For many landowners, being approached by a developer or a land promoter can feel like a once in a lifetime opportunity.
After owning land with development potential for many years, an offer to unlock its value can be particularly exciting.
However, because these opportunities are often rare it is essential to approach them carefully and make informed decisions from the outset.
Strategic land agreements are complex and can have long-term implications for both the landowner and their legacy. With significant financial stakes and processes that can span many years, securing the right agreement is crucial.
Below are five steps landowners should take to ensure strategic land deals go as smoothly as possible.
It is perhaps only natural to focus on the percentage share of proceeds being offered. But this does not tell the whole story. Headline figures can distract from more important considerations such as the promoter’s experience, track record and planning strategy. A smaller share of a successful scheme can be worth significantly more than a larger share of a poorly executed one. The planning system is complex and different promoters may adopt very different approaches to achieving consent – so it’s important for landowners to understand how their land will be promoted, what type of development is being pursued and whether the strategy aligns with their objectives.
Many landowners underestimate how long the planning and promotion process can take. In practice, strategic land projects can take 10 years or more from start to finish and – even if relatively straightforward – they rarely complete in less than three years. Without recognising these challenges, landowners can sometimes become frustrated by what appears to be a lack of progress. It is therefore important for all parties – landowner and developer – to set realistic expectations from the beginning to help avoid disappointment.
Securing planning permission is expensive. Fees for planning consultants, technical reports, legal advice, surveys and appeals can quickly add up. In a promotion/option agreement, these costs are deducted from the sale proceeds before profits are shared, meaning they can have a significant impact on a landowner’s final return. This can often be underestimated when agreeing terms, so it’s important to include safeguards such as setting a sensible cap on recoverable promotion costs. Determining the right level of protection can be challenging as every site is different, so professional advice can be particularly valuable.
Many landowners overlook this important safeguard. Agreements can last for many years during which time market conditions may change significantly. Without proper protection, there is a risk the site could be sold at a price that falls short of the landowner’s expectations. Minimum price provision sets a threshold below which the land cannot be sold without the landowner’s approval – meaning it cannot be disposed of at a lower value just to achieve a quick sale. However, it’s important to ensure the minimum price is realistic. Set too high, it may restrict the promoter’s ability to market the site effectively and delay a sale. The ideal scenario is to find a balance between landowner protection and flexibility to respond to changing market conditions.
The key to ensuring landowners are best placed to maximise potential opportunities is to seek professional advice as early in the process as possible. The ideal time to appoint an adviser is before engaging in detailed discussions with a promoter or developer. At this stage, the interests of negotiating parties are often least aligned – and having someone on hand with experience can make a difference. A good adviser will structure an agreement to protect the landowner’s interests, secure better terms and help them understand their options. A well-drafted contract can also help reduce the risk of disputes further down the line. To that end, the roles of solicitors and surveyors are also important. Instructing a specialist team with expert knowledge and a strong track record of managing strategic land deals – alongside a thorough understanding of the commercial elements of the deal –will ensure the process runs as smoothly as possible.
