Development
Insights Edition 4 • Spring 2025
Navigating development
potential What options are available for landowners? Landowners with property with development potential know that securing planning permission can enhance the land value. But how do they turn that potential into reality? We caught up with Matthew Handford, Senior Associate in our development agency team, to break down the options for obtaining planning permission, each with its own set of advantages and challenges.
Self-Promotion For landowners with funds available and with an appetite for risk, self-promotion is a viable route. This involves hiring a planning consultant to spearhead the process of promoting their land for development. While they will bear the costs (which are significant), they retain full control over the journey, and it can be incredibly rewarding.
Strategic Development Agreements Many landowners opt for Strategic Development Agreements, which come in three forms: Option Agreements, Promotion Agreements and Hybrid Agreements. • Option Agreement: with this option, a housebuilder promotes the land and incurs the costs for doing so at their risk. Upon a planning permission being obtained the housebuilder purchases the land at a discount of Market Value. • Promotion Agreement: in this scenario, a promoter works to obtain planning permission on the land. At the point of obtaining a satisfactory planning permission, the site is marketed, and the Promoter receives a percentage of the sale proceeds on completion of a sale. • Hybrid Agreement: a combination of both an Option and Promotion Agreement which tends to be a viable option with larger sites. These options allow them to leverage the expertise of professionals while mitigating financial risk. They would not incur the cost of promoting the land, but they still stand to gain if the project moves forward.
Freehold Disposal An alternative strategy is to dispose of the freehold interest. This often includes an
overage provision, where the landowner retains a percentage of the value increase once a planning permission is secured. While this provides immediate financial return, it might not maximise long-term return from the asset, as the uplift in value will be crystalised once a planning permission is obtained. However, the opportunity to obtain upfront capital can be compelling.
Why do landowners choose freehold disposal? Many landowners find freehold disposal suits their needs perfectly. Here are a few recent examples: • The Firs, Newbold Verdon, Leicestershire: A bungalow and 6.5 acres of pastureland sold in May 2024. • Land at Chasetown, Staffordshire: 22 acres of pastureland sold in May 2024. • Land at Codsall, Staffordshire: 14 acres of pastureland sold under a Promotion Agreement in September 2024. Other sales are ongoing in Barrow upon Trent and Littleover, Derbyshire. The reasons for these decisions vary, but common themes include frustration with planning timelines, a desire for quick capital returns, and strategies to reduce future tax liabilities.
Market Trends and Tax Changes Changes to major planning laws and rising taxes are pushing more landowners to explore the route of disposing their freehold interest prior to obtaining a planning permission. This trend is likely to grow due to the rise in Capital Gains Tax (CGT) and the looming cut to Agricultural Property Relief (APR) on inheritance tax in April 2026. From April 2026, agricultural property relief and
business property relief will only be available on the first £1,000,000 of qualifying assets. Qualifying assets exceeding this limit will be eligible for a 50% relief. Inheritance Tax will then be charged at 40% of the remaining taxable estate. According to independent analysis from Agriculture and Horticulture Development Board (AHDB), “Inheritance tax changes to affect more than 75% of English and Scottish farms of 50 hectares in size or more.” Tim Bradshaw, President of the NFU, has been quoted stating the following, “The fact that the government’s own levy board has now come to the same conclusion as the NFU, that 75% of commercial farm businesses could be affected by this policy – more than 42,000 farms”. It could not be clearer that the data behind this abhorrent family farm tax is wrong, and that the Treasury has drastically underestimated the scale of the impact on British farming and food.” Previously, landowners benefited from 100% relief on qualifying agricultural property assets. Given the proposed changes to Inheritance Tax on Agricultural Property, some landowners may now take the decision to dispose of land which benefits from strategic development potential to reduce the tax burden on the next generation.
What are the next steps? Owning land with development potential means understanding all the options and aligning them with their long-term goals. Whether they prefer to manage the promotion themselves, enter into a strategic agreement, or sell outright, there is a solution to fit their needs. Their decision will hinge on their risk tolerance, timeline, and financial objectives. At Fisher German, our team of experts are here to help them navigate the process and make the best choice.