Development Options

Landowners, whether they be individuals or organisations, have a range of options when they consider how to maximise the value of their assets.  These options depend upon the level of resources which they wish to commit, and the level of risk associated with that process.

At the low-risk, low resource commitment end of the spectrum is the option of entering into a promotional agreement.  With this option, the landowner entrusts the promotion of the site through the planning process to a site promoter, the costs of which are met by the promoter in return for the promoter taking a percentage of the value of the land upon the sale of the site to a developer.  The process is often, although not always, a medium to long-term one and might involve the promotion of the site through a Development Plan review process leading to the site’s allocation for development.  It is in both parties’ interests to maximise the value of the site.

At this end of the spectrum also, is an option agreement, which is often entered into with a developer and which may involve the payment of an option sum to the landowner by the developer.  The process is typically shorter than a promotional agreement and usually results in the submission of a planning application for development of the site.  An option agreement is less of a co-operative process than a promotional agreement and may involve the developer agreeing to pay the landowner a minimum value for the site.  It will also result in the landowner accepting a proportion of the market value of the site, although usually higher than for a promotional agreement as the landowner will incur costs associated with the promotion of the site.  It is within the developer’s interest to minimise the amount they pay for the site in order to maximise their profit.

Self-promotion of the site through the Development Plan review process is time-consuming and not without expense but the landowner will retain all of the sale value of the site.  However, the success of this process will depend upon the quality of the planning advice that the landowner receives and may still be a long-term process.

In a similar vein, the landowner may choose to take the short-term approach of applying for planning permission.  While the outcome of this process is more immediate, it is a high risk, expensive option, requiring significant investment in expert advice to provide robust justification for the granting of planning permission.

Whichever option that a landowner may choose, it may be best to consider those options in the context of undertaking some form of planning and development appraisal.  Such an appraisal could guide a landowner as to the risk involved in trying to bring the site forwards for development; the type of development that consent may be granted for; the financial viability of that development; and whether the process of gaining consent is likely to be short, medium or long-term.  On that basis, it will inform the landowner of which of the site promotion options referred to above is appropriate.

Planning and Development Appraisal

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