Planning Promotion Agreements have been big business for developers and entrepreneurs recently, particularly in the run up to submission of a Strategic Local Plan in areas such as St Albans.
In Central Bedfordshire, the draft local plan was withdrawn rather than be rejected by Central Government, leaving the Council vulnerable to speculative planning applications. Such agreements have also proved popular in areas where the local Council does not have the supply of housing land required in their allocation by Central Government.
So what is a Planning Promotion Agreement? It is an agreement between a landowner and a land promoter or developer ("promoter") whereby the promoter agrees to promote the landowner's property for development. This usually involves undertaking a pre-application consultation with the Council, obtaining site reports and surveys, drawing up plans and, where indications from the Council and surveys are favourable, submitting a full application for planning permission. The promoter generally pays all professional fees in connection with the application as well as the Council's planning application fees. On signing the agreement, the landowner receives a relatively small sum of money in return for committing their land to the proposed development project for what may be a period of several years, the idea being that much larger sums will be paid once the proposed development gets the green light. Once planning permission has (hopefully) been obtained, the promoter (if they are also a developer) may have the option to buy the site themselves and carry out the development, or alternatively the agreement will provide that the property is to be sold to a third party developer who will then build out the development. In this case each party receives a split of the end sale proceeds as agreed at the outset.
It is easy to see why Planning Promotion Agreements have found favour amongst landowners, who may not have any knowledge of the planning process and do not wish to incur the costs of obtaining planning permission with no guarantee of success. Promoters see an opportunity to make a profit in areas where there is a high need for houses and commercial sites, particularly where the Council's planning department is in disarray due to non-submission of a local plan. In Central Bedfordshire, the "Call for Sites" where the Council asked agents, landowners and developers to submit land which they thought could be developed to meet demand for homes and jobs, ran until April 2016, prompting a glut of Promotion Agreements.
So what could possibly go wrong? The recent case of Gladman Developments Ltd v Sutton provides a valuable lesson for any promoter in the dangers of not having a written Promotion Agreement in place. The defendants were farmers who owned land in Cheshire (amusingly called "Bent Farm"!), the claimant, Gladman was a company which specialised in promoting land for development at sites throughout the UK. A Promotion Agreement is not a contract for the sale of land and as such is not subject to section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, and as such does not have to be in writing. Gladman alleged that an oral agreement had been made to engage their services as promoter of Bent Farm, and as such they made a response to the local Council's request for consultation on strategies to be included in relation to the future development of the area over the next 20 years. However, the Court disagreed and decided that even where parties "may have reached an agreement on essential matters, their agreement may be "in principle" only and not, at that point binding because there are further terms to be agreed". It was unswayed by Gladman's efforts to persuade it that once the main terms were agreed and the parties had shaken hands on it, an agreement to engage their services as promoter had come into existence. The fact that Gladman had circulated a 35 page proforma Promotion Agreement did not assist their case, and neither did the fact that when the respective parties' solicitors were eventually instructed each headed their correspondence "subject to contract". In addition, the defendants' solicitors were unwilling to commence work before they had received the usual undertaking for their costs. This all added weight to the defendants' position that it was always intended that a proper Promotion Agreement be put in place, in respect of which they were to receive proper legal advice before committing themselves.
The lesson: although many promoters and developers will be keen to leverage an opportunity to "get in quick" once a "Call for Sites" has been made by a Council, it is always better to get a proper Promotion Agreement put in place before doing any substantive work. It is worth agreeing terms as quickly as possible and contacting your solicitor at an early stage so that they can get the ball rolling by obtaining a copy of the landowner's title and getting a draft Promotion Agreement in circulation. The promoter's solicitor should also be provided with the funds necessary to give any costs undertaking to the landowner's solicitor to avoid any further delays.