Planning permission and development options for landowners
By Toby Pound
There has been much coverage in the local press in recent months over Babergh’s decision to grant planning permission for 144 new homes on farmland close to East Bergholt. This is just one of a number of recent planning decisions to allow building on green field sites in East Suffolk and with local authorities coming under increasing pressure to meet targets for new houses, landowners in the right locations have a real opportunity to obtain significant gains in land values by obtaining planning consents for development. The issue for landowners is how best to achieve those gains.
The traditional route for a landowner was to grant an option to a developer to buy the land once planning permission has been obtained. The advantage of this route to the developer is that it has complete discretion over whether or not to buy the property and, during the option period, it can secure the property from its competitors. It can apply for planning permission knowing that it can buy the property if it is successful but does not have to buy if planning permission is refused or if the planning permission has conditions which make the development commercially unviable. For his part, the landowner can rely on the experience and skill of the developer during the planning process with no financial risk.
In recent years, many landowners have taken a different route by linking up with a land promoter who may or may not be a developer. Under a land promotion agreement, the landowner and the promoter agree to apply for planning permission for a development on the landowner’s land and then to market the property for sale once planning permission has been obtained. The promoter usually funds the planning and marketing costs initially and, if planning permission is not obtained by a certain date, the promotion agreement will end.
If planning permission is obtained, the property is marketed for sale to a developer and the promoter’s costs in obtaining planning are reimbursed. The landowner and the promoter then split the net proceeds of sale in agreed shares, reflecting the landowner’s ownership of the land and the promoter’s expertise and skill in obtaining planning. The main advantage for the landowner is that he is not committed to a single developer at an early stage in the process.
Any landowner considering opportunities for development needs to seek early legal advice in this complex area.
Article published previously in Business East, 14th June 2016
Toby Pound is a partner and head of the Property department at Barker Gotelee.