Planning reform is one thing, but updating your land agreements is another

Planning reform continues to dominate discussion across the development sector, with much of the focus on housing delivery and the government’s ambition to accelerate housebuilding. Less attention has been paid to a related issue: how those reforms could affect the operation of conditional acquisition agreements, promotion agreements and option agreements.

For developers, promoters and landowners, this is where significant risk can arise.

Many existing precedents were drafted for a planning system that looked very different. As the planning landscape evolves, parties may find themselves exposed to additional costs, delays or disputes if historic drafting is left unchanged. Planning reform and related development requirements are also changing the way land agreements allocate risk, cost and value between the parties.

This article sets out some of the drafting points which deserve closer attention, whether parties are negotiating new agreements or reviewing existing arrangements.

Expand the definition of an acceptable planning permission

Historically, many agreements focused on obtaining planning permission for a minimum number of dwellings or maximising value. That approach is becoming increasingly simplistic. More importantly, given the long-term nature of many option and promotion agreements, those provisions may remain in place for many years after the agreement is signed.

Changes to national planning policy, Grey Belt policy, affordable housing requirements and viability expectations may result in permissions containing obligations which would not have been anticipated when the agreement was signed.

The definition of an ‘Acceptable Planning Permission’ may now need to address:

• Building Safety Levy implications
• Building Safety Gateway approvals
• affordable housing percentages
• nutrient neutrality requirements
• water supply and resource issues
• Biodiversity Net Gain obligations
• infrastructure connections and availability
• phasing restrictions
• delivery obligations affecting viability.

The key question is no longer simply whether planning permission has been obtained, but whether it can be implemented on terms which remain commercially deliverable.

Review regulatory change clauses

Many option and conditional purchase agreements contain limited protection against changes in law. That is becoming increasingly problematic.

The Building Safety Levy is due to apply from October 2026 and creates a new development cost which many agreements signed several years ago could not have contemplated.

Parties should consider:

• whether new taxes or levies are deductible before calculating purchase price
• who bears the cost of additional regulatory burdens
• whether viability re-openers should apply
• whether minimum land values continue to be appropriate following legislative change.

Update planning cost definitions

Many agreements define ‘planning costs’ narrowly. That definition often no longer reflects modern development realities.

Developers are increasingly incurring costs associated with:

• nutrient neutrality mitigation
• habitat mitigation
• conservation covenants
• Biodiversity Net Gain delivery and monitoring
• additional technical assessments
• building safety compliance work.

These costs can be significant and parties should decide expressly whether they are deductible before calculating uplift, overage or option exercise payments. Similar considerations may arise under promotion agreements when determining the costs which can be recovered before sale proceeds are distributed.

Revisit longstop dates

The planning system remains in transition.

Although reforms are intended to accelerate decision-making, many sites continue to face delays arising from environmental constraints, infrastructure issues and other development-related requirements. Longstop dates agreed three or four years ago may no longer be realistic.

Delays can also arise from matters such as section 106 negotiations, utility capacity constraints and environmental mitigation requirements.

Consider:

• automatic extensions for regulatory change
• additional time for environmental mitigation
• delays arising from utility or infrastructure constraints.

Strengthen planning strategy provisions

Many older agreements were drafted on the assumption that planning policy would remain relatively stable. The pace of change means that assumption can no longer be taken for granted.

Recent reforms have introduced major debate around housing land supply requirements, Grey Belt development and the relationship between local policy and national policy.

Agreements should provide greater flexibility regarding:

• the type of application pursued
• density assumptions
• alternative development schemes
• appeals strategy
• the circumstances in which a revised application can be submitted.

Rigid drafting may prevent parties from taking advantage of planning policy changes that arise during the term of the agreement.

Review overage and value capture provisions

Planning reform may unlock sites that previously carried little or no hope value. Landowners will understandably wish to participate in that uplift, while developers will want certainty regarding the basis upon which it is calculated.

Overage provisions should therefore be reviewed carefully to ensure they properly address:

• Grey Belt releases
• enhanced densities
• additional or successive planning permissions
• future planning reforms.

Think carefully about Section 106 and infrastructure risk

National pressure for housing delivery does not remove the burden of infrastructure obligations. Indeed, some reforms could increase pressure to deliver affordable housing and supporting infrastructure.

Drafting should address:

• what level of section 106 liability is acceptable
• whether obligations can trigger termination rights
• how viability reviews are handled
• the treatment of future changes to affordable housing policy.

These issues can have a greater impact on land value than the planning permission itself.

The Birketts view

Planning reform is creating opportunities across the development sector, but it is also raising new questions about how planning risk, cost and value should be allocated between the parties to a land agreement.