What is a Land Promotion Agreement?
Land Promotion Agreements are becoming an increasingly popular way to enable landowners to gain the necessary expertise and financial resources from Land Promoters or developers to secure planning permission on a parcel of land. This naturally significantly increases the value of that land and thus can be sold for development of which the proceeds can be shared.
What is a Land Promotion Agreement?
A land promotion agreement is a legally binding contract between a landowner and an aligned party. This partner is typically a land promoter or developer. Land Promotion Agreements are used to allow a promoter or developer to partner with the landowner to gain planning permission on a parcel of land which is then sold for a significant uplift.
The developer or land promoter will bring their money and expertise to enable the best possible chance of gaining successful planning consent on the site. This would all be at the land promoter’s risk. The landowner doesn’t have to contribute anything apart from the land which they agree to be sold once consent is granted.
Once the planning is in place, the land would be properly market tested through an active marketing campaign to ensure the land is sold for the best possible price. The promoter will also pay for the marketing costs of doing this.
In return for doing this and taking the risk of planning on, the land promoter would receive a % of the agreed sale price which would be set out in the land promotion agreement at the beginning.
The Land Promotion agreement would typically include:
An agreed time the land promoter has to successfully gain planning permission.
A cap on the costs incurred by the land promoter to ensure they are kept reasonable.
The % share of the eventual sale the land promoter will receive on the sale of the land.
Why would a landowner undertake a Land Promotion Agreement?
1. The promoter takes all the risk by paying for planning.
The land promoter will pay for all associated costs of getting planning and thus if the planning is not granted, there is no risk to the landowner as the promoter bears all the costs. The promoter only gets paid when the land is sold with planning to a developer.
2. Your interests are aligned.
Due to the nature of a land promotion agreement, both the landowner and land promoter want to achieve the best possible price from the sale of the land. The land promoter only gets paid if they succeed so both parties are motivated for it to be successful.
3. The land is market-tested and decided through competitive bidding.
Unlike with an option agreement where typically there is only one purchaser, with a land promotion agreement, the land will be taken to the open market with the benefit of consent and a proven marketing strategy and competitive bidding process. Due to the land already being consented and thus considerably less risky, a developer is willing to pay a premium for the site.
4. The Land promoter will manage the whole process.
The landowner does not have to do or worry about anything once a Land Promotion Agreement has been signed. The land promoter will take all responsibility for getting consent on the land and deal with the sale once planning permission has been granted.
5. The landowner retains control over the land.
One of the biggest benefits to a Land Promotion Agreement is the land is still yours and you retain all use of it whilst the promoter is working on securing planning.
6. The Landowner will be well informed.
Throughout the whole process, the land promoter will keep the landowner well informed with progress and be totally transparent from start to finish. The landowner will be regularly consulted on decisions such as the sale of the land.
What are the alternatives to a Land Promotion Agreement?
The main alternative is an Option Agreement. Option agreements are typically used by developers to secure a parcel of land and secure the planning on, very much like a Land Promotion Agreement. However, unlike a Land Promotion Agreement, the landowner sells the land to the developer for an agreed price, which is usually at a discount for taking on the risk. The benefits to an option are there is a pre-agreed sale once planning is achieved and by parenting with a local developer as opposed to a land promotion, can enable the LPA to see the scheme is achievable to build and there is already a developer in place to deliver it.
We understand the process of selling land and securing planning can be very tricky, but Marches Homes can help landowners significantly increase the value of their land through planning with no risk.
If you would like to know more, please do get in touch with us and see how we can help you.
Miles Pattison-Appleton
Land Director
miles@marchehomes.co.uk
07772814468