Key issues when considering land for development
Published July 30th, 2019
Landowners often consider how to maximise the value of their assets and a common way to achieve this is through the development of land and buildings.
Each site is unique and requires tailored advice to ensure that the proposed development is in line with the landowner’s objectives, whether that be to capitalise on value or provide expansion of the business in the right location.
Charlotte Rogerson at the Shrewsbury office of Berrys outlines the key points to review prior to obtaining planning permission:
Is the land owned by a partnership, company or as individuals? Consider whether all parties who have legal ownership of the land are on board with the concept and how future costs will be shared. It is also important to review title documents to understand whether there are any restrictive covenants or overage clauses on the land which may impact on value or require permission from a third party.
Check your legal boundaries with the physical boundaries. It is not uncommon for neighbouring properties to have encroached onto your land or incorrect boundaries registered with Land Registry. This can lead to unnecessary access issues, boundary disputes or service constraints which have the possibility of being easier to resolve prior to a planning application being submitted.
If the land does not have direct access from the adoptable highway then a review of access options to the site is paramount. If the land has the benefit of a right of access then is the right for the purpose of the development? For example if the land only has agricultural rights of access, and the proposed development is residential, then there aren’t sufficient rights for the proposal. If there aren’t sufficient rights of access, then it is important to review all points of access and consider opening discussions with the relevant landowners which may have a significant impact on value.
Does the property have on-site connection to services including electricity, water, drainage (foul and surface water) and gas? If not, will the cost of bringing those services to site outweight the potential uplift in value of the property? In addition, are there services which cross the property (i.e. a Wayleave or an Easement) as this could impact the size and layout of the site?
The sale of land will potentially attract various taxes including capital gains tax (CGT) and income tax but sometimes there are ways to minimise the tax burden. The profit from the sale of land that has been occupied by the landowner for the business or tenanted out is usually liable to CGT but if the land is sold with profitable development in mind the transaction could attract income tax at a higher rate and possibly National Insurance. Considerations regarding Rollover Relief, Entrepreneurs Relief and Value Added Tax are important.
Landowners can either fund the planning costs themselves or for those who are unable or unwilling to fund these costs can seek a development partner to fund the planning cost who may take a share of the consequential increase in value of the land. Commonly, the landowner and development partner agree terms under either an Option Agreement or a Promotion Agreement. Under an Option Agreement the land owner typically gives a developer the right to buy the land whereas with a Promotion Agreement the developer does not have the right to buy the land and instead would be entitled to a percentage of the sale proceeds as and when the land is sold.
Each site requires thorough investigations prior to obtaining planning permission to ensure that the uplift in value isn’t constrained to a point where the proposed development becomes unviable.
For further advice contact Charlotte Rogerson at the Shrewsbury office of Berrys on 01743 290642 email [email protected]
You can read this update from Berrys on TFF's AGVendor...
Landowners often consider how to maximise the value of their assets and a common way to achieve this is through the development of land and buildings.
Each site is unique and requires tailored advice to ensure that the proposed development is in line with the landowner’s objectives, whether that be to capitalise on value or provide expansion of the business in the right location.
Charlotte Rogerson at the Shrewsbury office of Berrys outlines the key points to review prior to obtaining planning permission:
- Land ownership
Is the land owned by a partnership, company or as individuals? Consider whether all parties who have legal ownership of the land are on board with the concept and how future costs will be shared. It is also important to review title documents to understand whether there are any restrictive covenants or overage clauses on the land which may impact on value or require permission from a third party.
- Boundaries
Check your legal boundaries with the physical boundaries. It is not uncommon for neighbouring properties to have encroached onto your land or incorrect boundaries registered with Land Registry. This can lead to unnecessary access issues, boundary disputes or service constraints which have the possibility of being easier to resolve prior to a planning application being submitted.
- Access and Rights of Way
If the land does not have direct access from the adoptable highway then a review of access options to the site is paramount. If the land has the benefit of a right of access then is the right for the purpose of the development? For example if the land only has agricultural rights of access, and the proposed development is residential, then there aren’t sufficient rights for the proposal. If there aren’t sufficient rights of access, then it is important to review all points of access and consider opening discussions with the relevant landowners which may have a significant impact on value.
- Easements and Services
Does the property have on-site connection to services including electricity, water, drainage (foul and surface water) and gas? If not, will the cost of bringing those services to site outweight the potential uplift in value of the property? In addition, are there services which cross the property (i.e. a Wayleave or an Easement) as this could impact the size and layout of the site?
- Taxation
The sale of land will potentially attract various taxes including capital gains tax (CGT) and income tax but sometimes there are ways to minimise the tax burden. The profit from the sale of land that has been occupied by the landowner for the business or tenanted out is usually liable to CGT but if the land is sold with profitable development in mind the transaction could attract income tax at a higher rate and possibly National Insurance. Considerations regarding Rollover Relief, Entrepreneurs Relief and Value Added Tax are important.
- Funding
Landowners can either fund the planning costs themselves or for those who are unable or unwilling to fund these costs can seek a development partner to fund the planning cost who may take a share of the consequential increase in value of the land. Commonly, the landowner and development partner agree terms under either an Option Agreement or a Promotion Agreement. Under an Option Agreement the land owner typically gives a developer the right to buy the land whereas with a Promotion Agreement the developer does not have the right to buy the land and instead would be entitled to a percentage of the sale proceeds as and when the land is sold.
Each site requires thorough investigations prior to obtaining planning permission to ensure that the uplift in value isn’t constrained to a point where the proposed development becomes unviable.
For further advice contact Charlotte Rogerson at the Shrewsbury office of Berrys on 01743 290642 email [email protected]
You can read this update from Berrys on TFF's AGVendor...