Following on from Part One of our Strategic Land series, where Katie Fung, a Partner in the Real Estate & Projects team at Devonshires, reviewed Option Agreements, Katie will now discuss Promotion Agreements.
A Promotion Agreement is similar to an Option Agreement up to the point of securing planning permission. It is an agreement between a landowner and their promotion partner who will promote the land through the planning process, apply and secure a planning permission. It is after securing planning permission that a Promotion Agreement defers from an Option Agreement. Once planning permission is obtained instead of having the option of purchasing the land, the promoter will market and sell the land to a third party.
The promoter will usually fund the planning and marketing costs on an at risk basis. Once the land is sold the landowner will reimburse the promotion, planning and any other professional costs which may have been paid to the promoter out of the gross sales proceeds from the sale of the land and then the net sales receipts will be split according to a pre agreed percentage between the landowner and the promoter.
Under a Promotion Agreement the common goal for both the landowner and the promoter is to sell the land at the best price possible. The land will be exposed to the open market. A promoter will often be a planning specialist as opposed to a developer and whilst they will have the relevant planning expertise the promoter may lack the experience and visibility of what a developer may want or need in practice. The main advantage of entering into an Option Agreement enables the landowner to utilise the experience and expertise of a developer.
It is commonly considered that a Promotion Agreement is more landowner friendly since the parties work in partnership with each other to achieve the common goal of selling the land for the best price. Ultimately when deciding how best to structure a deal it will come down to the landowner’s appetite for control and their willingness to be involved during the planning process not to mention the relationship between the landowner and promoter.
Make sure to keep a look out for updates on our Strategic Land webinar, which we will be hosting in the coming months!
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.