YRPS Insight: Edition Eight - Flipbook - Page 8
THE ROUTE TO DEVELOPMENT:
WHAT ARE YOUR OPTIONS?
James Thompson, Associate Rural Chartered Surveyor discusses routes to
development for farmers and landowners.
Do you own land on the urban fringe adjacent to the local
town or village? Have you considered that your land may
be suitable for development? James Thompson, Associate
Chartered Surveyor based across the Sedgefield and
Northallerton offices at youngsRPS, discusses the options
that you should be considering to ensure that your land is an
attractive prospect to developers.
There are essentially three main routes to obtaining
development on your property:
At the date of writing, the consultation period for the
governments proposals for the planning system in England,
which aims to streamline and modernise the process and
ensure more land is available for development where it is
needed, has just closed.
Which is right for you?
If you wish to pursue development of your property, you
should be working to raise its profile, rather than waiting to
be approached by potential developers. Increasing the profile
of your land can be as simple as putting forward planning
representations to the Local Authority or instructing an
agent to actively market the opportunity to develop your
land, either on or off market.
• self-funding a planning application;
• securing an option agreement with a developer; or,
• entering a promotion agreement with a promotor.
Self-Funded Planning
A full planning application for a development site can be
a costly exercise, particularly once the lead-in promotion
surveys and design requirements are considered. Whilst
obtaining planning permission for a development site
yourself will bring greater reward in terms of your net land
return, this needs to be balanced against the potential risk of
not obtaining planning permission, or ultimately obtaining
planning consent for a site that is too onerous to implement.
Discussions regarding end values and the likelihood of
obtaining planning consent are essential at an early stage.
The initial early promotion work of putting forward planning
representations during Local Plan consultations is a relatively
low-cost method of gauging a Local Authority’s response for
a potential site. The representations are also a valuable tool
to highlight your site to potential developers or promoters.
We would always recommend enlisting the help of a
professional planning consultant to maximise your assets
potential.
Option Agreement
An option agreement gives the developer the right to buy
the land from the landowner within a given time period
(typically 5 to 10 years, depending on planning status). The
developer will agree under the terms of the option to apply
for planning permission at their own cost. If a satisfactory
planning consent is granted, then the developer may exercise
their option to purchase the land. The purchase price of the
land is then agreed between the landowner and developer,
with the developer receiving a percentage discount to
reflect their risk return in obtaining planning permission. This
method removes all the risk, however there can be conflicts
in agreeing the purchase price in a ‘closed market’. In order
to overcome conflicts in the negotiation process, it is always
advised to bring on board a professional, skilled and qualified
negotiator.
Promotion Agreement
A promoter can be a developer or an individual, and, like an
option agreement, the promoter will agree to promote the
land at their own expense and apply for planning permission.
If planning permission is granted, the promoter, landowner
and landowner’s agent agree a marketing strategy to sell the
land. The proceeds from any sale are distributed between
the landowner and promoter at the pre-agreed percentages,
following the promoter being reimbursed for planning and
other professional costs incurred. The advantage here is
that the arrangement allows the land to be put on the open
market for competitive tenders, thus avoiding the ‘closed
market’ associated with option agreements.
Conclusion
Obtaining advice at an early stage is key to ensuring that
the terms of any agreement are favourable and that you
understand the alternatives. A successful option or promotion
agreement invariably has the developer paying for the
landowner’s legal and agent fees, or, at least a proportion of
these. The benefits of an option or promotion agreement is
that planning permission is fully funded by the developer or
promoter with no upfront costs incurred by the landowner.
The distribution of sale proceeds from a promotion
agreement or the purchase price from an option agreement
can often take place several years following commencement.
Therefore, enlisting the help of a agent will ensure that each
party is aware of its obligations and potential costs and
return, resulting in a much smoother process.
youngsRPS offer a range of services enabling land to
come forward for development, from our dedicated
team of planners submitting planning applications and
representations, through to a team of experienced surveyors
negotiating option/promotion agreements and ultimately
the sale of development land.
To discuss your land, please contact:
James Thompson | james.thompson@youngsrps.com
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