The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Structuring Purchases of Development Land

Paul Higgs of Millbank Land comments

Last month I wrote about the two main secrets to seriously profitable development -) finding the best 'off-market' deals;  and) knowing how to creating maximum 'planning value'.  I also spoke about the need to structure transactions in such a way that minimises your risk and the amount of capital needed.

This month I'll provide an overview of the three main ways of structuring the purchase of a site with development potential - Unconditionally, Subject-To-Planning (STP) or via an Option Agreement.

Land (which includes existing property or buildings with development potential) has effectively two potential values - The Existing Use Value (the value as-is) and the Development Value which is achieved if and when permission to develop is achieved. This could be through the usual route of applying for and winning a planning permission or through such things as the granting of Permitted Development rights.

Clearly, it is the grant of the very best Planning Permission that results in the potential for the maximum uplift in value. Often land may have 'hope value' where it is known that a planning permission could probably be achieved, but it can't be sure exactly what for, until an application is submitted and a planning permission hopefully granted.

Obviously the amount of any 'hope value' is largely determined by the planning potential of a property and the view that a possible purchaser will take about the certainty (or not) of gaining planning permission. And, more particularly, exactly what any planning permission might be for.

Want the full article?