Often Farmers and Landowners cannot afford to promote their farmland through the planning system to obtain planning permission. Housebuilders and Investors will pay for the planning costs in return for the Farmer or Landowner entering into an agreement to sell their land to the Housebuilder or Investor once planning permission has been granted.

An Option Agreement is agreed with builders. They have similar clauses to a Promotional Agreement. Option Agreements grant developers a fixed amount of time in which to secure planning permission and buy the site from the Landowner, usually at a discounted price of between 0% to 20%. Typically, Options involve the payment of an initial option premium which is paid on the signing of the Option.

The main differences of an Option Agreement compared with a Promotion Agreement are:

• The developer does not have to buy the site as soon as planning permission is granted. Instead, they can choose to hold the site whilst there is still time left on the Option, buying it at a time that suits them.

• You only have one buyer, being the builder, who will pay a price based on the RICS Red Book “Market Value” at the point planning permission is secured. Instead of being assessed through a competitive bidding process, that “Market Value” is an estimate based on their planning permission, their technical designs, an estimated cost of abnormals and their view of selling prices.

The result of this is that often land prices achieved are lower with an Option, and higher with a Promotional Agreement. Whilst Landowners can challenge the valuation by going to arbitration or Independent Expert determination, it is time consuming and costly. The developer always has the advantage too because the estimate is based on the planning permission and technical information they provide.

Often Landowners are disappointed with the values achieved under an Option Agreement. While the motivation for a Promoter is to maximise the price paid for your site, the motivation for the developer under an Option Agreement is to minimise the price they pay.

Paton Land address the specific requirements of individual Landowners. Paton Land has many years of experience leading negotiations in support of Farmers and Landowners wishing to option or sell their land. Contact us to discuss your specific circumstances.