Chance, research, referral, introduction in whatever happy combination has brought together a landowner and a developer with a common cause all centred on a plot of land.
For the purposes of this article let us assume that the site has yet to receive the coveted planning permission needed to be developed economically to the benefit of the landowner, the developer, and the community in which it sits. Getting the best consent reasonably obtainable from the local planning authority is the joint objective of the parties in this new relationship.
What are the important considerations from a legal point of view?
The land needs to be clearly identified. The most important document in this respect is the Land Registry plan as it defines the extent of the legal title. Drawings based upon Ordnance Survey maps may create problems as the maps may well not follow the Land Registry plans. These plans themselves are not precise, so a visual inspection is vital to pick up any variation on the ground.
The land has been chosen because of its location, guided by the planning system as being a good prospect for future development. So, there is little choice about all the other factors that can affect the land. It will likely be subject to third party rights, usually regarding services, but such can also limit the title of the landowner, as when the mines and minerals are owned by a third party. It may be subject to obligations, positive and negative, which can determine what you can do on the land and may restrict its development. Deciding the effect of these factors on the attractiveness of the site and working out how to minimise or overcome such issues should be an early consideration before too much money is expended.
The location of the land can also determine that it should have or needs to acquire rights to be able to service and access the proposed development. These might be costly to acquire or make the requisitioning of service connection more expensive. Knowing that such rights are needed and exist or can be obtained is important at the outset.
The landowner is to tie up their land for a period to give the developer the opportunity of getting a planning permission. The developer needs time, access to the land for inspection and survey, the co-operation of the landowner and a relatively free hand to work with the local community, statutory consultees, planning consultants and the planning authority. Both parties need to be comfortable with the time scales being agreed. Above all they need to be realistic.
The nature of the relationship to be established should suit the parties and the circumstances. It is unlikely that neither will want nor expect a sale and purchase independent of planning permission being granted. So, any arrangement will have the grant of a suitable planning permission as a pre-condition of a sale. The developer could commit to buy if consent is granted (a conditional contract), be given the right to buy if it chooses (an option) or be able to require the landowner to sell on the open market to a third party and the proceeds shared between the landowner and the developer (a promotion agreement).
Any deal will have to identify what will be paid for the land once consented and sold. This can be a fixed sum agreed and easily calculable, a percentage of the full open market value of the consented site to be assessed at the time or a price to be determined by exposing the site for sale on the open market once consented.
In addition to legal issues there is the physical position and condition of the land and its flora and fauna which needs to be investigated and understood as such can have an impact on its prospects for planning permission and its developability hence its value as a development site. These factors will usually be considered by the developer together with other professional consultants as part of its work toward obtaining planning permission once the site has been secured legally.
If you have a prospective development opportunity and would like to discuss this with a legal adviser, please contact a member of our Development team on development@stephens-scown.co.uk or 01872 265100.
In the next article I look at how you can protect yourself until the exchange of contracts, and exclusivity agreements.