Freeths Real Estate Law Blog – Maximising the value of land
We assist landowners in maximising the value of development land by negotiating land promotion agreements.
What is a Promotion Agreement?
A promotion agreement is a joint venture contract entered into between a landowner and a promoter. Under the terms of the contract, the promoter agrees to promote the land at its own cost and apply for planning permission. Following the grant of an acceptable planning permission, a promoter will market the site and will receive a share of the net sale proceeds when the land is sold, as well as reimbursement of some or all of the promotion costs that the promoter incurred.
Under a promotion agreement, the landowner and promoter are obliged to collaborate with each other in order to achieve certain common objectives, including:
- To ensure all appropriate measures are taken to obtain planning permission as soon as reasonably possible
- To maximise the area of the site which can be developed by the planning permission
- To use reasonable endeavours to ensure that any affordable housing comprised in a proposed development does not exceed the requirements of the local planning authority’s policy from time to time
- For the parties to act without undue delay in performing their respective obligations
- To minimise so far as practicable sums of money payable in respect of CIL, common facilities and/or deferred consideration and/or planning levy and/or sale preparation costs
- To seek to sell the site once planning permission has been obtained on the best terms
- To maximise the sale price of the site.
It is essential that a landowner uses an experienced promoter with good knowledge of local planning policies and the market within which the land is situated. The promoter must also have suitably experienced and reputable consultants to advise on planning, architectural, engineering and environmental matters.
Advantages of Promotion Agreements
Promotion agreements have a number of benefits for landowners and are in our experience a popular alternative to granting developers options over land, especially where a mid- to long-term strategy has to be taken to developing land.
One of main advantages for landowners is that the risk and expense of promoting a site and obtaining planning permission which, often runs into the £10,000s, is passed on to the promoter.
A promotion agreement also enables a landowner to retain a degree of control over its site throughout the planning, marketing and disposal process.
Another advantage is that the active marketing of the site once planning is secured can result in competing bids, which maximises the sale price and may result in a landowner receiving more for the site than if it was purchased by a developer exercising an option.
For more information or guidance, please do contact one of Freeths’ Real Estate team.
The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.
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