Call John on 07971 389985 or 01527 328401 / [email protected] for free, impartial and expert guidance.
Developing and selling land is a highly specialist activity and requires experience, patience and a good grasp of planning, land values and the land market. It is very much an 'art' not a 'science'. If are thinking of selling your land, you have been approached by developer(s) or you are seeking to obtain a guide to the potential value of your land, then we hope that you find the information below useful.
Some of the questions that Landowners want answers to are also noted below but you will also find more information on LAND PRICES (See 'How Much do Developers Pay for Land in the UK ?' below) and how the SALE OF LAND PROCESS works further down this page :
Please note that these are the views of the author (John Holland) and are intended to be a general guide only and cannot be legally relied upon at a later date. You are always advised to seek the services of an expert property lawyer, land agent or advisor if you get into discussing any form of detailed land agreement with a third party.
At the foot of this page is a short GLOSSARY of terms used in land transactions.
How much do developers pay for land in the UK ?
The most recent published figures for land in the United Kingdom are to be found at https://www.gov.uk/government/collections/land-value-estimates but I suggest you take these with a ‘pinch of salt’ as they tend to be a little over-exaggerated (and remember they are price per hectare not acre so multiply the value by 2.471 to get a £ per acre value).
In the prime parts of South-East England with planning permission for residential development will be worth between £1 million pounds and sometimes almost £2 million pounds per acre (in the most valuable areas or very close to London). Remember that 10 'gross' acres of land would have an actual 'net' developable area of less (say 70-80% of the total site area) due to the need for infrastructure such as roads and open space etc. which typically don't attract 'value'.
In the Midlands and Regions the land prices can vary from as little as £350,000 per acre to again, in excess of £1 million pounds in more expensive parts of the country (e.g. Winchester in Hampshire, Warwick, Knutsford in Cheshire, Solihull near Birmingham, The Cotswolds - i.e. very much ‘upmarket’ locations).
Ultimately, even if your land is within a 'high value' area, the level of 'affordable housing' and technical constraints will effect the final price payable - which is why it is imperative to have a good understanding of the planning process and the way Developers operate.
Knight Frank and Savills provide annual updates on land prices, the latest of which can be found here :
https://www.knightfrank.co.uk/research/uk-res-dev-land-index-q1-2019-6395.aspx
https://www.savills.co.uk/research_articles/229130/295529-0/market-in-minutes--residential-development-land---q4-2019
The traditional method used to value land for the housebuilders was what is known as the 'Residual Method of Valuation' - with the key hint being contained in the word 'residual' - i.e. what is left for the landowner after all deductions. This was typically a ‘Third : Third : Third’ calculation – that is One Third cost to build, One Third cost as land value and One Third cost as profit. So for example, £9 million pound's worth of built houses for sale would have a land value of about £3 million pounds (One Third of the gross development value).
This old-fashioned calculation has changed dramatically and the huge costs of ‘Section 106’, Community Infrastructure Levy (CIL), Affordable and Social Housing and higher specifications for infrastructure and sustainable housing have largely reduced the profit margins and put up build costs significantly. This has consequently reduced the price you get for your land now compared (pro-rata) to what you would have achieved 10, 20 or 30 years ago.
So for instance the 'Third : Third : Third' may now be more like 18% Profit : 60% Build Cost (& Planning etc) : 22% Land Value.
How much is my land worth for Commercial or Industrial development (prices as at 2021) ?
Again, useful to refer to the United Kingdom Government publication at : https://www.gov.uk/government/collections/land-value-estimates which provides some idea of commercial land values, but these are generally a lot less than residential values. Typically, a 1 acre warehouse and yard in a good location could fetch up to £1 Million pounds freehold with a rental value of perhaps £100,000 or more per annum (a gross 10% 'yield'). An alternative source of information is www.novaloca.com - this site and another www.egpropertylink.com both have active commercial and industrial sites for sale, many with asking prices. However, please bear in mind that an 'asking price or OIRO - Offers In the Region Of'' price is one thing but the actual real value or sale price may well be 10% to 20% lower than that indicated.
The advantage of having rental properties in a development for a landowner may be that they can then secure long-term rental income whilst retaining the freehold of a good part of their land in exchange. Some landowners are very attached to their land as it may have been in the Family for many generations and this method allows them to retain a good level of control.
Where a site is located in an area where a lot of commercial property is available or conversely where it is located in a very rural or remote area, both the values and the opportunity to regularly let a property may fall significantly and this aspect becomes uneconomic when compared with a straight residential development.
How much is my land worth if developed for a Retirement or a Care Home (prices as at 2021) ?
The most recently published figures by the Government for care homes and retired people is from 2017 and it was estimated that 410,000 residents are in care homes with 5,500 providers operating 11,300 care homes.
One of the largest UK retirement developers McCarthy & Stone state that there are about 12.2 Million people who are aged over 65 in the UK (2018) and that this will grow by 43% by 2043 which will mean there is an estimated annual demand for 30,000 retirement properties (or individual apartments).
There is a large new sector called ‘later living’ which caters for those people who are more active but wish to retire. The most well known players in that market are McCarthy & Stone and Churchill Retirement and they alone find and build and operate anywhere between 50-100 new ‘retirement homes’ a year (research shows that 8,000 apartments/properties are being built a year across the whole UK).
This means retirement and care home developers need new locations for these homes continually. One of the key benefits of Retirement schemes is they do not have to provide as much car parking as normal housing and normally no affordable housing either, and therefore they can usually offer much higher prices for smaller sites of 0.5 acres upwards.
For instance a small 1 acre site situated close to a good town centre with road frontage could be worth between £3 million to £5 million pounds in the south-east or a high-end UK location. Even small sites of 0.5 acre to 1 acre in an average UK town could be worth £700,000 to £1 million pounds.
The retirement operators usually offer an Option or a Conditional Contract to buy the site subject to obtaining planning and they will almost always make a fixed offer to you at the outset (with legal costs and a small goodwill fee or 'Option Premium' being paid as well - you usually keep this whether your site gets planning permission or not).
How much is my site worth for residential (housing) development (prices at 2021) ?
As a general guide, a small site for purely residential housing of say 3 acres may be worth perhaps between £750,000 to as much as £4,000,000 close to London. For instance, currently up to 10 larger houses can be developed on a small site (say 1 to 1.5 acres) and no affordable housing is required – this makes smaller sites more valuable than larger ones, per acre.
A much larger site of say 15 acres of land will proportionately be worth a little less as generally the larger the site the slightly lower the pounds value per acre (£/acre) and with larger sites more of the land is likely to be used for roads, open space, new schools and playing fields etc.
So only say 12 acres of a 15 acre site would be ‘developable’ and therefore you would receive say £1.2M an acre close to London and perhaps only £500,000 per acre in the other regions of the UK. But still anywhere between £6 million to £14 million pounds for 15 acres of good housing development land.
Which companies buy land for residential or ‘mixed-use’ development in the UK today ?
Until about 2010 when the last economic recession was in full swing, the mainstream housebuilders such as Barratt, Persimmon, Taylor Wimpey, Bellway and others would normally buy your land via either an Option Agreement or a Conditional Contract (see explanation below).
However, the UK Government made Local Councils have a ‘5 years housing land supply’ and that has meant significant pressure for those Councils to allow more land to be developed for housing. This has meant that the new ‘Land Promoters’ have grown in both number and size and it is thought they now account for some 80% of all UK land transactions for residential purposes.
An increasing number of both Housebuilders and Land Promoters are recognising the potential for offering ‘mixed-use’ developments whereby they combine housing and say industrial or office uses, even retirement homes. This is a useful (and flexible) opportunity for landowners as you can sometimes seek to retain some land with a longer-term income via rents and long leases. Please note that this is different from a 'Hybrid Agreement' whereby the developer (usually a housebuilder) tries to offer some real 'full market' land value and other value by athe traditional Option Agrement.
What are the advantages and disadvantages of doing a deal with a LAND PROMOTER ?
FOR : Likely Higher Price & Land Promoter offers a more Flexible Deal (can be 50% more money - land sale value - for the landowner)
AGAINST : Land Promoter may want a higher percentage of the sale price (can be up to 20% of sale value compared with 10% from housebuilder)
Some Advantages : Despite the term ‘Land Promoter’ sounding rather pushy and hard-sell, there are now some very experienced and capable firms established which have picked-off thre best people in the industry to work for them. The Land Promoter will normally be very keen to get on with the process of obtaining planning and will use a legal document called a 'Land Promotion Agreement' to do this (see below for explanation of this type of Agreement).
It is usually their own private money at stake (although funds are also widely utilised) and unlike a plc Housebuilder they do not have to worry about building the homes so they can concentrate 100% on your land and obtaining the best scheme and therefore the most money for it possible.
The Land Promotion Agreement they will sign with you seeks to align your interests and theirs as a ‘partnership’ with the aim of securing the best scheme they can which will have the highest value when it is (normally) offered to Housebuilders on what is called the ‘open market’ (i.e. bidding for the site takes place, highest bid wins).
Disadvantages are that Land Promoters can seek to charge high discounts to the sale price, rack up higher charges on the costs of planning applications and work and may be understaffed in some cases or have a bad reputation with the Council (Planning Authority) due to other schemes within the area.
It is also important to monitor their proposed planning and technical development strategies throughout any lengthy 'promotion term' so that the most cost effective solutions are chosen. Landsite recommend formal monitoring of progress in any medium-long term agreement.
Land Promoters also charge VAT on the ‘services’ part of their advice so if you are not registered for this then you may find that you have to pay VAT on that element of the deal. A Land Promoter can be expected to deduct anywhere between 5% and 25% of the sale price. The Land Promoter will contend that you could see a sale price perhaps 20%+ more than the ‘market value’ offered by the Housebuilder - as it is a competitive bidding process and therefore the very highest price should be achieved.
What are the advantages and disadvantages of doing a deal with a HOUSEBUILDER ?
FOR : Good Reputation & Resources & may (in some cases) even be able to offer houses as part of the deal.
AGAINST : Potentially nowhere near as as high a land value when you sell, compared to a Land Promotion Agreement.
Some Advantages of a large, established UK housebuilder is that they are unlikely to go bust whilst taking your site through planning.
Secondly, they actually build the homes themselves so some Councils prefer this as it means the site will be ‘deliverable’ and not simply sold to the highest bidder.
Thirdly, the housebuilders have a prominent reputation to consider so may well seek to hold very clear and well-designed public exhibitions and tours of their existing developments. Lastly, a housebuilder may be in a position to simply provide you with houses as part of any deal.
The Main Disadvantage of dealing with a housebuilder is that they are very unlikely provide a market-tested and sole a ‘Land Promotion Agreement’ but in almost all cases they must do a deal via either a ‘Land Option Agreement’ or a ‘Conditional Agreement’ (see below for explanations of these Agreements). In effect what this means is that you will not normally get the higher price that a Land Promoter achieves by ‘going to the market’ with a valuable planning permission.
Housebuilders make most of their money by actually building and selling completed homes so it is not necessarily in their interest to pay the highest price for your land. The housebuilders may also be slower to get on with the process of ‘promoting’ the site and getting planning permission.
A housebuilder will typically seek a deduction of at least 10% to ‘market value’ via an Option Agreement and normally 15% if the site is classed as Greenbelt land. This may sometiems be a lower discount to sale value than that charged by a Land Promoter, but it may ultimately be less than the 'extra' cash generated through the competitive bidding which occurs with a land promotion deal.
A Housebuilder can sometimes offer a more professional technical approach, as they are set up in business divisions with whole teams dedicated to each part of the development process. However, likewise, they may have a narrow-minded focus and beareaucratic process spending a lot of time drawing up masterplans and commissioning consultants instead of dealing with the main issues associated with obtainng a planning permission.
What fees and costs are met by the Housebuilder, Land Promoter or Retirement Developer ?
Land Promoters (and Housebuilders) will normally pay for ALL of your (reasonable) legal costs (excpect say £5,000 + VAT to £7,000 + VAT for a small site and up to £15,000 + VAT+ for a site with several hundred houszes). They also pay you a ‘goodwill’ sum or Promotion/Option deposit payment which you keep whether or not they obtain planning permission. THis is anythwre between as alitle as £10,000 + VAT to as much as £100,000 + VAT (or more). Housebuilders will normally want a decent ‘term’ of years for their agreement (which depends on their planning prognosis) and they may have to pay you a further sum to renew or extend the agreement.
Land Promoters tend to offer ‘5 year + 5 year + 5 year’ (or less - e.g. '3 + 3 + 3 year') agreements which both parties an opportunity to review the performance at every interval and also be paid a small sum to extend the promotion agreement (every 3 or 5 years - which is nice !). Housebuilders may often have to sign up Option Agreements on 10-year terms only (with an extension for 5 years).
Retirement Developers can usually pay more for the site that a small housebuilder as car usage is low and affordable housing is not normally required which helps to push the land value (price paid) up. They will normally pay a 'goodwill' sum at the outset when you sign the agreement and all your (reasonable) legal costs. They will seek to obtain plannoing permission very quickly (within a year or so) and seek minimum 12 month contracts for a fixed payment of land value. At Landsite we will seek to negotiate reasonable payment by the developer for your premium payment and for legal fees.
These 'goodwill' or 'sweetener' payments (usually called an 'Option Premium') are commonplace and are essentially a gesture by the developer that they are serious about gettng plannign and recognised the ;anmd will be controlled by them in some way whilst they secure planning. However, it does not mean ythe landowner cannot sellt the lanmd or so anythign with it.
The Option Premium / 'goodwill fee' must be balanced against the costs the Promoter or Developer will have to pay to promote the site and gain planning consent and they will usually seek to deduct legal fees, the Option Premium payment and the costs of their planning application (or Appeal) from the final land payment to you, as landowner. However, if they fauil to get planning the Legal Fees and Option Premium payment are usually not able to be retrieved by the developer from the landowner.
Historically, planning permissions used to be relatively cheap to secure, and therefore landowners saw healthy 'premiums' - sometimes up to £300,000 to £500,000 on large residential sites.These are now much lower. The size of premium also depends on the size and the planning status of the land - e.g. Greenbelt land a lower premium; 'Allocated' or approaching allocation land much higher option / promotion premiums.
However with the costs of planning rising very significantly and the delays to securing planning increasing, today you could expect to be given only between £5,000-£15,000+ for a small site and perhaps £100,000 for a larger residential opportunity. Between £5,000 to £15,0000 towards your legal costs to instruct a solicitor to respresent you (which will normally cover the fees entirely).
Can my land be developed for houses ?
This very much depends upon where your land is and if it is in the Greenbelt or not. Until recently, Greenbelt land was a no-go area and virtually impossible to secure planning permission for residential development.
However, the growing and continued need for more housing has meant that Councils are having to look at releasing parts of the Greenbelt close to existing towns and cities in particular.
If your land lies near a good-sized road and is surrounded on at least 2 sides by existing houses (or a railways or road or canal etc) then it has potential and if a few acres in size Landsite would be happy to provide some guidance and advice.
Previously developed land, whether in the Greenbelt or outside, is looked upon favourably by local authorities for redevelopment.
Your land must have access onto a public highway, and be in the vicinity of services (i.e. water, electric and drainage networks) to be considered developable.
Sometimes, you may not have all of the above and require 'third party land' to achieve access or servicing. If this is the case, Landsite can also advise on your options to unlock development.
My land has been allocated for housing - what do I do ?
If you land has been allocated for housing development then you are in a VERY VERY GOOD POSITION. However, the BIG DANGER for landowners is that they may simply assume a large, well-known housebuilder is the best partner to take the matter forward - NOT ALWAYS THE CASE - see above !
How long will it take to sell my land ?
Much is dictated by the planning process which takes a minimum of 13 weeks to decide each major planning application and usually much longer (e.g. 6 months+) for larger sites. Discussions to sell a piece of land may take between 2 to 6 months to complete; the planning application would then take a further 3-4 months to prepare properly and then it would be submitted (a further 2-3 months).
Realistically you should assume that from contacting LandSite to receiving a payment for your land will take about 12-15 months at the very least and if the site is not Allocated in the Local Plan or is Greenbelt you must expect it to take several years to see a planning permission and then sale of your site.
If you have a piece of land that is ‘Allocated’ for development within the Local Plan, or is very likely to get it then you could see a sale within 12 months and offers will normally be very competitive.
It is the case that some sites can be sold ‘unconditionally’ which means the developer will buy the site as it is, however this is often not the best route to secure maximum value. Sites with planning permission can be sold unconditionally.
Some sites (particularly large ones or those in the Greenbelt) may take many years to obtain a planning permission and that is why Land Promoters and Housebuilders both seek to have a Land Promotion Agreement or an Option Agreement that lasts for at least 5 years and normally can be extended to 10 or even 15 years.
Sites located in the GREENBELT can ONLY be developed by getting them 'Allocated' as a site in the Council Local Plan - the only possible exception to this is where a site is currently 'brownfield' (i.e. used for industrial uses, with significant buildings or contaminated) and in this instance there may be the potential to apply for re-development without getting an allocation in the Local Plan.
Why is there an opportunity at the moment for developing residential sites?
During the last 12 years (to 2022), the UK has not been building enough new homes to meet current demand. Many Local Authorities are now under considerable pressure to grant planning permission for new sites, often in what was previously considered as 'sacrosanct' Green Belt land.
Government intervention in the market such as 'Help To Buy' and a relaxation of some planning policies has helped to fuel the demand for housing and the potential for sites to succeed in obtaining planning permission for development.
I have been approached by a land promoter, what is your advice ?
Stay calm and get some independent advice. There are over 200 Land Promotion Companies operating in the United Kingdom of all shapes and sizes. Some are good and have long established reputations and track record and others (albeit not many, thank goodness) may be aggressive, poorly funded or lack expertise and seek unfair terms and conditions.
As explained above, Land Promoters certainly have a place in the market and there are some excellent and trustworthy companies. All Land Promoters will require that a landowner must sign a 'Promotion Agreement' (or sometimes an Option Agreement instead) which will then bind your land to them for a fixed period of time.
Once the Land Promoter has secured the best planning permission they consider they can obtain, then they will take the site, via a clear and open marketing process, to several housebuilders or developers to get the best price they can. You would be involved in this process, as the land is still in your possession, and actually the Promoter never acquires your land at all - they just take a fee for their services in securing the planning consent.
The ultimate price you get will reflect a deduction of a fixed percentage (%) of the sale price and a deduction for the costs they have spent in promoting the site (which could include the fees they paid upfront to you).
However, by 'best', that does not always mean the most money on offer - you have to like and get along with your development partner, whether they are a Land Promoter or a Housebuilder.
Is it expensive to develop land myself ?
The short answer is YES. A typical medium-sized residential site of 10 acres would cost the developer a minimum of £200,000 for preparing the Planning Application only, not including any years of promotion work prior to that (SEE BELOW : 'Why are Planning Applications So Expensive ?'). The Local Authority will then charge a Planning Application Fee when it is submitted for them to decide upon whether to grant permission or refuse it.
To build the houses and infrastructure costs anywhere between £100/ft2 to £200+/ft2 even for the large housebuilders (who typically benefit from more economies of scale on their costs) so a typical development of say 100 new houses could cost perhaps £8,000,000 to £15,000,000. This is apart from the associated payment of costs to the Local Authority such as S106 Payments, the CIL (Community Infrastructure Levy) or off-site Affordable housing contributions.
Threfore YES - it IS an expensive, frustrating, complicated and time-consuming business and that is why it is always best to try to deal directly with a land promoter or reputable developer from the start.
What is a Promotion Agreement ?
A Land Promotion Agreement is signed by the landowner and a land Promotion Company to legally confirm that the company will do its best to secure as valuable a planning permission as possible within (ideally) the shortest period of time.
Once the company has gained planning permission then the land is worth considerably more money and it is therefore sold to the highest bidder (normally a Housebuilder).
It will have been agreed between the landowner and the Land Promotion company at the outset that the costs of getting planning for the site, the legal costs and between 5% to perhaps as much as 25% of the sale value of the site will be paid to them. The landowner will receive the remaining amount which will equate to between 75% and perhaps 95% of the sale value.
The possible advantage of a Land Promotion Agreement for the landowner is they will ultimately receive more money for their land (with planning permission).
What is a Option Agreement ?
An Option Agreement (occasionally referred to as a 'Land Option Agreement' and 'Option Agreement to Purchase') are essentially the same thing and these are normally used by a developer or housebuilder to legally agree to purchase your land if certain criteria are met.
In the case of a deal to buy your land for residential development then the housebuilder will offer to buy the land for a percentage (%) of what is known as it's 'Open Market Value' (OMV). This is essentially what the land is likely to be worth with planning permission in the 'open' market place.
The Option Agreement will specify a length of time that it will remain in force (while the housebuilder tries to get the valuable planning permission which will make the land hugely more valuable) and it will also agree that all legal costs and a 'goodwill' fee (known as an 'Option Premium' payment) is paid to the landowner.
When the landowner and housebuilder (or developer) have agreed everything the Agreement is signed by both parties and Exchanged.
When the housebuilder obtains planning permission then the Option is triggered and the Housebuilder will issue an Offer for the site based on what THEY think the Open Market Value (minus their percentage).
The housebuilder might make another slightly higher offer but if the two parties cannot agree then the price is agreed by a third party (acting as an Expert or Arbitrator). The final value determined by the Expert or Arbitrator is binding upon the landowner and the Housebuilder or Developer.
Why are Planning Applications So Expensive ?
At one time, in the 1960's, 70's and even in the 1980's, Planning Applications were not particularly expensive and a good Application for say 100 new homes might have only cost between £15,000 to £75,000.
However, increasing UK and EU regulations on environmental matters, more stringent requirements for technical information together with the requirement for Affordable Housing at every site and more recently much higher charges to actually apply for planning permission has meant that the costs have rocketed.
Consequently, a planning application for 100 new homes now might easily cost £200,000 to £350,000 or more. The largest 'strategic' sites where upwards of 500 to 1000 new homes are being planned (often with new schools, leisure facilities, a Doctors Surgery, Village Hall etc) can be in excess of £1 million pounds and sometimes multiples of this amount.
GLOSSARY OF TERMS
Landowner - the person who owns the piece of land which could have potential to get planning permission for development.
Land Promoter - a company which specialises in securing planning permission for residential development but which does this by working in 'partnership' with the landowner to try to see the site for the highest amount. Examples include : Richborough Estates, Gladman Land, Catesby Estates, Welbeck Estates, IM Land, Rosconn Strategic Land, Muller Property, Ptarmigan Land, Lonestar, Pigeon Land, St Congar and Frontier Estates. A full list can be found at the Land Promoters & Developers Federation (https://www.lpdf.co.uk/).
Housebuilder - a company that buys land and builds and sells finished houses. There are plenty of examples of larger housebuilders in the UK.
Developer - a company which seeks to buy land and either develop it themselves or perhaps sell it on with the benefit of planning permission.
Land Promotion Agreement - the document used by Land Promoters to enter into legal agreement with a Landowner to agree to secure the most valuable planning permission for housing development that can be permitted within an agreed timescale and then to sell the land with the benefit of planning permission to the highest bidder and split the proceeds between itself and the Landowner.
Land Option Agreement - the document used by the majority of UK Housebuilders to enter into legal agreement with a Landowner to purchase their site at a discount to the 'Open Market Value' which is usually determined by the Housebuilder in ther first instance. The deal must be done with the Housebuilder only.
Conditional Agreement - the document whereby a Housebuilder or Developer may seek to offer a fixed sum of money subject to the signing of a contract (between it and the Landowner) and securing a planning permission for development of housing or perhaps housing and another use on the same site. The land must be sold for the price agreed within a fixed term.
Conditional Sale - the sale of the land is dependent upon the Purchaser (e.g. a Developer or Housebuilder) doing certain things such as securing a planning permission and / or meeting it's obligations in accordance with the Agreement.
Unconditional Sale - the sale of the land is for a fixed price and there is no requirement for the purchaser (e.g. a Developer or Housebuilder) doing certain things such as securing a planning permission. The sale of the land simply proceeds for a agreed sum and is sold to the Purchaser after undertaking typical due diligency such as legal and Title checks. This type of sale is used where the land may have existing planning permission or is perhaps a disused industrial or commercial building surrounded by residential housing.
Land Bank - A stock of land held by a developer with the intent to hold it for future development or until such a time as it is profitable to sell on to others. The media refer to plc housebuilders 'landbanking' land which could be developed for housing - this is very simplistic - ALL large housebuilders need to have a supply of land in reserve and in most cases once they get planning permission they will build the houses and develop the site.
Hybrid Agreement - Planning Permission is granted for residential development and a proportion of the site is openly marketed to achieve market value and sold to a third party. The developer then purchases the remainder of the site at market value less any costs and discount. This tends to relate to larger sites only and is usually with a plc housebuilder or large developer. It can help their cashflow. Do not be confused by thinking a Hybrid Agreement will secure the best land value for your land - only a pure Land Promotion Agreement is fully 'market tested'.
Joint Venture Agreement - The housebuilder or developer shares the cost and risk of securing a planning application with the landowner e.g. sometimes the landowner may be prepared to put the land in 'for free' so that the site can be developed and they get a larger slice of the 'whole site' profit. This is not a common route and can be very time consuming and challenging in legal terms. It can only really be undertaken with a developer or housebuilder, not a land promoter - as they want to sell the land with planning only and take their share of the uplift in value from securing a planning permission. Once planning has been granted, the parties (landowner and developer) then jointly service the site, sell the completed properties and share a proportion of the land cost and profit.
Overage or 'Claw-Back' - this is a term which applies to a clause in the Contract you sign normally with a new landowner, a developer or housebuilder whereby if they should get planning permission for more than they anticipated or planning for more houses and therefore a more valuable site than was originally agreed then they must pay a % of the 'uplift' in value (the extra value) to the landowner. This protects landowners from being swindled after they have sold the land or agreed a sale.
Land Promoters including :
Catesby Estates plc - Midlands - https://www.catesbyestates.co.uk/your-land
Richborough Estates - Birmingham - https://www.richboroughestates.co.uk/our-approach/strategic-land-promotion-faqs/
Lone Star Land - Warwickshire - https://lonestarland.co.uk/land-promoters/
Pigeon Land - Essex - https://www.pigeon.co.uk/land-promotion/
Frontier Estates - London - https://frontier-estates.com/about/
Ainscough Land - Northern - https://www.ainscoughstrategicland.co.uk/
Gladman - Northern - https://www.gladman.co.uk/
IM Land - Solihull - https://www.imland.co.uk/news/
Landform - London - https://landformestates.com/
Wallace Land Investments - https://www.wallaceland.co.uk/
Axis Land Partnerships - https://www.axislp.com/approach/
Generator - http://www.generatorgroup.co.uk/about-us/generator-strategic-land/
Gladman Land - https://www.gladman.co.uk/
Lands Improvement - https://www.lih.co.uk/
Neptune Group - https://neptune-land.com/
Anwyl Land - https://www.anwylland.co.uk/
Rosconn Strategic Land - https://rosconnstrategicland.com/
Rainer Developments - https://www.rainierdevelopments.co.uk/
Ptarmigan Strategic Land - https://www.ptarmiganland.com/projects
Sigma Strategic - https://sigmahomesgroup.co.uk/land/strategic-land
St Congar - http://stcongar.com/
St Philips - https://stphilips.co.uk/
Unique Land - https://uniqueland.co.uk/
Valorem - http://valorem-mgmt.com/
Waddeton Park Land - https://www.waddetonpark.co.uk/Waddleton Park
Wallace Land Investments - https://www.wallaceland.co.uk/
Welbeck Land - https://www.welbeckland.co.uk/
Muller Property Company - https://www.muller-property.co.uk/what-we-do/land-promotion-obtaining-planning-permission/
Leaper Land Promotion - http://www.leaperlandpromotion.co.uk/
Land Promotions - https://landpromotions.co.uk/
James Coker Land - https://www.jamescokerland.co.uk/land-promotion/
Dandara Strategic - https://www.dandarastrategic.com/
Fruition Properties Land Promotion - https://www.fruitionproperties.co.uk/land/promotion/
Planning House - https://planninghouse.co.uk/land-promotion/
Landstrom Group - https://www.landstromgroup.com/our-services/land-promotion/
Cheffins - https://www.cheffins.co.uk/development/development-services/strategic-land-promotion.htm
Batchellor Monkhouse - https://www.batchellermonkhouse.com/development-and-land-promotion/
Landrose Group - https://landrose.com/land/land-promotion-process/
Mayes & Co. - http://www.mayesandco.co.uk/land-promotion/
Land Promotion Group - https://www.landpromotiongroup.com/how-it-works/
Himor - https://www.himor.co.uk/
South-Coast Land - http://www.southcoastland.co.uk/land-promotion/
Endurance Estates - http://www.endurance-estates.co.uk/land-promotion
Dean Lewis Estates - https://www.deanlewisestates.co.uk/
Land Promoter - https://www.landpromoter.co.uk/
Laketree - https://laketreeconsultancy.co.uk/developers-land-promoters
Strategic Land Group - https://strategiclandgroup.co.uk/land-wanted/
Plc Housebuilders and Retirement Developers :
Barratt Homes - https://www.barrattdevelopments.co.uk/about-us/what-we-do/land-buying
David Wilson Homes - https://www.dwh.co.uk/the-buying-process/what-is-stamp-duty/land-and-buildings-transaction-tax-lbtt/
Persimmon Homes - https://www.persimmonhomes.com/corporate/land-requirements
Taylor Wimpey Homes - https://www.taylorwimpey.co.uk/land-and-planning/acquiring-land
CALA Homes - https://www.cala.co.uk/land-planning/
Berkeley Homes - https://www.berkeleygroup.co.uk/about-us
Bovis Homes (Vistry) - https://www.bovishomes.co.uk/land
Linden Homes (Vistry) - https://www.lindenhomes.co.uk/land
Crest Nicholson - https://www.crestnicholson.com/contact-us/partnerships-and-strategic-land
Countryside - https://www.countrysideproperties.com/housebuilding/strategic-land
Redrow - https://www.redrowplc.co.uk/land/
Bellway - https://www.bellwayplc.co.uk/land
McCarthy & Stone - https://www.mccarthyandstone.co.uk/we-buy-land/
LNT - http://lntcaredevelopments.co.uk/landwanted.php
Churchill Retirement - https://www.churchillretirement.co.uk/land/
Beechcroft Developments - https://www.beechcroft.co.uk/about-us/overview
Adlington Retirement - https://adlington.co.uk/wp-content/uploads/2020/01/Sites-Required-Brochure_lo-res.pdf
Larger Regional Developers & Affordable Homes :
Davidsons Homes (Leicestershire & Midlands) - https://davidsonsgroup.co.uk/
Antler Homes - https://www.antlerhomes.co.uk/land-and-planning
Fairview New Homes - https://www.fairviewnewhomes.co.uk/land-acquisition/
Generator Group - http://www.generatorgroup.co.uk/topland-and-generator-group-form-strategic-land-partnership/
Gentoo - https://www.gentoohomes.com/
Hopkins Homes - https://www.hopkinshomes.co.uk/land-acquisition/
Hill Residential - https://www.hill.co.uk/working-with-hill/land-planning/land-acquisition/
Jones Homes - https://www.jones-homes.co.uk/land-required/
Inland - http://www.inlandhomesplc.com/about-us/our-portfolio/
Miller Homes - https://www.millerhomes.co.uk/corporate/land.aspx
Lovell Homes - https://corporate.lovell.co.uk/what-we-do/our-land/
Spitfire Homes - https://spitfirepg.co.uk/land-required/
Organisations dealing with Land Promotion & Development :
Land Promoters & Developers Federation (LPDF) - https://lpdf.co.uk
Countryside Landowners Association (CLA) - https://www.cla.org.uk/
Farmers Weekly - https://www.fwi.co.uk/business/markets-and-trends/land-markets/4-ways-farmers-can-sell-land-development
ADAS - https://www.adas.uk/services/land-development
Legals Resources & Specialists :
UK Practical Law - https://uk.practicallaw.thomsonreuters.com/Cosi/SignOn?redirectId=rt_175f5d69-a3a5-4faa-aa48-d6ad2da3eb3f
Howes Percival LLP - https://www.howespercival.com/articles/promotion-agreement-or-option-agreement-whats-in-your-best-interest/
Holmes-Hills - https://www.holmes-hills.co.uk/news/2019/august/methods-of-securing-payments-under-a-land-promotion-agreement/
Farrer Solicitors - https://www.farrer.co.uk/news-and-insights/agreements-for-the-promotion-and-sale-of-development-land/
BHW Solicitors - http://bhwsolicitors.com/land-promotion-agreements-protecting-landowners-interests/
Keston Reeves Accountants - https://www.krestonreeves.com/news/land-promotion-agreements-tax-issues/
FSB Solicitors - https://www.fsp-law.com/option-or-promotion-agreement-which-is-best/
Savills - https://www.savills.co.uk/blog/article/289188/residential-property/in-plain-english--option-and-promotion-agreements.aspx
Some of the questions that Landowners want answers to are also noted below but you will also find more information on LAND PRICES (See 'How Much do Developers Pay for Land in the UK ?' below) and how the SALE OF LAND PROCESS works further down this page :
- Likelihood of securing Planning Consent - very much dependant upon whether your land is in the Greenbelt or not, 'allocated' in a Local Plan or lies near to a town or village. The size of the site and its 'setting' (e.g. is it surrounded by other houses already ? Is it on a significant slope or next to an historic or listed building ?).
- The different ways in which you can sell your land - you can do this by using a company like Landsite to competitively 'tender' your land to a wide market (this is a one-to-one approach which landowners like as it is more 'confidential' and does not alert neighbours and the Council to what your intentions are) or you can deal directly with a developer who has approached you. It it KEY that you understand what sort of deal you want and like and trust the people you are dealing with. The process MUST be CLEAR, HONEST and TRANSPARENT.
- Advice on land promotion agreements, option agreements, hybrid agreements and conditional contracts - these agreements are applicable to different situations and largely depend upon what level or risk and reward you are seeking as a landowner. Option Agreements are the traditional contract used by housebuilders and developers and will normally last between (e.g.) 1-2 years for a smaller site up to 10 or 15 years for a large site (e.g. 10-30 acres+); Promotion Agreements are now being favoured by owners of larger sites as they allow then to partner with a developer and get the best price; Conditional Contracts are suitable for smaller sites where planning permission is likely (e.g. a 'brownfield site like a scrapyard or where there is existing storage/industry) and they usually offer a fixed price to be paid after planning is granted and the site is purchased. Lastly, 'Hybrid' agreements are just that - they utilise elements of the Option and Promotion Agreement to create a bespoke solution for the land owner. They are rarely used however.
- Transparent and open marketing so that you get the best offer - the best was (in our opinion) to achieve this is to ensure that bespoke marketing particulars are prepared for your site and that this is sent with a covering letter and by email to a select number of developers, housebuilders and land promoters (usually about 50+ companies). These companies are invited to make their best offer to you and your family and you meet with the top bidders to choose a partner.
- Comparative valuation of your land and alternative development choices - It is always useful to obtain an independent opinion about the likely value of your land and this can usually be obtained for free. There are also various sustainable energy uses for land now including Photovoltaics (Solar farms), Wind Turbines, Microhydropower, Battery Storage and Carbon Capture (planting new woodland).
- Ongoing advice and guidance on the progression of the deal and assistance with any issues that may arise - It is very important that you get advice from the outset that is accurate, honest and clear. This also applies to the time after a deal has been agreed with a developer when you will want continued accurate and pragmatic advice.
- Preparation of Heads of Terms (HoT') for issuing to solicitors - once you have chosen a developer to work with then Heads of Terms (HoT's) are required to be issued to solicitors and these are essentially the basic terms for the Agreement between each party (you and the developer).
- Timescale and values - required at the outset when you need to know what the likely value and timescale is for developing your land and realising the value (often in the £Millions) and then getting straightforward advice on how best to proceed.
Please note that these are the views of the author (John Holland) and are intended to be a general guide only and cannot be legally relied upon at a later date. You are always advised to seek the services of an expert property lawyer, land agent or advisor if you get into discussing any form of detailed land agreement with a third party.
At the foot of this page is a short GLOSSARY of terms used in land transactions.
How much do developers pay for land in the UK ?
The most recent published figures for land in the United Kingdom are to be found at https://www.gov.uk/government/collections/land-value-estimates but I suggest you take these with a ‘pinch of salt’ as they tend to be a little over-exaggerated (and remember they are price per hectare not acre so multiply the value by 2.471 to get a £ per acre value).
In the prime parts of South-East England with planning permission for residential development will be worth between £1 million pounds and sometimes almost £2 million pounds per acre (in the most valuable areas or very close to London). Remember that 10 'gross' acres of land would have an actual 'net' developable area of less (say 70-80% of the total site area) due to the need for infrastructure such as roads and open space etc. which typically don't attract 'value'.
In the Midlands and Regions the land prices can vary from as little as £350,000 per acre to again, in excess of £1 million pounds in more expensive parts of the country (e.g. Winchester in Hampshire, Warwick, Knutsford in Cheshire, Solihull near Birmingham, The Cotswolds - i.e. very much ‘upmarket’ locations).
Ultimately, even if your land is within a 'high value' area, the level of 'affordable housing' and technical constraints will effect the final price payable - which is why it is imperative to have a good understanding of the planning process and the way Developers operate.
Knight Frank and Savills provide annual updates on land prices, the latest of which can be found here :
https://www.knightfrank.co.uk/research/uk-res-dev-land-index-q1-2019-6395.aspx
https://www.savills.co.uk/research_articles/229130/295529-0/market-in-minutes--residential-development-land---q4-2019
The traditional method used to value land for the housebuilders was what is known as the 'Residual Method of Valuation' - with the key hint being contained in the word 'residual' - i.e. what is left for the landowner after all deductions. This was typically a ‘Third : Third : Third’ calculation – that is One Third cost to build, One Third cost as land value and One Third cost as profit. So for example, £9 million pound's worth of built houses for sale would have a land value of about £3 million pounds (One Third of the gross development value).
This old-fashioned calculation has changed dramatically and the huge costs of ‘Section 106’, Community Infrastructure Levy (CIL), Affordable and Social Housing and higher specifications for infrastructure and sustainable housing have largely reduced the profit margins and put up build costs significantly. This has consequently reduced the price you get for your land now compared (pro-rata) to what you would have achieved 10, 20 or 30 years ago.
So for instance the 'Third : Third : Third' may now be more like 18% Profit : 60% Build Cost (& Planning etc) : 22% Land Value.
How much is my land worth for Commercial or Industrial development (prices as at 2021) ?
Again, useful to refer to the United Kingdom Government publication at : https://www.gov.uk/government/collections/land-value-estimates which provides some idea of commercial land values, but these are generally a lot less than residential values. Typically, a 1 acre warehouse and yard in a good location could fetch up to £1 Million pounds freehold with a rental value of perhaps £100,000 or more per annum (a gross 10% 'yield'). An alternative source of information is www.novaloca.com - this site and another www.egpropertylink.com both have active commercial and industrial sites for sale, many with asking prices. However, please bear in mind that an 'asking price or OIRO - Offers In the Region Of'' price is one thing but the actual real value or sale price may well be 10% to 20% lower than that indicated.
The advantage of having rental properties in a development for a landowner may be that they can then secure long-term rental income whilst retaining the freehold of a good part of their land in exchange. Some landowners are very attached to their land as it may have been in the Family for many generations and this method allows them to retain a good level of control.
Where a site is located in an area where a lot of commercial property is available or conversely where it is located in a very rural or remote area, both the values and the opportunity to regularly let a property may fall significantly and this aspect becomes uneconomic when compared with a straight residential development.
How much is my land worth if developed for a Retirement or a Care Home (prices as at 2021) ?
The most recently published figures by the Government for care homes and retired people is from 2017 and it was estimated that 410,000 residents are in care homes with 5,500 providers operating 11,300 care homes.
One of the largest UK retirement developers McCarthy & Stone state that there are about 12.2 Million people who are aged over 65 in the UK (2018) and that this will grow by 43% by 2043 which will mean there is an estimated annual demand for 30,000 retirement properties (or individual apartments).
There is a large new sector called ‘later living’ which caters for those people who are more active but wish to retire. The most well known players in that market are McCarthy & Stone and Churchill Retirement and they alone find and build and operate anywhere between 50-100 new ‘retirement homes’ a year (research shows that 8,000 apartments/properties are being built a year across the whole UK).
This means retirement and care home developers need new locations for these homes continually. One of the key benefits of Retirement schemes is they do not have to provide as much car parking as normal housing and normally no affordable housing either, and therefore they can usually offer much higher prices for smaller sites of 0.5 acres upwards.
For instance a small 1 acre site situated close to a good town centre with road frontage could be worth between £3 million to £5 million pounds in the south-east or a high-end UK location. Even small sites of 0.5 acre to 1 acre in an average UK town could be worth £700,000 to £1 million pounds.
The retirement operators usually offer an Option or a Conditional Contract to buy the site subject to obtaining planning and they will almost always make a fixed offer to you at the outset (with legal costs and a small goodwill fee or 'Option Premium' being paid as well - you usually keep this whether your site gets planning permission or not).
How much is my site worth for residential (housing) development (prices at 2021) ?
As a general guide, a small site for purely residential housing of say 3 acres may be worth perhaps between £750,000 to as much as £4,000,000 close to London. For instance, currently up to 10 larger houses can be developed on a small site (say 1 to 1.5 acres) and no affordable housing is required – this makes smaller sites more valuable than larger ones, per acre.
A much larger site of say 15 acres of land will proportionately be worth a little less as generally the larger the site the slightly lower the pounds value per acre (£/acre) and with larger sites more of the land is likely to be used for roads, open space, new schools and playing fields etc.
So only say 12 acres of a 15 acre site would be ‘developable’ and therefore you would receive say £1.2M an acre close to London and perhaps only £500,000 per acre in the other regions of the UK. But still anywhere between £6 million to £14 million pounds for 15 acres of good housing development land.
Which companies buy land for residential or ‘mixed-use’ development in the UK today ?
Until about 2010 when the last economic recession was in full swing, the mainstream housebuilders such as Barratt, Persimmon, Taylor Wimpey, Bellway and others would normally buy your land via either an Option Agreement or a Conditional Contract (see explanation below).
However, the UK Government made Local Councils have a ‘5 years housing land supply’ and that has meant significant pressure for those Councils to allow more land to be developed for housing. This has meant that the new ‘Land Promoters’ have grown in both number and size and it is thought they now account for some 80% of all UK land transactions for residential purposes.
An increasing number of both Housebuilders and Land Promoters are recognising the potential for offering ‘mixed-use’ developments whereby they combine housing and say industrial or office uses, even retirement homes. This is a useful (and flexible) opportunity for landowners as you can sometimes seek to retain some land with a longer-term income via rents and long leases. Please note that this is different from a 'Hybrid Agreement' whereby the developer (usually a housebuilder) tries to offer some real 'full market' land value and other value by athe traditional Option Agrement.
What are the advantages and disadvantages of doing a deal with a LAND PROMOTER ?
FOR : Likely Higher Price & Land Promoter offers a more Flexible Deal (can be 50% more money - land sale value - for the landowner)
AGAINST : Land Promoter may want a higher percentage of the sale price (can be up to 20% of sale value compared with 10% from housebuilder)
Some Advantages : Despite the term ‘Land Promoter’ sounding rather pushy and hard-sell, there are now some very experienced and capable firms established which have picked-off thre best people in the industry to work for them. The Land Promoter will normally be very keen to get on with the process of obtaining planning and will use a legal document called a 'Land Promotion Agreement' to do this (see below for explanation of this type of Agreement).
It is usually their own private money at stake (although funds are also widely utilised) and unlike a plc Housebuilder they do not have to worry about building the homes so they can concentrate 100% on your land and obtaining the best scheme and therefore the most money for it possible.
The Land Promotion Agreement they will sign with you seeks to align your interests and theirs as a ‘partnership’ with the aim of securing the best scheme they can which will have the highest value when it is (normally) offered to Housebuilders on what is called the ‘open market’ (i.e. bidding for the site takes place, highest bid wins).
Disadvantages are that Land Promoters can seek to charge high discounts to the sale price, rack up higher charges on the costs of planning applications and work and may be understaffed in some cases or have a bad reputation with the Council (Planning Authority) due to other schemes within the area.
It is also important to monitor their proposed planning and technical development strategies throughout any lengthy 'promotion term' so that the most cost effective solutions are chosen. Landsite recommend formal monitoring of progress in any medium-long term agreement.
Land Promoters also charge VAT on the ‘services’ part of their advice so if you are not registered for this then you may find that you have to pay VAT on that element of the deal. A Land Promoter can be expected to deduct anywhere between 5% and 25% of the sale price. The Land Promoter will contend that you could see a sale price perhaps 20%+ more than the ‘market value’ offered by the Housebuilder - as it is a competitive bidding process and therefore the very highest price should be achieved.
What are the advantages and disadvantages of doing a deal with a HOUSEBUILDER ?
FOR : Good Reputation & Resources & may (in some cases) even be able to offer houses as part of the deal.
AGAINST : Potentially nowhere near as as high a land value when you sell, compared to a Land Promotion Agreement.
Some Advantages of a large, established UK housebuilder is that they are unlikely to go bust whilst taking your site through planning.
Secondly, they actually build the homes themselves so some Councils prefer this as it means the site will be ‘deliverable’ and not simply sold to the highest bidder.
Thirdly, the housebuilders have a prominent reputation to consider so may well seek to hold very clear and well-designed public exhibitions and tours of their existing developments. Lastly, a housebuilder may be in a position to simply provide you with houses as part of any deal.
The Main Disadvantage of dealing with a housebuilder is that they are very unlikely provide a market-tested and sole a ‘Land Promotion Agreement’ but in almost all cases they must do a deal via either a ‘Land Option Agreement’ or a ‘Conditional Agreement’ (see below for explanations of these Agreements). In effect what this means is that you will not normally get the higher price that a Land Promoter achieves by ‘going to the market’ with a valuable planning permission.
Housebuilders make most of their money by actually building and selling completed homes so it is not necessarily in their interest to pay the highest price for your land. The housebuilders may also be slower to get on with the process of ‘promoting’ the site and getting planning permission.
A housebuilder will typically seek a deduction of at least 10% to ‘market value’ via an Option Agreement and normally 15% if the site is classed as Greenbelt land. This may sometiems be a lower discount to sale value than that charged by a Land Promoter, but it may ultimately be less than the 'extra' cash generated through the competitive bidding which occurs with a land promotion deal.
A Housebuilder can sometimes offer a more professional technical approach, as they are set up in business divisions with whole teams dedicated to each part of the development process. However, likewise, they may have a narrow-minded focus and beareaucratic process spending a lot of time drawing up masterplans and commissioning consultants instead of dealing with the main issues associated with obtainng a planning permission.
What fees and costs are met by the Housebuilder, Land Promoter or Retirement Developer ?
Land Promoters (and Housebuilders) will normally pay for ALL of your (reasonable) legal costs (excpect say £5,000 + VAT to £7,000 + VAT for a small site and up to £15,000 + VAT+ for a site with several hundred houszes). They also pay you a ‘goodwill’ sum or Promotion/Option deposit payment which you keep whether or not they obtain planning permission. THis is anythwre between as alitle as £10,000 + VAT to as much as £100,000 + VAT (or more). Housebuilders will normally want a decent ‘term’ of years for their agreement (which depends on their planning prognosis) and they may have to pay you a further sum to renew or extend the agreement.
Land Promoters tend to offer ‘5 year + 5 year + 5 year’ (or less - e.g. '3 + 3 + 3 year') agreements which both parties an opportunity to review the performance at every interval and also be paid a small sum to extend the promotion agreement (every 3 or 5 years - which is nice !). Housebuilders may often have to sign up Option Agreements on 10-year terms only (with an extension for 5 years).
Retirement Developers can usually pay more for the site that a small housebuilder as car usage is low and affordable housing is not normally required which helps to push the land value (price paid) up. They will normally pay a 'goodwill' sum at the outset when you sign the agreement and all your (reasonable) legal costs. They will seek to obtain plannoing permission very quickly (within a year or so) and seek minimum 12 month contracts for a fixed payment of land value. At Landsite we will seek to negotiate reasonable payment by the developer for your premium payment and for legal fees.
These 'goodwill' or 'sweetener' payments (usually called an 'Option Premium') are commonplace and are essentially a gesture by the developer that they are serious about gettng plannign and recognised the ;anmd will be controlled by them in some way whilst they secure planning. However, it does not mean ythe landowner cannot sellt the lanmd or so anythign with it.
The Option Premium / 'goodwill fee' must be balanced against the costs the Promoter or Developer will have to pay to promote the site and gain planning consent and they will usually seek to deduct legal fees, the Option Premium payment and the costs of their planning application (or Appeal) from the final land payment to you, as landowner. However, if they fauil to get planning the Legal Fees and Option Premium payment are usually not able to be retrieved by the developer from the landowner.
Historically, planning permissions used to be relatively cheap to secure, and therefore landowners saw healthy 'premiums' - sometimes up to £300,000 to £500,000 on large residential sites.These are now much lower. The size of premium also depends on the size and the planning status of the land - e.g. Greenbelt land a lower premium; 'Allocated' or approaching allocation land much higher option / promotion premiums.
However with the costs of planning rising very significantly and the delays to securing planning increasing, today you could expect to be given only between £5,000-£15,000+ for a small site and perhaps £100,000 for a larger residential opportunity. Between £5,000 to £15,0000 towards your legal costs to instruct a solicitor to respresent you (which will normally cover the fees entirely).
Can my land be developed for houses ?
This very much depends upon where your land is and if it is in the Greenbelt or not. Until recently, Greenbelt land was a no-go area and virtually impossible to secure planning permission for residential development.
However, the growing and continued need for more housing has meant that Councils are having to look at releasing parts of the Greenbelt close to existing towns and cities in particular.
If your land lies near a good-sized road and is surrounded on at least 2 sides by existing houses (or a railways or road or canal etc) then it has potential and if a few acres in size Landsite would be happy to provide some guidance and advice.
Previously developed land, whether in the Greenbelt or outside, is looked upon favourably by local authorities for redevelopment.
Your land must have access onto a public highway, and be in the vicinity of services (i.e. water, electric and drainage networks) to be considered developable.
Sometimes, you may not have all of the above and require 'third party land' to achieve access or servicing. If this is the case, Landsite can also advise on your options to unlock development.
My land has been allocated for housing - what do I do ?
If you land has been allocated for housing development then you are in a VERY VERY GOOD POSITION. However, the BIG DANGER for landowners is that they may simply assume a large, well-known housebuilder is the best partner to take the matter forward - NOT ALWAYS THE CASE - see above !
How long will it take to sell my land ?
Much is dictated by the planning process which takes a minimum of 13 weeks to decide each major planning application and usually much longer (e.g. 6 months+) for larger sites. Discussions to sell a piece of land may take between 2 to 6 months to complete; the planning application would then take a further 3-4 months to prepare properly and then it would be submitted (a further 2-3 months).
Realistically you should assume that from contacting LandSite to receiving a payment for your land will take about 12-15 months at the very least and if the site is not Allocated in the Local Plan or is Greenbelt you must expect it to take several years to see a planning permission and then sale of your site.
If you have a piece of land that is ‘Allocated’ for development within the Local Plan, or is very likely to get it then you could see a sale within 12 months and offers will normally be very competitive.
It is the case that some sites can be sold ‘unconditionally’ which means the developer will buy the site as it is, however this is often not the best route to secure maximum value. Sites with planning permission can be sold unconditionally.
Some sites (particularly large ones or those in the Greenbelt) may take many years to obtain a planning permission and that is why Land Promoters and Housebuilders both seek to have a Land Promotion Agreement or an Option Agreement that lasts for at least 5 years and normally can be extended to 10 or even 15 years.
Sites located in the GREENBELT can ONLY be developed by getting them 'Allocated' as a site in the Council Local Plan - the only possible exception to this is where a site is currently 'brownfield' (i.e. used for industrial uses, with significant buildings or contaminated) and in this instance there may be the potential to apply for re-development without getting an allocation in the Local Plan.
Why is there an opportunity at the moment for developing residential sites?
During the last 12 years (to 2022), the UK has not been building enough new homes to meet current demand. Many Local Authorities are now under considerable pressure to grant planning permission for new sites, often in what was previously considered as 'sacrosanct' Green Belt land.
Government intervention in the market such as 'Help To Buy' and a relaxation of some planning policies has helped to fuel the demand for housing and the potential for sites to succeed in obtaining planning permission for development.
I have been approached by a land promoter, what is your advice ?
Stay calm and get some independent advice. There are over 200 Land Promotion Companies operating in the United Kingdom of all shapes and sizes. Some are good and have long established reputations and track record and others (albeit not many, thank goodness) may be aggressive, poorly funded or lack expertise and seek unfair terms and conditions.
As explained above, Land Promoters certainly have a place in the market and there are some excellent and trustworthy companies. All Land Promoters will require that a landowner must sign a 'Promotion Agreement' (or sometimes an Option Agreement instead) which will then bind your land to them for a fixed period of time.
Once the Land Promoter has secured the best planning permission they consider they can obtain, then they will take the site, via a clear and open marketing process, to several housebuilders or developers to get the best price they can. You would be involved in this process, as the land is still in your possession, and actually the Promoter never acquires your land at all - they just take a fee for their services in securing the planning consent.
The ultimate price you get will reflect a deduction of a fixed percentage (%) of the sale price and a deduction for the costs they have spent in promoting the site (which could include the fees they paid upfront to you).
However, by 'best', that does not always mean the most money on offer - you have to like and get along with your development partner, whether they are a Land Promoter or a Housebuilder.
Is it expensive to develop land myself ?
The short answer is YES. A typical medium-sized residential site of 10 acres would cost the developer a minimum of £200,000 for preparing the Planning Application only, not including any years of promotion work prior to that (SEE BELOW : 'Why are Planning Applications So Expensive ?'). The Local Authority will then charge a Planning Application Fee when it is submitted for them to decide upon whether to grant permission or refuse it.
To build the houses and infrastructure costs anywhere between £100/ft2 to £200+/ft2 even for the large housebuilders (who typically benefit from more economies of scale on their costs) so a typical development of say 100 new houses could cost perhaps £8,000,000 to £15,000,000. This is apart from the associated payment of costs to the Local Authority such as S106 Payments, the CIL (Community Infrastructure Levy) or off-site Affordable housing contributions.
Threfore YES - it IS an expensive, frustrating, complicated and time-consuming business and that is why it is always best to try to deal directly with a land promoter or reputable developer from the start.
What is a Promotion Agreement ?
A Land Promotion Agreement is signed by the landowner and a land Promotion Company to legally confirm that the company will do its best to secure as valuable a planning permission as possible within (ideally) the shortest period of time.
Once the company has gained planning permission then the land is worth considerably more money and it is therefore sold to the highest bidder (normally a Housebuilder).
It will have been agreed between the landowner and the Land Promotion company at the outset that the costs of getting planning for the site, the legal costs and between 5% to perhaps as much as 25% of the sale value of the site will be paid to them. The landowner will receive the remaining amount which will equate to between 75% and perhaps 95% of the sale value.
The possible advantage of a Land Promotion Agreement for the landowner is they will ultimately receive more money for their land (with planning permission).
What is a Option Agreement ?
An Option Agreement (occasionally referred to as a 'Land Option Agreement' and 'Option Agreement to Purchase') are essentially the same thing and these are normally used by a developer or housebuilder to legally agree to purchase your land if certain criteria are met.
In the case of a deal to buy your land for residential development then the housebuilder will offer to buy the land for a percentage (%) of what is known as it's 'Open Market Value' (OMV). This is essentially what the land is likely to be worth with planning permission in the 'open' market place.
The Option Agreement will specify a length of time that it will remain in force (while the housebuilder tries to get the valuable planning permission which will make the land hugely more valuable) and it will also agree that all legal costs and a 'goodwill' fee (known as an 'Option Premium' payment) is paid to the landowner.
When the landowner and housebuilder (or developer) have agreed everything the Agreement is signed by both parties and Exchanged.
When the housebuilder obtains planning permission then the Option is triggered and the Housebuilder will issue an Offer for the site based on what THEY think the Open Market Value (minus their percentage).
The housebuilder might make another slightly higher offer but if the two parties cannot agree then the price is agreed by a third party (acting as an Expert or Arbitrator). The final value determined by the Expert or Arbitrator is binding upon the landowner and the Housebuilder or Developer.
Why are Planning Applications So Expensive ?
At one time, in the 1960's, 70's and even in the 1980's, Planning Applications were not particularly expensive and a good Application for say 100 new homes might have only cost between £15,000 to £75,000.
However, increasing UK and EU regulations on environmental matters, more stringent requirements for technical information together with the requirement for Affordable Housing at every site and more recently much higher charges to actually apply for planning permission has meant that the costs have rocketed.
Consequently, a planning application for 100 new homes now might easily cost £200,000 to £350,000 or more. The largest 'strategic' sites where upwards of 500 to 1000 new homes are being planned (often with new schools, leisure facilities, a Doctors Surgery, Village Hall etc) can be in excess of £1 million pounds and sometimes multiples of this amount.
GLOSSARY OF TERMS
Landowner - the person who owns the piece of land which could have potential to get planning permission for development.
Land Promoter - a company which specialises in securing planning permission for residential development but which does this by working in 'partnership' with the landowner to try to see the site for the highest amount. Examples include : Richborough Estates, Gladman Land, Catesby Estates, Welbeck Estates, IM Land, Rosconn Strategic Land, Muller Property, Ptarmigan Land, Lonestar, Pigeon Land, St Congar and Frontier Estates. A full list can be found at the Land Promoters & Developers Federation (https://www.lpdf.co.uk/).
Housebuilder - a company that buys land and builds and sells finished houses. There are plenty of examples of larger housebuilders in the UK.
Developer - a company which seeks to buy land and either develop it themselves or perhaps sell it on with the benefit of planning permission.
Land Promotion Agreement - the document used by Land Promoters to enter into legal agreement with a Landowner to agree to secure the most valuable planning permission for housing development that can be permitted within an agreed timescale and then to sell the land with the benefit of planning permission to the highest bidder and split the proceeds between itself and the Landowner.
Land Option Agreement - the document used by the majority of UK Housebuilders to enter into legal agreement with a Landowner to purchase their site at a discount to the 'Open Market Value' which is usually determined by the Housebuilder in ther first instance. The deal must be done with the Housebuilder only.
Conditional Agreement - the document whereby a Housebuilder or Developer may seek to offer a fixed sum of money subject to the signing of a contract (between it and the Landowner) and securing a planning permission for development of housing or perhaps housing and another use on the same site. The land must be sold for the price agreed within a fixed term.
Conditional Sale - the sale of the land is dependent upon the Purchaser (e.g. a Developer or Housebuilder) doing certain things such as securing a planning permission and / or meeting it's obligations in accordance with the Agreement.
Unconditional Sale - the sale of the land is for a fixed price and there is no requirement for the purchaser (e.g. a Developer or Housebuilder) doing certain things such as securing a planning permission. The sale of the land simply proceeds for a agreed sum and is sold to the Purchaser after undertaking typical due diligency such as legal and Title checks. This type of sale is used where the land may have existing planning permission or is perhaps a disused industrial or commercial building surrounded by residential housing.
Land Bank - A stock of land held by a developer with the intent to hold it for future development or until such a time as it is profitable to sell on to others. The media refer to plc housebuilders 'landbanking' land which could be developed for housing - this is very simplistic - ALL large housebuilders need to have a supply of land in reserve and in most cases once they get planning permission they will build the houses and develop the site.
Hybrid Agreement - Planning Permission is granted for residential development and a proportion of the site is openly marketed to achieve market value and sold to a third party. The developer then purchases the remainder of the site at market value less any costs and discount. This tends to relate to larger sites only and is usually with a plc housebuilder or large developer. It can help their cashflow. Do not be confused by thinking a Hybrid Agreement will secure the best land value for your land - only a pure Land Promotion Agreement is fully 'market tested'.
Joint Venture Agreement - The housebuilder or developer shares the cost and risk of securing a planning application with the landowner e.g. sometimes the landowner may be prepared to put the land in 'for free' so that the site can be developed and they get a larger slice of the 'whole site' profit. This is not a common route and can be very time consuming and challenging in legal terms. It can only really be undertaken with a developer or housebuilder, not a land promoter - as they want to sell the land with planning only and take their share of the uplift in value from securing a planning permission. Once planning has been granted, the parties (landowner and developer) then jointly service the site, sell the completed properties and share a proportion of the land cost and profit.
Overage or 'Claw-Back' - this is a term which applies to a clause in the Contract you sign normally with a new landowner, a developer or housebuilder whereby if they should get planning permission for more than they anticipated or planning for more houses and therefore a more valuable site than was originally agreed then they must pay a % of the 'uplift' in value (the extra value) to the landowner. This protects landowners from being swindled after they have sold the land or agreed a sale.
Land Promoters including :
Catesby Estates plc - Midlands - https://www.catesbyestates.co.uk/your-land
Richborough Estates - Birmingham - https://www.richboroughestates.co.uk/our-approach/strategic-land-promotion-faqs/
Lone Star Land - Warwickshire - https://lonestarland.co.uk/land-promoters/
Pigeon Land - Essex - https://www.pigeon.co.uk/land-promotion/
Frontier Estates - London - https://frontier-estates.com/about/
Ainscough Land - Northern - https://www.ainscoughstrategicland.co.uk/
Gladman - Northern - https://www.gladman.co.uk/
IM Land - Solihull - https://www.imland.co.uk/news/
Landform - London - https://landformestates.com/
Wallace Land Investments - https://www.wallaceland.co.uk/
Axis Land Partnerships - https://www.axislp.com/approach/
Generator - http://www.generatorgroup.co.uk/about-us/generator-strategic-land/
Gladman Land - https://www.gladman.co.uk/
Lands Improvement - https://www.lih.co.uk/
Neptune Group - https://neptune-land.com/
Anwyl Land - https://www.anwylland.co.uk/
Rosconn Strategic Land - https://rosconnstrategicland.com/
Rainer Developments - https://www.rainierdevelopments.co.uk/
Ptarmigan Strategic Land - https://www.ptarmiganland.com/projects
Sigma Strategic - https://sigmahomesgroup.co.uk/land/strategic-land
St Congar - http://stcongar.com/
St Philips - https://stphilips.co.uk/
Unique Land - https://uniqueland.co.uk/
Valorem - http://valorem-mgmt.com/
Waddeton Park Land - https://www.waddetonpark.co.uk/Waddleton Park
Wallace Land Investments - https://www.wallaceland.co.uk/
Welbeck Land - https://www.welbeckland.co.uk/
Muller Property Company - https://www.muller-property.co.uk/what-we-do/land-promotion-obtaining-planning-permission/
Leaper Land Promotion - http://www.leaperlandpromotion.co.uk/
Land Promotions - https://landpromotions.co.uk/
James Coker Land - https://www.jamescokerland.co.uk/land-promotion/
Dandara Strategic - https://www.dandarastrategic.com/
Fruition Properties Land Promotion - https://www.fruitionproperties.co.uk/land/promotion/
Planning House - https://planninghouse.co.uk/land-promotion/
Landstrom Group - https://www.landstromgroup.com/our-services/land-promotion/
Cheffins - https://www.cheffins.co.uk/development/development-services/strategic-land-promotion.htm
Batchellor Monkhouse - https://www.batchellermonkhouse.com/development-and-land-promotion/
Landrose Group - https://landrose.com/land/land-promotion-process/
Mayes & Co. - http://www.mayesandco.co.uk/land-promotion/
Land Promotion Group - https://www.landpromotiongroup.com/how-it-works/
Himor - https://www.himor.co.uk/
South-Coast Land - http://www.southcoastland.co.uk/land-promotion/
Endurance Estates - http://www.endurance-estates.co.uk/land-promotion
Dean Lewis Estates - https://www.deanlewisestates.co.uk/
Land Promoter - https://www.landpromoter.co.uk/
Laketree - https://laketreeconsultancy.co.uk/developers-land-promoters
Strategic Land Group - https://strategiclandgroup.co.uk/land-wanted/
Plc Housebuilders and Retirement Developers :
Barratt Homes - https://www.barrattdevelopments.co.uk/about-us/what-we-do/land-buying
David Wilson Homes - https://www.dwh.co.uk/the-buying-process/what-is-stamp-duty/land-and-buildings-transaction-tax-lbtt/
Persimmon Homes - https://www.persimmonhomes.com/corporate/land-requirements
Taylor Wimpey Homes - https://www.taylorwimpey.co.uk/land-and-planning/acquiring-land
CALA Homes - https://www.cala.co.uk/land-planning/
Berkeley Homes - https://www.berkeleygroup.co.uk/about-us
Bovis Homes (Vistry) - https://www.bovishomes.co.uk/land
Linden Homes (Vistry) - https://www.lindenhomes.co.uk/land
Crest Nicholson - https://www.crestnicholson.com/contact-us/partnerships-and-strategic-land
Countryside - https://www.countrysideproperties.com/housebuilding/strategic-land
Redrow - https://www.redrowplc.co.uk/land/
Bellway - https://www.bellwayplc.co.uk/land
McCarthy & Stone - https://www.mccarthyandstone.co.uk/we-buy-land/
LNT - http://lntcaredevelopments.co.uk/landwanted.php
Churchill Retirement - https://www.churchillretirement.co.uk/land/
Beechcroft Developments - https://www.beechcroft.co.uk/about-us/overview
Adlington Retirement - https://adlington.co.uk/wp-content/uploads/2020/01/Sites-Required-Brochure_lo-res.pdf
Larger Regional Developers & Affordable Homes :
Davidsons Homes (Leicestershire & Midlands) - https://davidsonsgroup.co.uk/
Antler Homes - https://www.antlerhomes.co.uk/land-and-planning
Fairview New Homes - https://www.fairviewnewhomes.co.uk/land-acquisition/
Generator Group - http://www.generatorgroup.co.uk/topland-and-generator-group-form-strategic-land-partnership/
Gentoo - https://www.gentoohomes.com/
Hopkins Homes - https://www.hopkinshomes.co.uk/land-acquisition/
Hill Residential - https://www.hill.co.uk/working-with-hill/land-planning/land-acquisition/
Jones Homes - https://www.jones-homes.co.uk/land-required/
Inland - http://www.inlandhomesplc.com/about-us/our-portfolio/
Miller Homes - https://www.millerhomes.co.uk/corporate/land.aspx
Lovell Homes - https://corporate.lovell.co.uk/what-we-do/our-land/
Spitfire Homes - https://spitfirepg.co.uk/land-required/
Organisations dealing with Land Promotion & Development :
Land Promoters & Developers Federation (LPDF) - https://lpdf.co.uk
Countryside Landowners Association (CLA) - https://www.cla.org.uk/
Farmers Weekly - https://www.fwi.co.uk/business/markets-and-trends/land-markets/4-ways-farmers-can-sell-land-development
ADAS - https://www.adas.uk/services/land-development
Legals Resources & Specialists :
UK Practical Law - https://uk.practicallaw.thomsonreuters.com/Cosi/SignOn?redirectId=rt_175f5d69-a3a5-4faa-aa48-d6ad2da3eb3f
Howes Percival LLP - https://www.howespercival.com/articles/promotion-agreement-or-option-agreement-whats-in-your-best-interest/
Holmes-Hills - https://www.holmes-hills.co.uk/news/2019/august/methods-of-securing-payments-under-a-land-promotion-agreement/
Farrer Solicitors - https://www.farrer.co.uk/news-and-insights/agreements-for-the-promotion-and-sale-of-development-land/
BHW Solicitors - http://bhwsolicitors.com/land-promotion-agreements-protecting-landowners-interests/
Keston Reeves Accountants - https://www.krestonreeves.com/news/land-promotion-agreements-tax-issues/
FSB Solicitors - https://www.fsp-law.com/option-or-promotion-agreement-which-is-best/
Savills - https://www.savills.co.uk/blog/article/289188/residential-property/in-plain-english--option-and-promotion-agreements.aspx
