Strategic Land and Development - Laying the legal foundations for commercial success
The delivery of new homes across England and Wales is clear to see, and the demand for new deliverable sites remains highly competitive. In this article we explore the commercial drivers behind development and the importance of accommodating evolving policy, market forces and public funding and delivery requirements. We also consider the preliminary stages of a development project and the overarching considerations for a successful Development Agreement.
High Stakes Game
The profits landowners and developers can make from house building are widely and often disapprovingly remarked upon, especially by politicians and the media. But less well understood is the ever-growing list of amenities that the private sector is now expected to deliver as it helps government meet its target of 300,000 houses new houses each year. Public benefits like infrastructure, social housing, ecological mitigation and facilities for health and education are now par for the course on any substantial development. Providing these requires ever greater sophistication, organisation and close collaboration with local government, neighbouring landowners, utility companies, ecologists and many other interested parties. In short, there are many moving parts and by taking on such challenges in an uncertain regulatory landscape, landowners, housebuilders and developers bear considerable financial and reputational danger. The rewards may be great, but the risks are too, which is why a well prepared Development Agreement is key.
Setting the Right Tone
Most often, new projects start with an agreement between a landowner and developer or promoter, the need for landowners to diversify their business, the desire to contribute to the public good and for landowners to create long lasting housing legacy on their land. These initial proposals are usually embodied in a development agreement between landowner, promoter and/or housebuilder/developer. They are put in place long before a planning permission has been granted and anticipate the project from start to finish.
These agreements determine the basis on which the parties will collaborate to support and procure the delivery of a project, lay the overriding principles and vision for the development, require the developer to pursue and achieve a viable and implementable planning permission and eventually, forecasts the proposals for delivering a development.
Such proposals for delivery include the mechanism for the construction of major infrastructure projects, such as new roads, road junctions and railway stations, facilities for retail, employment, education and healthcare, the phasing of the development and the effective delivery of private and affordable housing. It also sets out the financial arrangements between landowner and developer and in time, the relevant council or government body factoring in the timing of the realisation of capital to fund public sector contributions.
A lot to be determined by one agreement! Yet the agreement and the process of entering to the agreement can set the tone for the future of the project and be instrumental in establishing the foundations for success. Where the agreement establishes a clear end goal with well-defined mechanisms, procedures and parameters and targets, it lays the groundworks for the progression of a project from the outset. Where the process of entering into the agreement has been carried out diligently and collaboratively by the legal and professional team, in theory, the rest should follow….
Flexibility for the Future
As alluded to above, a development agreement should stand the test of time and sets the ground rules for the delivery of a project from its inception to completion. Whilst unforeseen circumstances will undoubtedly arise over the course of a development, which on the larger scale could span up to 30-40 years, a well-negotiated agreement should have the ability to adapt to change, both in relation to the project itself and the wider and constantly evolving considerations of tax, planning policy, sustainability, housing needs and government policy.
A clear and recent example of this is the well covered Phosphate issue, where thousands of planning applications have been held up by the need for information on phosphate levels resulting from the proposed development. How these projects will progress will depend on a multitude of factors, but a well-crafted agreement will have the scope to accommodate the necessary steps to overcome the hurdle.
One shot, or one opportunity
Entering into a development agreement for a landowner is, more often than not, a once in a lifetime undertaking. The agreements themselves require dedicated drafting and negotiation in the hands of experienced lawyers with significant input our clients and their professional representatives. The process itself serves to identify opportunities and roadblocks alike and are a platform for all parties to forge long lasting relationships to build for the future.
Polly is a Senior Associate in our Private Client team.
In this episode of the More Than Law Podcast we feature our cross-departmental strategic land team, with host Miri Stickland talking to Partners Christopher Findley and Henry Cecil from the Rural Property team, Commercial Real Estate partner Ben Brayford and Planning partner Victoria Du Croz. Discussion points include what we mean by “strategic land”, who are the key parties and their particular drivers and concerns, and the key components needed for a successful strategic land development.