With the increased demand and need for new housing in England, farmers are frequently being approached by developers, property finders and land promoters to consider future strategic land development.  Daniel Sturman outlines what might be involved in such agreements and analyses whether land promoters can offer value to famers and landowners. 

An increasingly popular trend developing in this area is land promotion and the use of land promotion agreements.  So what is a land promoter and why do they use such agreements?  A land promotor effectively acts as the land owner’s agent and wishes to have exclusive use of the land owner’s property for a specific period of time for promotion, planning and marketing purposes.  The promoter will promote the land, make applications for planning consent to increase market value and deal with disposal.  All of the leg work, including planning and promotion costs, will usually be paid for by the promoter, which is a massive incentive for land owners to consider such agreements.

Once the land has been effectively marketed and a sale is completed, the promoter will use the gross sale proceeds to reimburse the expenses incurred in promotion and then distribute the net sale proceeds with the land owner, with the promoter receiving a percentage of those net sale proceeds.

The land promotion agreement is entered into between the land owner and the promoter and is used to document the arrangement between the two parties. Usually the promoter will pay an initial sum to the land owner representing consideration for entering the agreement.  The terms covered will include:

• the obligations on the promoter and the land owner
• what would be a satisfactory planning permission
• defining the promotion costs
• defining market value
• the initial promotion sum
• inspection of records and accounts in order to check the promoter’s costs
• planning strategy, application, and statutory agreements such as s106 agreements
• meetings and cooperation
• disposal strategy and dispute resolution 

Once agreed and exchanged, the land promotion agreement is usually registered against the land owner’s property to protect the promoter’s interest along with a restriction. If the promotion period expires and no sales have been achieved, the agreement is terminated and entry removed from the legal title.

As you can see, these agreements should be as comprehensive as possible so that both parties have a clear strategy and working relationship.  Because of this, the down side is that such agreements are lengthy and costly.  Usually when acting for land owners we advise that the promoter’s solicitors provide an undertaking to pay the land owner’s costs first, so that these are covered in case the matter does not proceed.

These agreements are becoming increasingly popular and allow farmers to have a third party pay for and deal with promoting the land, deal with planning on their behalf, and remove the risk and costs away from the land owner.  Whilst such agreements are more risky for the promoter, if successful the result can lead to great profits being made by land owners and farmers.  The benefits are obviously worth consideration but we would always advise taking legal advice before the agreement is finalised.

For more advice, please contact Daniel Sturman on 01245 453811 or email daniel.sturman@birkettlong.co.uk