Longmores Rural Roundtable – Promotion Agreements
By Victoria Sandberg, Partner and Head of Rural.
Rachael Spalton and Victoria Sandberg of Longmores Solicitors’ Commercial Property team recently held a “Rural Roundtable” with fellow professionals to discuss Promotion Agreements. Promotion Agreements are a relatively new way of dealing with land, so it was very useful to discuss with surveyors and accountants the various ways of structuring such agreements, and particular issues to consider.
The roundtable commenced with a discussion about the need to involve a surveyor at an early stage in the negotiations. The following reasons were cited as to why a surveyor should be appointed by a landowner who has received a direct approach from a promoter/developer:
- to make sure you test the market, to see whether the price/percentage you have been offered is actually the best available, as there can be a huge range between offers;
- to check whether an offer is conditional and if so, whether those conditions are reasonable and achievable;
- to consider whether a promoter can really deliver what it is promising – a surveyor can check their track-record, look at case studies, establish what their strategy is etc;
- a surveyor will obviously charge a fee but appointing a surveyor at the outset could result in a far higher payout if and when the development comes to fruition.
It was also pointed out that landowners need to be careful not to rush in to signing an agreement without taking independent advice, as the promoter / developer’s interest may not be the same as the landowner’s. In particular, be aware of offers that refer to huge payments without emphasising that these are likely to be conditional. Subtle nuances in the wording could have a huge impact on the ultimate payment to the landowner.
The discussion then moved on to VAT and “tax suspension”. This is too complicated a subject to go into in this blog but in short, everyone agreed that a landowner should always speak to an accountant for advice about tax before agreeing the Heads of Terms for a Promotion Agreement.
Finally, the group discussed the various government initiatives for building new houses and the potential dangers in planning policy.
This #RuralRoundtable was the first in what is intended to be a regular discussion forum for property professionals. If you are a surveyor/agent or accountant who would like to come along to our next meeting, or for more information about the subject of this blog, please contact Victoria Sandbergor Rachael Spalton
Please note the contents of this note are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.