Site and Land Acquisition Solicitors
The contracts you use when acquiring a site are crucial because they provide a legally binding framework, that protects your investment and ensures a smooth, enforceable transaction. We help residential developers buy land using a variety of contact types depending on their goals:
A key aspect of each is to focus firmly on the end objective – building and selling new homes. Before a developer is committed to the purchase, we need to remove all obstacles to development.
There may be restrictive covenants or rights of way. Are they enforceable? Can they be varied or released? Can we cover them with insurance? These are just a few of the issues we will address, and we will always check back with you regarding your objectives and commercial realities.
Our role is to keep sight of the big picture while never missing the detail.
To speak to a solicitor about a residential development, get in touch with Switalskis today by calling 0800 138 0458 or contact us through the website.
Conditional contracts are among the most common contract types during site acquisitions.
Commonly, the contract is “subject to planning”, and the practical implications of that can be complex. Typically, you are not legally committed until a “satisfactory planning permission” has been granted. What counts as “satisfactory”, however, is not always clear. Sometimes, the buyer has sole discretion in deciding whether the permission meets their needs. In other cases, the contract may require the buyer to make that decision “reasonably” based on objective criteria.
These distinctions are crucial in ensuring a buyer does not become tied to a site that cannot be developed profitably—or at all. We deal with these issues daily.
There are other types of conditional contracts as well. For example, an offer might be made subject to satisfactory ground conditions. In such cases, it’s essential for the contract to define what “satisfactory” means in this context. If the ground conditions are poor, the next steps depend on the terms of the contract. Some agreements allow the buyer to withdraw, while others include a purchase price adjustment mechanism. Quite often, however, the contract remains silent on these issues – particularly where ground surveys are carried out after the Heads of Terms are agreed but before contracts are exchanged.
This is why having experienced solicitors involved from the outset is essential. They can identify potential risks, advise on appropriate provisions, and help ensure the contract properly reflects your commercial intentions.
Once contracts are exchanged, you are committed to the purchase. You need to make sure that you are ready to go ahead at that point.
Typically, that will include a planning permission that you are satisfied with – perhaps full permission obtained for a different scheme or an outline permission that you are confident you can work with. Even if there is full permission, you must ensure that the contract enables you to implement the permission using the seller’s drawings (substituting your house types).
Unconditional contracts are quite rare. They are only really suitable for “oven-ready” sites.
Options are still used a lot, despite the rise of promotion agreements.
Under an option agreement the developer has the right, but not the obligation, to buy the land on pre-determined terms. That’s unlike a conditional contract, where the developer legally has to buy the land if the conditions are satisfied.
An option agreement often involves as much legal work as a full site purchase – even if the option is never exercised. That’s because a notice to exercise an option creates a binding unconditional contract – so you have to be sure that the title and searches of the land are satisfactory and everything else is in place.
It is possible to wait until later in the planning process to carry out the legal due diligence such as searches. However it is a risk to spend time and money on reports and applications, only to uncover a covenant or legal issue that stops you being able to proceed with your plans.
By working with us from the start of the process we can help you to identify potential problems before you invest too much and risk losses.
Options can be at a fixed price or expressed as a percentage of the market value of the land. If you choose an option agreement that is a percentage of the market value your agreement needs to be clear on when the market value is assessed. You also need to consider if you can deduct your planning costs from the price. Often the percentage represents a discount against full market value to reflect the fact that the developer is expected to carry the planning costs.
From a landowner’s perspective, one of the key issues is how long the option period is, that is how long the land is tied up for. The landowner may be relatively relaxed if that period is short, but less so if the developer is able to extend it or renew the option period.
Promotion Agreements have gained in popularity in recent years, but it’s important to understand how they work.
A Promotion Agreement is fundamentally different from a conditional contract or Option Agreement (which ultimately may lead to the owner selling the land to the developer). Under a Promotion Agreement the “Promoter” (not necessarily a developer) stands side-by-side with the landowner, seeking to get a suitable grant of planning permission at the Promoter’s expense. When planning permission is granted, the land will be marketed to developers. When sold, the Promoter will take a share of the proceeds to reflect the planning costs incurred and the risk that the Promoter has taken in seeking planning permission at its own cost.
Landowners may prefer the idea of a Promotion Agreement as the Promoter is “on their side” and keen to maximise the price at which the land is sold (in contrast to other agreements where the developer will try to pay as little as possible). That relationship needs carefully defining however to make sure that that is the effect in practice.
An alternative view is that the developer will want to get their own planning permission before buying the site, so there can be an element of delay and duplication, if the original planning permission isn’t thought suitable.
These do arise on occasion, but we suggest that you think carefully about their value before entering into one. An exclusivity/lock-out agreement typically gives the buyer a free run at the site for a defined period, perhaps enabling you to do ground investigations before going any further. That may sound useful, but they have their limitations in practice (and in law).