The Southeast has a chronic shortage of housing, and local authorities are under pressure to meet targets set by central government.

Landowners and farmers may have hidden development opportunities, often on larger greenfield sites. If so, they will need to navigate through the many different ways of unlocking their land’s development potential, maximising their own benefit. This may involve dealing with unsolicited approaches from developers or their intermediaries, who will be motivated by their own financial gain. Inflation, reduction in government support and the cost-of-living crisis are squeezing margins, and any ways to generate new capital will obviously be welcome.

However, landowners and farmers should proceed with caution and seek expert professional advice when considering promoting and selling their land for housing development.

The search begins
Housebuilders, development promoters, planning consultants and other assorted intermediaries are continually scouring the country, particularly the overpopulated southeastern England, for potential new development sites.

Many landowners will therefore inevitably be approached by developers and their intermediaries, who can find out who owns land through simple searches at the Land Registry. They will review land topography, its relationship to existing settlements and services, and local authority development plans to identify possible new development sites.

When any landowner is approached, it could well be an opportunity to get their land promoted for housing development at little or no initial cost or risk to them.

Prudent landowners must however ensure they secure the most favourable deal available; developers and promoters are ultimately driven by profits, and any ‘first offer’ is unlikely to ever be the best deal for the landowner.

Intermediaries identify sites and can play a helpful role in bringing together the developers and landowners. But while they can be a useful catalyst, they are not independent, usually being engaged and paid by the developers, bringing about a strong potential for a conflict of interest, which they will often not recognise or acknowledge.

My strong advice to any landowner who wants to explore the potential development of their land or who is approached by a developer, is to consult a suitably qualified and experienced development surveyor at an early stage. They will be able to advise on and negotiate commercial terms and will usually be able to ensure that their fees are settled by the developer.

Structure of deals
There are a number of possibilities, and the surveyor will be able to advise what is most suitable for each individual area of land and landowner, bearing in mind the specific circumstances. The two main ones will be:

• An option agreement: the developer takes on responsibility to promote the land through the planning system. If they are successful, they will then have the option to buy land, usually getting their costs of promotion reimbursed and often getting a discount on the open market value.

• A promotion agreement: the developer/promoter will carry out the first task to promote the land through the planning system. If successful, the land will then be sold on the open market and they will again be reimbursed their planning promotion costs, but instead of a discount on market value, they will usually be paid a fee, being a percentage of the market price paid.

Under certain circumstances a conditional contract might be suggested which may be appropriate for smaller developments.

In both of these main structures, the developer/promoter will almost always take on all initial financial risk, paying professional fees for the landowner and all consultant fees and planning application costs. If they are successful, they will be well rewarded, but will have unlocked significant uplifts in value at no risk to the landowner.

For either type of deal, the initial pre-legal stage will involve the surveyor putting together detailed Heads of Terms, which usually run to several pages, covering the rights and the duties of both parties. An overview from the landowner’s solicitor, if they have experience of such deals, can be useful at this stage.

Early involvement of suitably experienced professionals is essential. Tax advisors should definitely be consulted to check on the VAT and Capital Gains Tax/Income Tax implications of any such deals.

Selling some or all of your land for development may not be for you and your family, but there are certainly opportunities out there as well as associated pitfalls.