Site assembly for commercial development
If you have a great idea for developing a piece of unused land, you may find that you need to get control of some neighbouring property to provide access or just to make the development large enough to be financially viable. Assembling a site can be time-consuming, so it helps if you know what to expect before you start.
‘Putting a development site together can be like doing a jigsaw,’ according to Stephen Evans, a solicitor in the commercial property team with Parnalls. ‘The difference is that you will need to buy the missing pieces from other people, and it may not always be obvious who owns them.’
How much land do you need?
Start with a clear plan of what you want to build, how much it is likely to cost and what you can expect by way of return. This is the time to look at all the possibilities. The first question is whether you are likely to get planning permission. Local and national planning policy will dictate things like density of occupation and how much space you should allow for facilities such as parking, electric vehicle charging and possibly public open space. You may also have to provide on site affordable housing or make a financial contribution towards providing it elsewhere. Any of these factors, together with any potential liability to pay CIL (Community Infrastructure Levy), could impact on the financial viability of the project and may mean you need additional land.
You may also need to obtain rights over other land to run service pipes and cables to connect to existing mains services, and access is a crucial consideration and one of the most common reasons for developers needing to buy neighbouring land.
Another thing to look out for is whether any parts of your site are affected by covenants restricting use. The Supreme Court recently decided that a developer acted unlawfully when affordable houses were built on a part of a site which was subject to a restrictive covenant against building. As well as picking up significant legal costs, the developer may now be forced to demolish the houses.
If there are any restrictions, you may need to design your development to work around them or acquire additional land.
Who owns the land?
Most land in England and Wales is registered at HM Land Registry, which makes it fairly easy for your solicitor to find out who owns it. If any of the land you need for your development is unregistered it is more difficult, and you may have to rely on asking around in the area. Once you know who owns the various parts of your site, you can start negotiating.
Assembling the site
If you are trying to buy several bits of land, you will need a strategic approach. You want to know you will be able to buy all the parts of your site once you get planning permission, but you may not want to buy them outright until you are certain that your development can go ahead. Unless the purchase price is fixed and legally binding before you obtain planning permission, the price the owner will want you to pay for the land is likely to increase when you do achieve that permission. If you have met the costs involved in a successful planning application, you will not want to find you have enabled the owner to sell to someone else at a profit you do not share. This is where you need to involve your solicitor who can advise on conditional contracts or option agreements.
A conditional contract means the buyer and seller are committed to the sale but only if the agreed conditions are met. Developers often enter into contracts to buy land which are conditional on planning permission being granted for the proposed development.
An option is different and gives the buyer more flexibility. Instead of being committed to buy the land when conditions are met, the developer can choose whether or not to exercise the option to buy it. This can be really useful if, for example, you are not sure whether or not you will need to use a particular piece of land as part of your development, or where there are a number of separate parts of the site in different ownerships. To get this flexibility, you may have to pay an advance option fee to the landowner and possibly agree to give them a share of the profit from the completed development.
It is crucial to get the drafting of options and conditional contracts right, so if this is what you have in mind, make sure you give your solicitor clear instructions about what you want to achieve.
If you are dealing with a number of landowners, you may also need to consider confidentiality provisions, to avoid the owner of the final piece of the jigsaw exploiting their position by wanting more money as a kind of ransom.
How we can help
From finding out who owns land to drafting and negotiating complex contracts and options, your solicitor will be a valuable partner in any site assembly project. Planning a development, seeking and securing planning permission, and assembling a site all hold many pitfalls for the unwary and can lead to expensive legal disputes. Getting the right advice on strategy and legal drafting could make all the difference.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
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