Selling Land for Development in the UK

16.09.19

Selling Land for Development in the UK

The United Kingdom is currently facing a housing shortage, and one of the reasons the demand has surpassed supply is the lack of desirable land in suitable areas on which to build. It is no wonder then that many landowners are looking to sell for development. Here are some tips which will help you in selling your land for development.

1.     Get your title sorted

It might seem obvious, but any issues with the title will delay sales and deter developers. Missing documents, boundary problems, unregistered land, restrictive covenants, lack of easements, or rights of way or rights of access- all of these can be resolved but addressing the issue early is necessary. You must ensure that the title is marketable and good to go. Whether your land has direct access to the adopted highway or not will play an important role. This is because it is one of the main things which a developer looks for when making a deal.  

2.     Get Proper Tax Advice

This is an important part of the process and must be addressed as early as possible. You will need professional advice for structuring a transaction which makes the most of available exemptions and reliefs. Capital Gains Tax, Value Added Tax, Income Tax, Inheritance Tax, and Stamp Duty Land Tax are needed to be considered and planned accordingly. Before exchanging contracts, most developers would like to make sure that the seller has obtained professional tax advice.

3.     Promotion Agreements

This type of agreements is now more popular amongst developers than conventional option agreements. These allow the promoter which is often a specialist planning consultant or a developer, to obtain planning permission at their own expense. The landowner must sell once the planning consent is obtained. And the promoters receive a part of the proceeds as their fee. Specialist advice is essential for this type of agreements. And the landowners must negotiate for protecting their interests under these agreements. You need to think about how long you will be tied into such an agreement and if you are prepared for that. 

4.     Unconditional Sales

In this type of agreement, no specific conditions have to be met for sale to happen. If you accept such an offer, then the process of exchange and completion will be initiated. This type of agreement will allow for the quickest release of capital. However, the maximum value of land won't be achieved unless the buyer has suitable planning permission. If the buyer is confident that they can make a profit, then some "hope value" may be added to the initial price. The amount of this hope value depends on the confidence of the buyer in making a profit.

 5.     Conditional/Subject to Planning Deals

In this type of agreement, the buyer will attempt to gain planning permission on the land at their own expense. If you give suitable planning permission, then the buyer is bound to buy the land at an agreed price. The reduction of risk for the developer will be reflected by this agreed price. The agreed price in a conditional deal is usually higher than the price in an unconditional deal. However, the sale may not be completed at all, and even if it does, it may take some years.

6.     Option Agreements

In this type of agreement, the developer has the option to buy a site at any point over the agreed period. The developer may buy the site at a pre-arranged price or at a reduction to pen market value. The sale will happen when you grant planning permission, but the developer will be under no obligation to buy the site.

7.     Environmental issues

When environmental issues are mentioned, usually contaminated land is what comes to mind. But in this case, it is likely to be potential drainage or flooding problems. If the land has a history of waterlogging or flooding, then it is probably not going to be welcome news for the developer. If the land is near sources of contamination or if it has been used for contaminative purposes in the past, then remedying actual contamination might be very expensive. It will also considerably impact the value of your land. If any surveys were carried out in the past or if there are any reports, then you should readily produce them upon request. 

8.     Informal rights of way

If a footpath crosses some part of your land, then you will probably know about it. However, you need to make sure if someone is using your land on a casual basis without any permission. These can establish prescriptive rights through long use. And it will have an adverse effect on the value of your land if successfully proven.

Simon Kyriacou

01.01.70
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