Following on from the first and second edition of the Strategic Land Series where Katie Fung, a Partner in the Real Estate & Projects team at Devonshires, discussed Option and Promotion Agreements, here in the third instalment of the Strategic Land Series Katie will look at Hybrid Agreements.
As the name suggests a Hybrid Agreement is a hybrid of both an option and promotion agreement. This form of agreement is more appropriate where the landowner has an extensive land holding and where a developer is willing to purchase and develop a certain number of phases as a result of exercising their option but will then market the remaining phases with the benefit of planning permission for sale to third parties.
Care needs to be taken when agreeing the timings for bringing phases forward and the drafting should cover the creation and agreement of a disposal and marketing strategy. The ultimate aim of the parties is to maximise the sales value – either when it comes to the delivery of the dwellings by the developer or the sale receipt for the phases which are being sold to third parties. What the parties want to avoid is a situation where each phase is competing against each other and thereby having an adverse effect on the price.
Hybrid Agreements are complex since it includes elements of an option and promotion. There may be provisions within the Hybrid Agreement for the developer to install infrastructure to enable disposal of the land as serviced parcels to third parties. This enables the developer/promoter to proactively respond to market demands and achieve a higher price for the phase in question.
In conclusion there are three main types of agreements. Option Agreements are a popular method of structuring a deal where a Developer has an option to purchase the land during the option period. Promotion Agreements are similar to an Option Agreement up to the point of securing planning permission but typically once planning has been obtained the promoter will market and sell the land to a third party. Finally, a Hybrid Agreement is a combination of the two and more suited to very large land holdings.
Make sure to keep a look out for updates on our Strategic Land webinar, which we will be hosting in the coming month!
The webinar will feature a Q&A session where we will discuss the most commonly asked questions. So we can tailor our webinar, we ask you to submit your questions and comments to us on Strategic Land by clicking here.
To help keep this webinar of interest for all delegates, it would be helpful if questions can be kept as generic as possible. Whilst we will endeavour to answer and discuss a variety of questions during our webinar, please note we cannot guarantee that we will be able to respond to all of your questions.
For more information on the upcoming webinar please contact Katie Fung.