop the planning strategy, appoint and manage a consultant team, liaise with the council and negotiate the eventual sale of the site to a developer.

5. You’ll be kept informed

All reputable land promoters will be open and transparent with you throughout the process. They’ll keep you informed on progress and be available to discuss the site from beginning to end.

6. You retain the use of your land

The land is still yours – while the land promoter is working to try to secure planning permission, you can carry on using it for whatever you were using it for before. You’ll be asked not to do anything that would increase the costs of development, or to sell it without letting the promoter know, but otherwise your use of the land is unfettered.

The alternatives

The main alternative to a Promotion Agreement is an Option Agreement – often used by developers to secure control of a site. Option Agreements give developers a fixed amount of time in which to secure planning permission and buy the site, usually at a discounted price.

There are two main differences between Options and Promotion Agreements.

Firstly, the developer doesn’t have to buy the site as soon as planning permission is granted. Instead, they can choose to hold the site whilst there is still time left on the Option, buying it at a time that suits them.

Secondly, the price paid is a discount to an estimated “market value” at the point planning permission is secured. Instead of being tested through a competitive bidding process, that “market value” is an estimate based on their planning permission, their technical designs and their view of selling prices. It doesn’t necessarily represent the selling price that could be achieved through competitive bidding.

Whilst land owners could choose to challenge the valuation, doing so is time consuming and costly. The developer always has the advantage, too, because the estimate is based on the planning permission and technical information they provide.

While the motivation for a land promoter is to maximise the price paid for your site, the motivation for the developer is to minimise it.

We know that the process of selling land isn’t always easy, but at The Strategic Land Group we work hard to give you peace of mind every step of the way, removing stress associated with the sale and giving you confidence that the process is in the very best hands.

If you want to work with a Land Promoter you can trust, give us a call – 0161 220 2935.

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