Land Promotion, Option and Overage Agreements

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Identifying possible development opportunities can be a great way to maximise the value of your land. There are many ways to realise value of potential development land. The traditional route was for landowners to enter into an option agreement with developers and, whilst option agreements are still popular, more and more Landowners are now choosing to go down the route of land promotion agreements. 

Land Promotion Agreements – here the landowner instructs a third party (the promoter) to obtain planning permission on their behalf. The promoter is often paid based on a percentage of any increase in the value of the land as a result of the planning permission being obtained. 

Promoters will often take on a large proportion of the risk and generally take responsibility for the costs of obtaining permission; however the owner retains ownership of the land giving them more options in the event that permission is granted. It may be that the owner wishes to develop the land themselves or alternatively, the site can be sold to a developer. 

Option agreements – option agreements are entered into between the landowner and developer and give a developer the option to purchase land at any time during the agreed option period. 

Generally, once an option agreement has been entered into, the developer will seek planning permission for the land and if granted, will then serve notice on the landowner requiring the land to be sold. 

The sale price may be agreed in advance, but often it is calculated in accordance with a formula set out in the option agreement. 

The landowner usually receives an initial payment (or option fee) at the time of granting the option. This is because the landowner is restricted in their dealing with the land during the option period.  

Overage – If you are intending to sell land which has potential to be developed at some point in the future, but which is unlikely to get permission now, or you need to sell land prior to obtaining planning permission, you should consider entering into an overage agreement. 

This type of agreement provides that, in the event of planning permission being granted in the future, the owner at that time will be required to make a further payment to you, generally calculated based on a percentage of any increase in value as a result of the permission.

These agreements carry a greater risk to the landowner and are often the cause of disputes, however they do offer a solution where a quick sale is required.

Our Land & Development team are dealmakers and offer a comprehensive start-to-finish service and understand the need to fulfil commercial and strategic ambitions in a timely fashion, with involvement from the earliest stage possible.

Whatever your goal, whatever the size and scope of your project, our highly experienced, pragmatic team are here to support you, advise you and get the job done.

Tim Hotchkiss

Partner and Head of Land & Development

Contact a member of the team  

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