During the development of land or building, the planning permission amplifies their value in the open market. In the process of preparing them, the planning obligation or planning gains play a role in safeguarding additional public benefits. They strive to catch some of the increase in the value of the land produced by planning permission. They can be put into use to ensure that commercial development can match the environmental and social sustainability standards.
Considering that you are one of the involved parties in land development, we are preparing this blog to familiarise you with the concepts of planning gain.
What is the Planning Promotion Agreement?
A promotion agreement is a settlement that involves the role of a planning specialist to market the land of the through in the planning process with the purpose of obtaining planning permission. After being granted, both the parties work closely to achieve the purpose of selling property to the developer.
In this whole process, a land promoter steps in to provide the needed time and funding to accomplish the planning, technical, and design work. They take care of the necessary arrangement with local planning authorities, residents, stakeholders, and statutory consultees in the whole process.
What is a section 106 agreement in planning?
A section 106 agreement refers to an arrangement that involves a local planning authority and a developer. It comprises the course of action that a developer has to take to lessen the effect on society. This agreement is designed to actualise an otherwise impossible development by getting contributions and concessions from a developer. It shapes a section of the 1990s Town and Country planning act. These can also be called planning obligations or S106 agreements.
Is the Planning Promotion agreement a win-win for landowners?
It doesn’t matter if you are a promoter or the landowner, you must evaluate the possibilities of your gain before stepping into any binding. With a planning promotion agreement, here is what you can attain:
The benefits of planning a promotion agreement
If you are an owner of the land, a planning promotion agreement can allow you to be a part of the process in the manner you want to be. Even if you want the promoter to take care of the marketing and sale of your land, it would be fine. An agreement of this kind can provide you with access and charge of the land. Whilst, it can also cover all the financial risks and costs for you. You will not have to pay the direct costs and legal charges as a land promoter can extend the financial support along with the know-how.
When it comes to the costs you can get in exchange for the land, a planning promotion agreement opens up the way of trading in the open market, which boosts their financial outcome. This arrangement allows several builders and other interested parties to bid for the land. As a result, you can pick the most profitable option for you.
Along with the above-stated benefits, you also have to look after several aspects. Possible arguments between the developer and the landowner occur in the sale of the land. However, with a favourable economic climate, the developer might wish to continue with the sale at the soonest possible time after obtaining planning permission. It can happen even when market conditions are not strong. At the same time, as a landowner, you may want to wait for the price to recover.
There is another possible side effect of the planning agreement, which is VAT. It can directly impact the wallet of the landowner. Considering that the developer imposes VAT on the share that belongs to him, but the landlord cannot claim the VAT back, a promotion agreement can turn out to be non-profitable for him.
How do residential land promotion agreements allure the landowners?
By now, you have become aware of what a residential land promotion agreement is. You know that the land promoter steps up for the risk of getting the planning permission for the owner of the land. He then promotes it to the market for the finest and finest possible return. Undoubtedly, the promoter is behind several many job roles, which aim at bringing benefits to everyone.
A residential promotion agreement can be beneficial for the landowner also. Being one, you will not have to combat any risk involved. Charging at no cost from you, a promoter can employ the best of expertise and resources to support the marketing of the land. Here is the set of reasons that make residential land promotion agreements attractive to the landowners:
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Elimination of conflicts of interest
The involved parties carry a mutual interest in achieving the finest price, which one can get in the open market. The financial return of the owner is contingent on the successful transaction of the sale of the property after the planning permission is granted. The promoter gets the incentive to increase the value of the land and employ proficiency in the market conditions.
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Project Financing
Even though the project can bring numerous benefits later, getting the planning permission can have challenges and several expenses. At the same time, there is no assurance that you can obtain it successfully. However, a land promotion agreement can eliminate the risk factor for the landlord.
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Determining final price
After obtaining the planning permission, the promoter starts creating the marketing plan for the sale of the land. As a landowner, you have to agree with it as per the partnership before the land is promoted in the open market. Promoters will create an information pack that will have an all-inclusive list of technical and legal reports. The objective is to assist and make the process work smoothly.
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Management of the whole process
Land promoters put a specialised team into use, which will consist of property and house building professionals. All of them are aware of the personal approach and involvement of the landowner in the whole process. With this partnership, you can have a custom role depending upon personal needs and on a transparent and open basis.
Planning gain agreement and the value-added tax( VAT)
The involvement of the promoter allows them to act as an agent. One can charge a commission which will be likely to be VAT. However, if the sale doesn’t occur, they will not be able to recover this amount.
Nevertheless, there is a way to avoid this from occurring, which is imposing a tax on land before the sale. It will increase the possibility of recovering the commission of the promoter and other related fees with the process.
In this blog, you have become aware of the planning gain and the related aspects. When it comes to sharing the risks or initiating them, our team at ADL can stay by your side to provide a profitable scenario. We can take care of the planning process and the steps involved. You can find our involvement in promoting property to create a win-win scenario for you. To embark on a smooth, risk-free, and easy process to avail your land for development, you can reach us.
