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Promotion Agreements – 9 things for landowners to think about

Posted by , Partner

Even though the economic climate is improving it can still be hard for developers to access bank lending to finance the purchase of development sites. Promotion agreements offer an opportunity to promote and develop the land without having to finance the actual purchase making it a more appealing option for developers. They allow land owners to use the skill, knowledge and funds of an experienced developer to obtain planning permission for land which is not currently earmarked for development.

Promotion Agreements are used where a developer agrees to:

  • Apply for planning permission for a development on a landowner’s property.
  • Market the property for sale on the open market once planning permission has been obtained.

Once planning permission is obtained the seller is legally bound to sell the land. Such agreements need to cover many issues, not least because of the length of time that may be required to secure a planning permission. Below are nine key issues all landowners should consider before entering into detailed negotiations with developers:

  1. The degree of control and involvement which they want in the project (which may be exercised either directly or via a consultant).
  2. Ensuring that the scheme only proceeds provided that a minimum land take or a minimum value is achieved.
  3. Determining whether the land is to be sold to a third party following the grant of planning permission or whether the Promoter can bid for the land along with third parties.
  4. Determining whether (and if so the basis upon which) the Promoter can introduce other land in the ownership of third parties into the area being promoted for planning.
  5. The degree of control they want over any changes in the party undertaking the promotion obligations, either within its own group of companies or to a new and separate third party.
  6. The ability to terminate the agreement or to take over particular obligations of the Promoter if the Promoter is in persistent or substantial default of the agreement.
  7. A timetable of the Promoter’s obligations so that both parties are clear what is expected.
  8. The right to use the land as freely as possible while planning is promoted and obtained without prejudicing either obtaining planning permission or a subsequent sale of the land for full value.
  9. Protection of the use, value and future development potential of the land which is not sold for development after planning is obtained.

Contact our Commercial Property team for more information on promotion agreements and any other commercial development issue.

0800 923 2065     Email

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