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An amazing turnout at the first of two seminars hosted by the CLA at the beautiful location of Hylands House in Chelmsford, Essex.

We were delighted to have the Government’s Chief Planner, Steve Quartermain, speaking about the planning for rural development.

Our own, Nick Harper, presented how Huntstowe Land works with landowners to add value through planning.

We we were also joined by colleagues from Ellisons Solicitors and Indigo Planning.

The second seminar is taking place on Wednesday 22^nd May 2019 at The Granary Estates, Wooditton, Suffolk, so please join us. click here.

Option or promotion agreement – how best to achieve planning consent and maximise value

Local authorities are under significant pressure to deliver new housing and many of them are still unable to show a five year supply of land for housing as they are required to do by the National Planning Policy Framework. This gives landowners the opportunity to consider whether some of their land might be suitable for development. However, the promotion of land for development is dependent upon getting the timing right, requires specialist expertise and involves very considerable expenditure, normally completely at risk should planning consent not be forthcoming.

For many landowners, the cost/risk ratio is unacceptable and therefore they look to work with experts, who will take the risk and cover the cost of a planning application, in return for a share of the proceeds of the sale of the land should planning consent be granted. Historically, this has often been done by entering into an option agreement with a housebuilder, but more recently, a new breed of land promoter has appeared, working with landowners using a promotion agreement rather than an option agreement. The fundamental difference between the two is that, under an option agreement, the housebuilder promotes the land for development, at its cost, and then has the right to BUY the land should planning consent be granted. A promoter will promote the land for development, at its cost exactly as a housebuilder will do, but then has the right to SELL the land, with the landowner, once planning consent is granted.

The significance of this is that, until planning consent is achieved, the interest of all parties is aligned. However, under an option agreement, as soon as planning consent is granted, the housebuilder wishes to buy the land as cheaply as possible whereas, under a promotion agreement, both the landowner and the promoter wish to sell the land for as much as possible and therefore their interests are completely aligned throughout the process.

In practical terms this means that a housebuilder will seek to maximise the ‘abnormal’ costs of development (foundations, ground conditions etc.) to minimise land value. Assessment of the purchase price, carried out by looking at the value of other sites that have been sold, is a retrospective and notional process. The true value of the land is not tested, often leading to a lower ‘agreed value’ than would be achieved if the land were to be sold on the open market. However, housebuilders may look for a lower share of the proceeds and there are instances where having the end deliverer of the housing can have some benefits in planning terms.

Whilst the prospects for bringing land forward for development have rarely been so favourable, landowners need to consider very carefully with whom they work, and on what basis, not only to give themselves the best chance of a successful planning application, but particularly to ensure that they receive best value for their land should planning consent be granted.

Chris Haworth BSc FRICS ARPS

Chris is a Director of Huntstowe Land Ltd
www.huntstowe.co.uk
chris.haworth@huntstowe.co.uk
07860 419874

Huntstowe Land Limited

Huntstowe Land (www.huntstowe.co.uk), the new land promotion company set up by Chris Haworth and Nick Harper, is delighted to announce the formation of a joint venture with Greenacre Capital.  Greenacre will be providing initial funding of £2m, with further funding available when required.

Huntstowe Land already has three sites under promotion and with a number of further development opportunities under negotiation, this will soon deliver the potential for over 1,000 dwellings.

Chris Haworth, Director of Huntstowe Land, said “We are very pleased to have formed this alliance with Greenacre Capital.  They are an ideal partner for us, commercial and fleet of foot, and will enable Huntstowe Land to grow significantly over the next few years.”  Francis Ong, Managing Director of Greenacre Capital, said “This is a sector of the market where we are under-represented, and working with the undoubted skills of Chris and Nick, and the Huntstowe Land team, we look forward to developing a significant business in the strategic land market.”

Huntstowe Land was represented by Rick Gibbs of Burnden Capital who has also taken a stake in the business.

About Hunstowe Land

Huntstowe Land was set up by Nick Harper and Chris Haworth to work with landowners to promote land for development.  Huntstowe uses its expertise to deliver planning consent for landowners. The cost and technical expertise required to bring land forward to achieve planning consent is very significant and many landowners choose to work with a promoter. Until planning consent is achieved, all the substantial planning costs are ‘at risk’ and this risk is often too substantial for a landowner to bear.  Huntstowe is able to shoulder that risk, in exchange for a small share of the proceeds, once planning consent is granted and the land is sold.

Both Chartered Surveyors, Haworth and Harper first started promoting land together while Chris was Head of Carter Jonas’ Commercial Department and Nick was Head of Development at The Crown Estate. Together they successfully drove the development performance of the Crown’s sizeable and diverse national land portfolio of 360,000 acres.

About Greenacre Capital

Greenacre Capital Ltd is a private investment company working across three divisions: property, independent living and clean energy. Based in the UK, the company works in partnership with governments, investors and charities around the world to identify investment opportunities that are both profitable and socially responsible. Its mission is to turn sustainable and social projects into positive investments.

For further information contact: –

Chris Haworth BSc FRICS ARPS (chris.haworth@huntstowe.co.uk , 07860 419874) or Nick Harper FAAV MRICS (nick.haper@huntstowe.co.uk , 07528 089419)