When a landowner has land suitable for development and is thinking about how best to gain planning for a subsequent sale to a developer, they may consider entering into a promotion agreement. This will be with a planning specialist ‘promoter’ who will then work with the landowner to sell to a developer.
As housing demand increases, so do the opportunities for landowners to offer up land for development, and to seek to maximise their return on the land value.
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Promotion Agreement FAQ
What is a Promotion Agreement?
A promotion agreement is an agreement that a landowner has with a planning specialist to promote the landowner's land through the planning process in order to gain planning permission.
What are the advantages to a promotion agreement?
This model is seen to incentivise both parties and has the following advantages for a landowner:
- as the land will be sold on the open market for the best price obtainable, there is a genuine desire on both parties to maximise the value of land and net sale proceeds.
- the developer funds the planning and marketing costs initially and the developer’s costs are then reimbursed out of the gross sale proceeds. The landowner avoids any upfront land promotion costs, but this will reduce the net sale proceeds and each party’s share following a sale; and
- as any excessive planning costs will affect the developer’s own share of the sale proceeds, they are less likely to incur unreasonable and unnecessary costs.
What’s the difference between promotion and option agreements?
There will often be a number of parties involved in arranging a deal, but any agreement will primarily revolve around the obligations of the landowner and the developer/promoter.
Promotion Agreement – a developer or promoter agrees to apply for planning permission for a development on a landowner’s property and market the property for sale on the open market once planning permission has been obtained. The promoter funds the planning and marketing costs initially. If planning permission is obtained, the property is marketed for sale and sold. The promoter’s costs are reimbursed to the promoter out of the gross sale receipts and the promoter receives a proportion of the net sale proceeds (along with the landowner).
Option Agreement – a developer intends to apply for planning permission to develop the property and requires an option to purchase the property on notice following receipt of a planning permission.
