Top Tips: 5 Things to Consider When Buying Land for Development

Whether you’re a start-up going into your first venture, or an established developer, the commitment to buy land for development raises similar issues to think about.

5 key things to consider:

1. Planning – unless the site is being sold with the benefit of a suitable existing planning permission, a new planning application will need to be made for your intended use. Arrange a pre-application meeting with your local planning authority to discuss your plans and identify any hurdles to achieving the planning permission you want. Attend with your architect so they can take on board any comments in their design of the development. Use the feedback you receive to inform your deal structure.

2. Access – you`ll need to know your site can be accessed via a publicly adopted highway or  that there is a suitable private right of way subject to proportionate maintenance costs. Ensure that the access covers not only physical access, but is sufficient to cover services both above and under the ground. If your initial property searches reveal a gap between the public highway and your intended access, further searches and enquiries should be carried out to identify the owner and establish whether any rights have arisen through long-usage. Where the owner can`t be identified and there is evidence of long-usage, insurance is likely to be available at an affordable cost. Where the owner can be identified and there is no evidence of long-usage, consider this a big red flag unless the risk can be tied into your proposed deal structure, perhaps by way of a contract conditional on securing the additional rights you need at a pre-defined cost.

3. Restrictive covenants/third party rights – these are matters which could adversely affect your development. Insurance may be available for a restrictive covenant depending on factors such as age, nature of the restriction and whether the beneficiary is identifiable and may be available on a pre and post planning basis. Insurance is unlikely to be available for existing third party rights such as a right to connect into service media although you`ll be able to make an informed decision about whether you proceed based on considering similar factors and ascertaining whether the seller is aware of any of the rights having been exercised. In both cases, avoid speaking to any beneficiaries as this will nullify your ability to get insurance or tip them off to a potential claim.

4. Utilities – a utilities search will help you identify the nearest service media apparatus to connect into and any apparatus which might adversely impact your development and the results should be considered in conjunction with any third party rights on your seller`s title.  £300-£400 will be good value compared to having to pay compensation for bursting a water main or more fundamentally finding out there’s something in the ground which you can’t build around.

5. Deal Structure – the vehicle you choose will depend on your overall commercial strategy, your appetite for risk and of course what your seller is willing to agree to. An option agreement (often referred to as a call option) will give you the right, but not the obligation, to purchase land at a fixed price and timeframe giving you maximum flexibility. Where your seller won`t agree to grant you an option but you`ve identified specific risks that could prevent your development going ahead, they may agree to a conditional contract where you`ll only be obliged to complete the purchase on the occurrence of a pre-defined event e.g. achieving a satisfactory planning permission. Alternatively, where you feel the value of the transaction is low and the land has a variety of potential development uses, your main aim might just be to exchange contracts as soon as possible to secure the opportunity and prevent a sale to anyone else.