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Agreements can protect both parties in land deals

In the face of a relaxation in local planning laws, landowners are being urged to consider the best way to explore development opportunities.

Martin Beardsworth, partner in the Commercial Property team at regional law firm Napthens, reveals his team has seen an increasing trend in the use of Planning Promotion Agreements.

These are agreements entered into between a developer/promoter and landowners – the developer will usually agree to apply for planning permission and market the land for sale, taking some of the burden from a landowner in the process.

If the land is ultimately sold, both parties will take a cut of the proceeds. If planning permission is not obtained by a certain date, the agreement usually terminates and the promoter of the land will not be reimbursed.

Martin Beardsworth of Napthens reports that promotion agreements often contain a list of objectives to maximise the market value of the land, and a requirement that the promoter submits the planning application at the earliest opportunity.

He said: “The promoter will fund the planning process, thereby removing the risk for the landowner, both ultimately sharing the increase in land value if planning permission is obtained.

“Such agreements are useful in many cases as both the promoter and landowner will have a common goal, to keep costs to a minimum and maximise the sale proceeds.

“This is often seen as an advantage over more conventional option agreements, where there can be a conflict of interest over the cost – the landowner will want the highest price, while the developer will want to obtain the land for the lowest price.

“The use of Promotion Agreements does not eliminate all risks but there are ways to protect the parties and reduce their risk, such as incorporating a cap on promoter costs and having a minimum purchase price.

“With the Government committed to providing more housing and a relaxation in local planning laws, our team is seeing an increasing trend in the use of Planning Promotion Agreements. It is worth exploring them with the right legal advice.”