Promotion Agreements – Commercial property

are they a good option for Landowners?

With rising housing demand, landowners are in a strong position to realise the development potential of their land. Promotion Agreements are just one of the ways in which landowners can work with land “Promoters” to achieve this.

How does it work?

The Promoter will agree to draw up and submit an application for planning permission and once that is obtained, to market and sell the land on the open market. Sale terms and how the proceeds will be distributed will also be agreed. This means you avoid the time, risk and expense of obtaining the planning yourself and finding a buyer. The value of your land is determined by its actual market value and not an estimated future figure.

Will I get any money up front?

Usually, as the parties would agree a “Promotion Fee” payable to the landowner when the agreement is signed. The amount is a point of negotiation and may be based on the expected development value of the land.   This fee is usually non-refundable, even if planning is not achieved. However, if planning is obtained and the land is sold, the Promoter can recover this fee as an “expense” from the gross sale proceeds before the profit is distributed.

Can I still use my land?

Yes you can. The “Promotion Period” during which the Promoter must obtain planning, may be a few years or it may be much longer depending on the circumstances.   During this time, you should still be able to use the land but the Promoter will normally impose, for example, restrictions on your use so as to avoid anyone else being given rights over the land that could hinder development.

How much profit will I make?

This would depend entirely on the sale price achieved at the end of the process. The Promotion Agreement will set out how the sale proceeds are distributed. This will normally start with the Promoter recovering all of its costs for the planning application, marketing and sale costs. You should also be given the amount equivalent to the market value of your land before planning was granted. The remaining profit is then distributed in agreed percentages between the landowner and the Promoter. Both you as landowner, and the Promoter therefore have a common interest in keeping costs low and achieving the highest sale price possible.

More Questions?

Please contact Katie Williams, Commercial Property Solicitor at kwilliams@thursfields.co.uk or on 01905 730450