Tips for landowners: How to sell to a property developer

It won’t come as a surprise to anyone to hear that we are in the grip of a national housing shortage. Estimates range in the region of 200-300,00 homes that should be built per year to keep up with demand. For once, pretty much all political parties are in agreement that housebuilding is a top priority.

The available of suitable land on which to build, it seems, is one of the major problems. Insufficient land in desirable house building areas are often cited as one of the main reasons why supply is lagging behind the demand for new homes.

If you’re a landowner, you’re in an enviable position. Farmland is particularly sought after, and if residential planning permission has already been obtained, the asset is worth even more. If you’re tempted to sell your land for development, here are some handy tips on how to go about it to get the best possible deal.

Find a professional land agent

Just as you would want to instruct an estate agent to help with the sale of your home, land agents are professional advisers whose job it is to guide you through the complexities of selling your land. Unless you’re a seasoned pro, the risk of going it alone is simply too great.

Property developers have a keen commercial focus, using specific criteria for purchasing development land to help maximise profits. Obtaining the right advice right from the start from a professional who is on your side is key. Not only will a land agent help you present your land in the most appealing way in the marketplace, it will be in their interest to maximise the value of the transaction.

Mitigate your tax exposure

In addition to a competent land agent, you also need an experienced tax accountant who can advise on how to structure the proposed land transaction in the most tax efficient way so as to maximise any tax reliefs and exemptions that may be available.

In fact, many property developers insist on the seller having obtained professional tax advice before contracts can be exchanged. A range of different tax liabilities are likely to be affected and will need attention. This includes Income Tax, Value Added Tax, Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax.

Ensure good title

For any land or property transaction to proceed smoothly, make sure your conveyancer has done the required homework to ensure that nothing will delay the sales process or put the buyer off the purchase.

Is the land registered, with full documentation in place? Is the land title subject to a legal charge? Have any existing tenants been dealt with? Does your land have direct access to an adopted highway? Are there any boundary issues, or restrictive covenants? What about existing rights of access and rights of way, or absence of easements? These and many other questions will be of great interest to the buyer. Make sure that you can provide clear answers to all obvious and predictable queries, and that the land is offered for sale in good and marketable title.

Prepare for environmental queries

You should also be prepared to disclose full information regarding any environmental issues affecting the land to be sold for housing development. In particular, this affects any past history of flooding or drainage problems resulting in waterlogging.

Establish if the land has ever been used for potentially contaminative uses or whether there are sources of contamination nearby. If there are any acute contamination issues, these will have to be addressed and remedied, which will be expensive and significantly impact the value of your land.

Whatever the situation, it’s important to have adequate documentation including past surveys and technical reports, ready to share with the property developer who is keen to buy your land.

Obtain planning permission

Clearly, the prospect of purchasing your land will only appeal to a property developer if planning permission for housebuilding can be obtained. Consent must be granted before any building works can begin.

As the landowner, you could apply for permission yourself – but how would you know what your buyer’s exact requirements will be? Any planning application is going to be a costly stab in the dark, and a positive outcome is far from guaranteed.

A preferable approach is to enter into Promotion Agreements or conditional contracts, both of which offer much greater chances of success on the right terms.

Consider a Promotion Agreement

Promotion Agreements are becoming increasingly popular amongst developers, and this type of arrangement can be beneficial for landowners too. As Worthing based land agent Bob Hilder explains:

“A Promotion Agreement allows for the joint marketing of a consented site to a competitive house-builder industry, hungry for immediately developable sites. On this basis, the interests of the landowner and promoter are wholly and mutually focussed on maximising sales proceeds, which is a critically important aspect of this form of offer. It invariably includes drawing up a planning and marketing strategy in full agreement with the landowner.”

Once the developer interested in purchasing the site has obtained planning permission, the transaction goes ahead.