When it comes to land that sells for development, it may appear that some landowners are just lucky but that is not the case; such landowners have made their own luck! Turning farmland into a potential housing development happens by actively and successfully promoting the land (usually over several years). If a landowner is not trying to promote the land or working with third parties to do so, they have little to no chance of success.
Is now the right time to promote my land for development and what’s the current development market like?
It is no secret that the development land prices have dropped from the 2022 peak (prior to Liz Truss’s mini budget in October 2022). A few examples of issues that housebuilders and purchasers are contending with are:
On the flip side, development land prices continue to benefit from a limited supply of good development sites available on the market and in turn, limiting the current reduction in sales prices. Looking forward, it is predicted that the inflation rate will slow to around 5% by the end of the year, which will also benefit the sector.
Development sites often take many years to promote and a few years to construct. Therefore, there is ample time for the market to recover for a development scheme that begins the promotion process today. In addition, a net minimum sale price (per acre) can and should be put in place to protect the landowner. Our knowledge of strategic development sales is invaluable in the sales process to ensure that the best price can be achieved given the current market circumstance.
What are my promotion options?
A promotion agreement is a legally binding contract between the landowner and a land promoter. The promotion agreement is created to bind the parties to work together in achieving a desirable planning permission. The promoter funds the planning process entirely at their risk and if they are unsuccessful then the landowner has nothing to pay. However, if the promoter is successful then the land is marketed, a proportion is paid over to the promoter and the remainder is available for the landowner. There are of course many other important terms within a promotion agreement to protect the landowner which would need to be carefully negotiated. The correct land promoter will bring with them experience and expertise that is invaluable to achieving the desired outcome.
An option agreement is a legally binding contract between the landowner and a developer. The option agreement grants the developer the right to purchase the land from the landowner during an option period in return for an option fee. The developer may look to gain planning on the land during the period. The purchase price the developer will need to pay the landowner will be pre-agreed within the option agreement. The price could be a fixed price or a discounted percentage from the agreed market value of the site at the point of sale. The right to exercise the option lies with the developer.
Land can be promoted by the landowner, usually with the help of an agent and other third parties. The landowner will look to fund the promotion of their land themselves, the benefit being that if their promotion is successful, the landowner will keep a higher amount of the proceeds. It is usually more viable for a landowner to promote their land on a smaller scheme.
How can we help?
Robinson & Hall, acting as land promoter, has promoted smaller sites for clients and the costs for the promotion are shared between Robinson & Hall and the landowner. We would take a pre-agreed percentage of the final sale if the promotion was successful, similar to any other promoter.
Robinson & Hall can increase your odds
We act for the landowner, not the promoter, to achieve the most favourable terms. Factors that are often negotiated include the upfront payment to the landowner, the length of the term of the agreement and the percentage split of the proceeds.
Robinson & Hall has a preferred list of promoters who we approach on behalf of our clients and who have a track record of successfully promoting sites for development.
From instruction to the point of sale, we will be working on behalf of the landowner to achieve the best results.
If you are considering your options and would like to find out how we can help you, then please contact David Jones, Partner at Robinson & Hall, on 01234 362906 or Hugo Bryan, Assistant Development Surveyor at Robinson & Hall, on 01234 362894.