Selling land to a developer is becoming increasingly common among landowners, whether it’s unwanted agricultural land or an inherited plot. Yet if you’re exploring it for the first time you may be unsure how it works and what your options are.
The good news is, you can sell your land to a developer with or without planning permission, and it might be a lot simpler than you think.
In our latest blog, we’re explaining the five main ways you can sell your land for property development purposes so you can make an informed decision about the future of your plot.
Conditional contract
Conditional land sales have specific conditions attached to them and can only go ahead with those conditions in place, for example, if planning permission has been granted.
This takes more time than an unconditional sale (explained below), as the planning application process can be lengthy.
However, it increases the potential ROI, because the value of the land is based on its future value set out under the conditions of the agreements.
Once the condition is met, e.g. securing planning consent, it becomes an unconditional contract and the developer has a required timeframe to complete the sale.
Unconditional contract
An unconditional land sale means selling your land for a set price upfront without any conditions attached to the sale, like planning permission.
It’s the most straightforward type of land sale and can be the best way to sell if you’re in a hurry.
It’s generally low risk for landowners, as all of the risk lies with the developer.
However, this does mean the price agreed can be lower, as it’s based on the current value of your land rather than the potential value it will hold once as a sought-after housing development.
Promotional agreement
In a promotional agreement, you partner with a developer or land promoter to “promote” the sale of your piece of land.
Your promotional partner will take the land through the planning process and then market it to potential buyers, shouldering the cost of these processes.
Their fee is either a percentage of the sale price or a set price agreed upon ahead of the promotional period.
This arrangement works well for you as a landowner, because you tap into the developer’s experience, expertise, resources, and network of property development contacts, which can result in a faster sale and maximise the value of your land.
Plus, you get the benefit of securing planning permission – which can be a complex and long-winded process – without having to navigate the process yourself.
Options agreement
Another way to sell the land is via an options agreement.
In this instance, you enter into a contract with a developer who will buy the site within a specified timeframe known as the “options” period.
The options period can typically range from two to 10 years.
As the landowner, you’ll receive a non-refundable fee after the options period begins, in addition to the final purchase price.
The benefit of an options agreement is that it reduces the risk involved for the landowner because the developer covers the cost of obtaining planning permission.
If they successfully secure planning permission, the developer can then acquire the land and reach an “overage agreement” with the landowner, based on the new value of the land.
Collaboration agreement or joint venture
Joint ventures or collaboration agreements are made between a landowner and a developer. The agreement states they’ll join forces to develop the land for mutual benefit, each contributing certain resources.
Generally, the landowner will contribute the land and the developer will provide the funding, experience, project management, and network of contacts to oversee the development.
This kind of agreement sees risk shared between the two parties. It can work well for both the developer and the landowner because the developer gains access to land without having to invest in the upfront cost of buying it.
Meanwhile, the landowner benefits from the developer’s skills, knowledge, and contacts.
Unsure which type of land sale is right for you?
Got a plot of land you’re thinking of selling but unsure which route to take? If you’d like to know more about your options and see if we could be the right development partner for you, get in touch with our team of property and planning specialists.
We’ll discuss your land and talk you through which type of land sale would suit you, your land, and your circumstances to help you make the right choice.
At Collaborate Land, we purchase land from landowners, manage the planning process, and act as the driving force for sustainable land development projects that benefit landowners, local communities, and the environment.
We’d love to work together to bring your land to life for good. Find out more about the process of selling your land to a developer.
