Land Acquisition and Disposal

Consortium Agreements are used to define the rights and obligations of each member of a Consortium formed by two or more individuals and/or companies with a common objective to develop land. Members retain their own identities but the agreement is the mechanism by which their relationship will be governed and to an agreed extent, the members will jointly participate in or pool resources to organise and manage the project.

The share of payments and costs savings by members can be fixed and liabilities between the parties can be defined. Consortium agreements are often used by housebuilding companies and it is key that the common objectives and actions are identified and provisions are included to cover both the practicalities of working together and possible eventualities and to protect the parties involved. Davies and Partners is experienced in giving advice and dealing with such agreements.

Collaboration Agreements are the form of contract that is widely used when more than one developer or promoter have a mutual interest in acting together to secure planning permission for development of land held under Option or controlled under a Promotion Agreement or owned outright. Collaboration Agreements are commonly used to provide a framework in which the developers will agree to add all the land required for a comprehensive development and apportion the costs of the promotion and the future costs of infrastructure between land owners in proportion to the number of acres that each brings to the development.

These are complex arrangements in the nature of a partnership with a single objective of maximising the value of the development land for the mutual benefit of all developers and their land owners with an interest in the project.

Overage and Uplift arrangements concern the terms on which land can be sold but with the right reserved for future payment to the seller in the event that the land subsequently benefits from the grant of planning permission that generates additional value. The contracts for such arrangements provide for the future calculation of any additional value and the terms on which payment will be made by any future owner to whoever holds the right to receive payment at the time. These type of arrangements evolved in the public sector and now apply to virtually every sale of land by the state but the mechanism can be applied to any sale of land in private ownership. Such arrangements frequently run for a period of 21 years from the date of sale and are on terms that any increase in value is shared equally between the original seller and the future owner.

Hybrid agreements combine elements of promotion agreements and option. Often used where a land owner has extensive land holdings which may be developed over a lengthy period.  With a hybrid agreement the strike price is generally ascertained by exposing a parcel or parcels of land to the Open Market. This is in contrast to the position with a conventional option where the value is agreed consensually between landowner and the housebuilder and in default is determined by an expert. Hybrid Agreements are often utilised on large urban extension sites. By their nature they tend to be more complex than a conventional option or a promotion agreement. Davies and Partners are experienced in dealing with hybrid agreements on complex sites.

Options are a long-established method employed by housebuilders to acquire land for development. An Option will allow a housebuilder to call on a landowner to sell to the housebuilder a particular property at some point in the future. In return the housebuilder agrees to bear the cost and risk of obtaining planning permission.

Options are commonly exercisable on the obtaining of planning permission and usually the decision whether or not to exercise the option rests with the housebuilder. The price of the property will usually be at a discount to market value to compensate the housebuilder for the risk of applying for planning permission. Davies and Partners have a long-established practice in advising both developers and landowners on the provisions of Option Agreements

Conditional contracts for the sale and purchase of land may be used by a developer when it wishes to secure an interest in land with potential for development but does not want to be obliged to acquire it until the condition (which is usually but not always, related to the grant of planning permission) is satisfied. A landowner will wish to ensure that a developer is obliged to acquire the land if the condition is satisfied. The consideration and drafting of the scope and terms of any such conditions and the timescales and triggers for their satisfaction is thus paramount for both parties. Davies and Partners has the expertise to assist either developers or landowners to achieve their objectives and having satisfied the condition(s), to conclude the sale and purchase.

Promotion Agreements are contracts between a land owner and a promoter that provide a frame work for the promotion of land for planning permission. The basic concept is that the Promoter takes the risk of the costs incurred in promoting the land in a defined window of opportunity and then takes a minority share in the increase the value of the land created by planning permission in a managed sale of the land to a house builder with consent for immediate development. These agreements sometimes include an arrangement for the provision of initial infrastructure works with a view to maximise the value of the land to be sold. If the promotion succeeds then the Promoter will be entitled to recover all the costs incurred in the promotion and take a defined reward from the sale proceeds when the land is sold.

In some cases, two or more landowners may each own land which only has potential for development in conjunction with the land owned by the other(s). The landowners will often choose to enter what is known as a Landowners’ Agreement between themselves to provide for their co-operation and to regulate the manner in which costs and receipts are to be divided up in the event that the land collectively is allocated for development. In some cases the owners may agree to equalise the receipts and profits by reference to the extent of the gross area of their respective ownerships but different apportionments may apply in other scenarios, particularly if one owner has control of only a small area which is nevertheless vital to the proposed scheme.

It is common for land which becomes available for development to be affected by pre-existing covenants which may prevent or limit potential development. The law relating to restrictive covenants is highly complex and we regularly advise on issues relating to the technical enforceability of covenants and solutions to such matters including indemnity insurance and the merits of applying to modify or release a covenant

The legal aspects of developing land for residential purposes are often complex and require a detailed knowledge of the traps and pitfalls which can undermine the financial benefit which land owners and developers both expect to achieve from a development project. Whether acting for housebuilders or land owners we offer pragmatic and commercial advice to assist our clients in achieving their objectives.