STRUCTURED AGREEMENTS
At Wholehomes, we like to ensure all parties can mutually benefit from a partnership to create a win/win scenario that all parties are committed to working towards. We have five main types of structured agreements that landowners may be aware of and they all present varying levels of risk, involvement, and potential financial benefits for both the landowner and the developer. Choosing the most suitable structure depends on factors like the land's potential, the level of risk one is willing to assume, the motivations for selling, the timescales required for sale and the desired level of involvement in the development process.
OUTRIGHT SALE
In an outright sale, the landowner sells the property directly to a developer. This straightforward transaction typically involves a one-time payment where the developer assumes ownership and control of the land immediately. It's a simple and quick process, where the landowner sells their land based on its current value and would not usually benefit from any future increase in land value resulting from planning gain or development.
CONDITIONAL CONTRACT (STP)
This is sometimes known as a Subject to Planning (STP) agreement and is contingent upon specific conditions being met before the sale is finalised. Conditions often include obtaining full planning permission or securing other necessary approvals. Once these conditions are fulfilled, the sale proceeds as agreed. This structure offers security to both parties; the developer ensures the land suits their needs, while the landowner secures a committed buyer upon those conditions being satisfied.
OPTION AGREEMENT (POA)
A purchase Option Agreement (POA) is when a landowner grants the developer exclusive rights to buy the land within a predetermined timeframe, at an agreed-upon price, triggered by particular outcomes. This structure allows the developer time for due diligence, planning and financing, often with the developer covering planning expenses. It empowers the landowner by securing a committed buyer without an immediate transfer of ownership, offering security and control.
PROMOTIONAL AGREEMENT
A promotional agreement involves the promotion of land to the Local Planning Authority for development that may otherwise not be in an area where development is permitted. The promoter will usually take full responsibility for the planning costs and obtaining planning permission on the land. Upon successful planning approval, the promoter may then develop the land or market the land to potential buyers, aiming to sell at a higher price than the lands original value. The landowner and promoter will usually share the increased profits from the sale.
JOINT VENTURE (JV)
This agreement involves direct collaboration between the landowner and the developer, removing the middle-man and forming a partnership to develop the land. Both parties contribute resources — such as land and expertise — to the project. Profits, risks, and responsibilities are shared based on the terms outlined in the Joint Venture agreement. This approach allows both parties to leverage their strengths for mutual benefit but requires careful planning and coordination until the completion of the project.