To Promote or not to Promote, that is the Option: Top 10 Tips with Promotion Agreements
- Identify a promoter with experience in the local area and expertise relevant to the scheme size and planning proposals
- Agree upfront clear objectives which may include maximising value and minimising affordable housing and planning contributions, unless either party has particular requirements
- Consider whether the landowner should be protected by a minimum price so that it is not forced to sell in poor market conditions
- The landowner and promoter need to decide who is liable for the costs of promotion and whether such costs are reasonable deductions and whether any caps should apply.
- Once permission is obtained, will there be sales in tranches or infrastructure works? If so, agree the timing of cost deductions and the impact on the landowner’s tax position.
- The parties should consider whether the landowner grants the promoter pre-emption rights. Understandably landowners may resist such rights to ensure true market testing keeps interests aligned. The key is to strike the right balance.
- Promoters require security over the land, whether a charge, residual option or restriction. Agree in advance what type of security is required to protect the promoter but allow the landowner to continue to easily deal with the land.
- If a greater degree of control is important to a landowner, for example where land is being retained, the landowner may seek more involvement for example in setting or approving the design parameters for the scheme during and after planning.
- Promoters often prefer to retain control of the marketing and sale process although it can be beneficial for landowners to deal as interests are not fully aligned
- Tax advice should always be obtained by landowners early on to ensure efficiency.
