What is strategic land? Option and promotion agreements.

The phrase ‘strategic land’ is often used within the professional field, however it is a phrase the public may be unfamiliar with. What does it mean?

Land is either ‘strategic’ by its specific location, for example the land forms a key access route, enabling a larger area of land to be developed, or the land is ‘strategic’ due to its proximity to existing developed areas, providing the land with potential to be developed in the immediate, short or longer term. Land alongside an existing housing development or an inner city brownfield site are particular examples. 

The players engaged in strategic land are essentially the owners of land, whether farmers, institutions, businesses, investors or developers, and builders and promoters who propose to unlock the value from strategic land. Advising these groups are teams of lawyers, accountants, surveyors, planners, architects, landscape designers, and funders.

Unlocking the potential value of strategic land is achieved through adding value to the land by promoting it through the planning system. This can either be by having the land allocated for a specific use in the local plan, or obtaining a planning permission, and sometimes both. The land is then either sold with the benefit of planning permission, it is developed and then sold, or it is held as an investment.

Strategic land transactions are typically agreed taking into account each party’s appetite for risk. The most common types of transaction are listed below. 

• Conditional contract: This is a contract of sale of land where the sale is conditional on the buyer first obtaining, at its own cost, planning permission.
• Land assembly: Where a developer brings together smaller areas of land, buying the land or using landowners agreements or options, which are then merged together to create a viable larger scheme.
• Option agreement: The developer has the option within an agreed time period to purchase the land from the landowner, the option permits or requires the developer to secure planning permission to generate the enhanced purchase price.
• Promotion agreement: The promoter agrees to promote the site and obtain either an allocation or planning permission. The landowner then sells the land, paying the promoter a fee.

In practice landowners are often approached by a developer who has identified the land as having strategic value, they offer to develop the site in one of the ways referred to above. The terms of a deal are then a matter for negotiation often using a strategic land surveyor. Sometimes the land sold is not the whole of a landowner’s landholding. Selling part of a landholding needs careful consideration to ensure that the land sold and the land retained can both be enjoyed and used independently.

The transactions are usually long term arrangements and are often complex. They require experienced advisors who understand the strategic land journey and can predict and draft for the pressure points on the way. 

Birketts has a Strategic Land team of more than 25 lawyers backed by the full spectrum of property, planning and construction lawyers across our five offices in London and the East of England.