How to Maximise Land Value before Going to Market? Practical advice for landowners considering disposal, targeting early-stage sellers.
Maximising land value before going to market requires careful consideration to ensure the best value is achieved.
Securing outline planning permission, which approves the principle of development or redevelopment, is the most effective way to maximise the value of a piece of land. Securing planning permission can turn a low-value piece of land into a high-value one. This can be achieved by changing the use to a more profitable one, for example, from agricultural to residential.
A planning consultant will be able to advise whether the site is within or adjacent to a settlement boundary and what realistic use classes might be achievable (residential, commercial, mixed-use, etc)
Gaining the necessary planning permissions requires landowners to consider the following steps
However, careful consideration is needed when applying for planning permission; the permission must be viable to maximise land value. Planning obligations, particularly affordable housing and S106 contributions, need to be meticulously negotiated to maximise the land value.
However, if a landowner does not have the appetite to pursue planning permission themselves, entering into a promotion agreement with a Land Promoter can be an effective way to navigate our complex planning system.
What is a Promotion Agreement?
A promotion agreement is a partnership between a landowner and a land promoter, with funding provided by the promoter. The agreement ensures that the interests of the two parties are aligned.
A promotion agreement would typically include:
An agreed period by which the land promoter must obtain planning permission.
Provisions to maximise the area of the site which can be developed under the planning permission.
The percentage split between the land promoter and the land owner when the site is ultimately sold.
Clauses to ensure that all parties act without undue delay in performing their respective obligations.
Agreement that the site is marketed with the benefit of planning consent and sold to the highest bidder to maximise value.
The primary reason for a promotion agreement is to maximise the value of the land.
Advantages of a Promotion Agreement
The landowner doesn’t incur any of the costs associated with securing the planning permission. These costs are borne by the land promoter.
The land promoter assumes the risk of securing planning consent.
The land promoter will have an extensive network of contacts and expertise.
As the landowner, you will retain control over your land throughout the term of the agreement, including the marketing and sale process. During the process, you will still be able to use the land as you wish.
As the landowner, you will retain control over your land throughout the term of the agreement, including the marketing and sale process. During the process, you will still be able to use the land as you wish.
Promotion Agreement vs. Option Agreement
A promotion agreement often yields higher returns for landowners because the site is sold on the open market and involves collaboration between the landowner and the promoter, whereas option agreements leave the planning process in the developer's hands. This can ultimately lead to disputes if the developer is not obliged to purchase the land at the pre-agreed price.
Summary
Land is a valuable asset, and securing planning permission for its development or redevelopment can significantly increase its value. However, securing planning permission can be expensive, time-consuming and complex. Therefore, it is of paramount importance that, as a landowner, you engage with planning consultants and industry experts who have in-depth knowledge of the planning process to help outline the key considerations you need to address to maximise land value.
