Selling Land To Developers

Arguably, this is the most beneficial arrangement for a prospective seller. The contract would state that on the granting of the planning permission the seller is obliged to purchase the property. This allows the seller maximum protection in relation to the sale and a landowner could take the developer to court for specific performance of the contract.

The formation of the contract is important, usually there would be a clause to state that any planning permission will need to be satisfactory for the buyer and such clauses should be carefully considered so that there is not an ‘out’ for the developer in any circumstance.

It is also important that time limits are placed on a conditional agreement so that each party is not bound by the same indefinitely.

An option agreement is more favourable for a developer. Under these agreements the developer will usually apply for planning permission. Once that planning permission is granted, the developer will have a choice whether or not they proceed with the purchase of the property. This can mean that a seller is unable to deal with their land as they see fit or sell the same for the period of the option agreement only for the property not to be purchased at the end.

Owing to this, sellers should receive something in return for the grant of the option. This may be money or some other benefit.

It is important for sellers to remember that an option is only the possibility of a future sale and as such any purchase price recorded in the option agreement is only a possible purchase price and might never be paid, as such sellers should not be swayed to accept an agreement only because of a generous purchase price.

These work differently to the above-mentioned agreements and allow a developer the opportunity to apply for planning permission and then sell the land on to another party who will actually develop the property. When developers advocate for these agreements, they are likely to discuss with the seller that this puts both the seller’s, and the developer’s interests on the same level as they will both want to achieve the greatest price for the land. While this may be helpful it is also worth remembering that these agreements come with large benefits for developers who face far less risk in selling the land on, rather than developing the land themselves.

Sometimes promotion agreements will also contain provisions that allow the developer an option to purchase the property should a buyer not be found.