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There are various legal agreements available which allow landowners and developers to collaborate, the most common are outlined below.
Traditionally Option agreements have been most prevalent however Promotion agreements are gaining popularity as they offer a shared goal between landowner and developer and can offer better returns for the landowner.
P R O M O T I O N A G R E E M E N T S
A 'promoter' collaborates with the landowner in achieving planning permission for a given site, which is then sold and profits split in favour of the landowner.
In return for the landowner fronting the land for development, the promoter will cover the costs associated in gaining approval and marketing/selling the site. The promotor pays these costs at his own risk as planning may be unachievable.
The promoter is reimbursed from the sale of the site plus takes a small percentage of the increase in value, not the overall site value, in return for fronting costs and risk.
This agreement works well for both the landowner and the promoter as they share a common goal in trying to achieve the highest price possible for the site.
O P T I O N A G R E E M E N T S
A developer may approach a landowner with a view to purchasing the land but wishes to have planning permission passed first, they retain the 'option' of purchasing the site upon approval.
Much like a promotion agreement, the developer pays all associated fee's in gaining approval. They then negotiate a reduced price with the landowner to account for these costs and for taking the risk also.
Option agreements can be difficult to negotiate as naturally the landowner will want the best price for their land, whereas the developer will be looking to pay as little as possible to offset taking on the costs, risk and to maximise their future build.
J O I N T V E N T U R E A G R E E M E N T S
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