The Farmers Mart Aug-Sep 2018 - Issue 58 | Page 61

PROPERTY 61
• AUG/SEP 2018
FARM DIVERSIFICATION - WORKING WITH
RESIDENTIAL HOUSING DEVELOPERS
The UK is in the midst of a housing crisis. The government has set a target of 300,000 new homes to be built every
year and has warned local councils that they will be “breathing down [their] necks” to ensure these targets are met.
IT is no surprise that selling land
to developers is an attractive
proposition for some farmers;
many are looking to diversify
in order to retain profitability.
Added to this, Brexit uncertainty
continues to exacerbate wor-
ries about recruiting agricultural
workers after we leave the EU.
For some, the demand for more
housing has come at just the right
time. With a relaxation of develop-
ment rights for agricultural land,
agricultural land owners are now
in a good position. If land sales are
approached correctly, farmers
should ensure that they find them-
selves in the driving seat.
So, if you are considering selling
land, what are the most important
things you need to know? What
are the pitfalls you must avoid?
Plan, plan, plan
Getting your ducks in a row
at the earliest possible stage is
essential in ensuring, as far as is
possible, that you call the shots,
not the developers. Put the best
team in place including a suitably
experienced solicitor, surveyor
and accountant.
Most importantly, anticipating
any problems before they arise all
helps you secure the best possible
outcome.
Know ing your assets
Understand what you have. As
farming techniques have changed,
so land owners can find they
have land and buildings that have
become redundant. You’ll want
to identify land that is an attrac-
tive proposition to a developer,
but also land that – if sold – will
still enable you to run your farm
efficiently.
Residential developments vary
enormously – from hundreds of
houses to bespoke courtyard de-
velopments. Added to that, some
infrastructure projects, such as St
Cuthberts Garden Village (South
Carlisle) or HS2, all potentially lead
to land previously unobtainable
becoming free for development.
So an understanding of your land
assets in the context of what’s
going on around you is key. any third-party land owners to
secure these amenities? One of
the most commonly unanticipat-
ed issues concerns discharge of
surface water – could there be
any problems here?
Put Your House in Order Heads of Terms
Ensure your team have con-
sidered any encumbrances or
limitations which might impact
on the development of that land.
If your land isn’t registered, it’s
worth doing so as developers
prefer registered land. Taking the steps above will help
finalise the terms of any sale.
Identifying and finding solutions
to issues will help you price your
land accordingly. If the develop-
er uncovers any of these issues,
they will likely want to knock
down the value of your land. So
it’s important to bear this in mind
when you consider the price and
how that price is formulated. In
some instances, you may want to
consider setting a minimum price
you’d be willing to accept.
Planning permission
Too many people think once
they have secured planning
permission, they can relax. But
planning permission is just the first
step in the development process.
Consider whether you can
service that development. Can
developers get power to the plot?
What about sewage? Do you
need to secure permissions form
Moving forward
A developer will be unlikely
to buy land at risk. As such any
purchase will usually only happen
once the developer has obtained
planning permission plus all other
associated consents to enable
that land to be developed. Of
course, on the odd occasion,
some developers will ‘take a
chance’ but they are few and far
between and the risk will likely be
reflected in the price.
If you agree terms for a sale,
the transaction is likely to
proceed in one of three ways. A
conditional contract, an option
agreement or a land promotion
agreement.
Conditional contract - allows
a developer to buy your land as
long as certain conditions are met.
Typically used for shorter term
projects, conditional contracts
usually cover a period of 0-3
years.
Option agreement - provides
a developer with an option to
purchase your property in the
future. They are typically used for
longer term projects and are often
utilised when it is less certain that
a site may be suitable for devel-
opment.
Land Promotion Agreement
– Here, you appoint a middle
man to deal with the planning
and sale of your land. If they
strike a good deal, they will
receive a commercially agreed
payment from your sale. Land
promotions agreements must
be approached with caution
and you must have absolute
confidence in the person you
are dealing with and their ability
to negotiate and secure the best
deal on your behalf.
As with many things in life,
preparation is key. Putting the
best team in place can help en-
sure your land sale is conducted
on the right terms.
Author: Duncan Harty, Partner,
Commercial Property
Baines Wilson LLP
www.baineswilson.co.uk