What is a land promotion agreement?
A land promotion agreement is a legally binding contract between a landowner and a land promoter. Such an agreement enables the landowner to have access to the promoter’s experience, expertise and financial resources to obtain planning permission for development on the landowner’s property. The planning permission significantly increases the value of that property which can then be sold for a significant uplift.
How does it work?
Under a land promotion agreement, a promoter typically agrees with the landowner to:
- Apply for planning permission for a development on the landowner's property; and
- Market the property for sale on the open market once planning permission has been obtained.
The promoter may pay a financial premium in order to enter into the agreement and funds all of the planning promotion and marketing costs.
If planning permission is not obtained by a certain date, the agreement terminates and neither the premium nor any costs incurred by the promoter are reimbursed.
If planning permission is obtained and the property is sold then the landowner:
- Reimburses the premium paid and the promoter's costs incurred from the gross sale receipts; and
- Pays a fee to the promoter being an agreed % of the net sale receipts.
What does each party contribute to the Process?
The promoter contributes their money and expertise to optimise the chances of obtaining planning permission for development. The promoter manages the whole planning promotion process and accepts all of the financial risk by funding the landowner’s relevant professional costs as well as the planning and marketing costs. Because there is no guarantee that those costs will be recouped as the promoter only gets paid if the property is successfully sold, the promoter is naturally motivated to succeed.
The landowner doesn’t have to make any financial contribution to the planning promotion process. The landowner contributes the property which it agrees to sell if planning permission is obtained. Until planning permission is obtained and the property sold the landowner retains ownership of it and is able to continue to use it.
If you are a landowner or a promoter thinking about entering into a land promotion agreement and want specialist advice, please give Claire Waring a call on 07867 393 496.
