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They want your land

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Despite the recession and continuing bad news world wide I am still experiencing considerable activity both from developers wishing to take options on land likely to come for development within the next ten to 15 years and from farmers anxious to snap up any land which comes onto the market either publicly or privately. Whilst there is some activity from the traditional homebuilders there are many investment funds, offshore or funded from offshore who are now in the market for promoting land for development. This continued development activity means that even if a landowner decides to sell his land outright he is often advised to retain a future share in any development potential even if the possibility of sure development is remote in the extreme. Such provision often reserves the right for the seller to receive half the uplift in value if the land is developed within 25 years. Even if the buyer is happy with this arrangement because he intends to farm the land for the rest of his days and does not think it will be developed any way he must nevertheless act with caution because such arrangements may affect his ability to use land for the security of future funding for his family business. Some sellers insist on taking a first charge over the land sold to secure the payment of their one half share of any uplift. Such a provision should be strenuously resisted by the buyer because it will compromise his ability to borrow against that land. Options granted to developers are complex documents and they are becoming more complex as advisors try to include in their terms provisions to deal with every possible eventuality however unlikely. Sound advice is always needed both from an agent who are experience in negotiating option terms and from a solicitor who has wide experience of analysing the provisions of the draft document produced on behalf of the buyer. Getting planning permission for the development of land is a long drawn out process. If landowners have land with potential for development they should not shy away from entering into an option requiring a developer to attempt to get planning permission as the cost involved is very substantial. Whilst paying an expert to try and get planning permission on your behalf is always a possibility, the cost of doing this should not be underestimated. It can easily run into hundreds of thousands of pounds and be money totally wasted. I have a client whose land bordering substantial existing development has had hope of development for at least 20 years. He has had three successive option agreements realising at least twice the market value of the land for agriculture as option fees – and the developer is still spending substantial sums of money in attempting to get the land allocated for development. One day it will al happen and his grandchildren will be very pleased. He would never have been able to fund this sustained campaign on his own account and without it his land would have little chance of being allocated. Success, in my experience, only comes after long and diligent efforts with the planning authority and never taking "no" for an answer. It always pays to seek out the best advice. Jonathan Douglas-Hughes, Senior Partner Land and Agricultural Specialist • For additional information or comment please contact: Jonathan Douglas-Hughes of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.