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‘Check legal agreements’ warning over rural development bids

Landowners are being warned to check legal agreements and take independent legal advice when being approached by developers looking to use land.

Andrew Holden, head of Rural at Napthens Solicitors, warns that his team has seen an increase in the number of developers approaching landowners, seeking to apply for planning permission for either renewable energy projects or residential developments.

In many cases, the developers seek an ‘option agreement’ from the landowner, giving the developer the chance to buy the land within a fixed period of time for an agreed price.

Andrew is urging landowners to make sure that these option agreements, as legally binding documents, are reviewed by a solicitor and negotiated or reviewed by a land agent.

He said: “In most cases, the developer is prepared to pay reasonable legal and agent’s fees for a review of the option, so there is no reason not to have the paperwork checked.

“There are a number of factors to watch out for in particular, including how long is the option period and whether it is extendable. Options are usually for an initial three to five years, but often have the provision allowing them to be extended, so landowners must make sure this provision ties in with their own future plans.

“Next, how is the purchase price calculated and are there any deductions. Landowners can’t assume that an option of 20 acres will mean payment on all 20 acres. Open spaces and roads may be excluded.

“Additionally, does the option involve purchasing the whole area or can the developer acquire it in stages or acquire part only – this could impact a landowner in terms of both Capital Gains Tax liability and future viability of the land, which is of particular importance in the farming sector.

“We are certainly not trying to scare people away from these option agreements; as one client told me, ‘the best crop you can grow is a crop of houses’, but we are just urging clients to ensure they represent the best possible outcome for both parties”.