Land promotion agreement

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Document overview

This is a promotion agreement for land and/or buildings to be used by a land promoter seeking to develop property that someone else owns.The promoter carries out the process of obtaining planning permission for development at his or her own risk, on the condition that the landowner sells the land as required and shares the uplift in value with the promoter.
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  • England & Wales
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  • Length:18 pages (2600 words)
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About this promotion agreement

This is an agreement for use by a promoter and a property owner whereby the promoter undertakes to carry out all the work required in connection with obtaining planning permission for development of the property.

As written it assumes that the property that will be developed is a piece of land. However, the agreement could equally be used for land with buildings, or just for redevelopment of an existing building.

Within this description we refer to the property as land.

Reduced risk for both parties

Most of the text of the agreement provides protection for the promoter whose money and time are at risk. As such, it is likely to be the promoter who buys and completes this agreement, not the landowner.

The main worry of most landowners is that their land will be tied up for a long period of time. The document mitigates that fear by providing for whatever reasonable time period as required, extendable in various specific circumstances and external events.

Because, over time, the promoter will better understand the chance of obtaining planning permission and what the value of that permission might be, the agreement provides for the absolute freedom of the promoter to walk away from the deal and write off the money and time invested to date. That means he can use the signed agreement to invest what is required in a survey, architects fees, meetings with a local authority and other early costs before making a final decision whether or not to continue to spend the bulk of the money required.

A flexible document template for your deal

This document makes a number of assumptions as to the arrangement between the parties. If these are not the case, then only minimal changes are needed.

The primary planning purpose will be for development of property for residential use.

The promoter is paid as a share of profit and not as a fee. Note that for VAT purposes, HMRC will treat the profit share as chargeable. The document states that the landowner will pay the VAT charged by the promoter and reclaim it if his or her business status so permits.

The landowner is compelled to give vacant possession when the promoter asks him or her to do so. That effectively means he or she has to make arrangements for leases and tenancies and other arrangements to be determinable at comparatively short notice.

Provision is made for the promoter to obtain development for the property in phases if that is likely to be favourable and more successful than a single application for the whole.

There are provisions to deal with any residual part of the land that is outside of any planning permission obtained.

How the agreement deals with the eventual sale of land

An important area that is covered very thoroughly concerns the arrangements for sale. The basic legal difficulty in this area is that the promoter has no real power to sell the land – because he does not own it. The agreement provides a procedure which compels the landowner to sell – but only subject to pre-agreed criteria.

All of the sale process is covered precisely. There is no reason why the parties should not agree different terms but what we have provided is a full and detailed procedure which will work.

This selling procedure also provides an option whereby the promoter can buy the land in the same way as any other buyer. It is assumed that there will be no price reduction for the promoter but the document does provide the flexible timing so that the promoter will be able to arrange finance.

The agreement provides a substantial and precise instruction that the landowner must give to his or her conveyancer. This is important because the promoter has no control whatever over the conveyancer whose instructions will be taken only from the landowner. These instructions cover a number of important legal items that benefit both parties. This avoids delay by problems caused by a conveyancer who decides to do things his or her own way.

It is specified that the land will be sold subject to the latest edition of Standard Commercial Conditions of Sale, or alternatively the RICS Common Auction Conditions.

Instructions to the conveyancer include specific easements to be granted and rights to be reserved. This provides for the promoter to take a share in any future ransom strip value occurring through later development of adjacent land.

Contents

The document template is written in plain English with a structure that only requires you to edit out what is not needed, rather than find words of your own to add in.

Not only does this make it easy to edit, the other party is far more likely to be happy with an agreement he or she can understand without translation by a lawyer.  

The contents of the document cover:

  • The fundamental contract
  • Owners' warranties
  • Extension of the Long Stop Date
  • Applications in phases
  • Promoter's Planning Obligations
  • Refusal on part of the Land
  • Promoter's activity
  • Present Tenancy
  • The Owners' covenants
  • Owners' restrictive promises
  • VAT and new tax
  • Early termination
  • Confidentiality
Sample land promotion agreement

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