Development Agreements

Both are mechanisms for controlling land without owning it. An option agreement gives you the right to purchase the land on predetermined terms if certain conditions (usually planning permission) are met. You typically pay the landowner an option fee upfront, then exercise the option only if planning is obtained. A promotion agreement is similar but usually involves a developer taking development risk in exchange for a larger share of the development profit—for example, the landowner might retain 30% of profit and the developer takes 70% plus cost recovery. Option agreements are cleaner if you want to own the land; promotion agreements work well if the landowner wants to stay involved but doesn't want to fund development costs.

The local authority has 13 weeks to determine a planning application (or longer if you've agreed). The application might be approved, refused, or approved with conditions. If refused, you can appeal to the Planning Inspectorate (England), which has further timescales. The appeal process can take 6-18 months depending on complexity and whether it goes to a public inquiry. If permission is refused, you can reapply with a different proposal or a more comprehensive application. Market conditions, local authority policy, and the strength of your application all affect prospects. I advise on the planning landscape and whether permission is likely. Sometimes the best approach is negotiating with the local authority before submitting formally, to understand their concerns and shape your application accordingly.

Significant cost overruns are a common development risk. Your options depend on your development finance. If you have retained equity or additional borrowing available, you might inject additional capital. If not, you might need to negotiate with the contractor for extended payment terms, defer some works, or seek additional finance from your lender (if they're willing to increase the loan). If you genuinely can't pay, and you breach the construction contract, the contractor might stop work, and you could face serious consequences—they might claim payment through the courts, seek a winding-up order against you (if you're a company), or place a lien on the property (preventing sale or mortgage). The best approach is careful cost planning and budgeting upfront, with contingency for overruns. I advise on structuring contracts to control costs and on managing relationships with contractors when money is tight.

If your main contractor becomes insolvent mid-project, it's a serious problem. You'll typically need to appoint a new contractor to complete the works, which costs money and time. Your protections depend on your contract and whether you've retained money from payments. Some contracts include parent company guarantees or bonds that protect you against contractor insolvency. The contract should specify what happens if the contractor goes insolvent—usually, it's grounds for termination and appointing a new contractor at the failed contractor's cost. However, enforcing this can be difficult if the contractor has limited assets. The best protection is vetting contractors thoroughly, requiring bonds or guarantees for significant works, and retaining money from each payment until defects are rectified.

Beyond construction, major costs include: land acquisition (the purchase price or option fee); professional fees (architects, engineers, surveyors, planners, lawyers—typically 5-15% of build cost depending on project complexity); planning contributions (affordable housing, infrastructure, highways improvements—these can be 10-20% of development value); finance costs (interest on the development loan); insurance (professional indemnity, contractors' all-risks, buildings insurance); compliance and certification costs; and contingency for unforeseen costs. For a £10 million development, professional fees might be £500,000-£1.5 million, planning contributions could be £1-3 million, and finance costs depend on how long the project takes. I help you develop a detailed cost plan upfront so you understand the full cost picture before committing.

A development monitor (often a surveyor appointed by your lender) oversees the project on the lender's behalf. They visit site regularly, check progress against the approved programme, certify that cost is being controlled, and confirm that works are being carried out in accordance with the contract and to required standards. They effectively protect the lender's security by ensuring the development is viable and the land value is maintained. For you, the development monitor can be helpful (they provide independent oversight and can flag issues early) or burdensome (if they're overly cautious or obstruct progress). Cooperative relationships usually work best—view them as an ally in keeping the project on track rather than an adversary. Their fees are typically charged to the project cost and repaid from loan drawdowns.

This depends on your circumstances. A fixed-price contract shifts cost risk to the contractor, which incentivises efficiency but might lead to disputes if unexpected issues arise (the contractor may claim a variation and additional cost). A cost-plus contract is more flexible—you pay actual costs, so unexpected issues are managed more easily—but you bear cost risk and there's less incentive for the contractor to control costs. A hybrid approach might use a fixed price for the main structure but cost-plus for specialist works that are harder to define upfront. For major projects, I often recommend a more collaborative form like NEC4, which encourages early dialogue about risks and variations. The choice depends on how well the works can be defined upfront, the track record of your contractor, and your risk appetite.

A development joint venture agreement should cover: how the parties contribute (land, capital, expertise); profit or loss sharing (how is value distributed between parties?); governance and decision-making (who has authority to make key decisions? Is there a managing partner?); work obligations (what is each party responsible for?); finance arrangements (how is the development funded? Who borrows from the lender? How are debt repayments managed?); conditions precedent (what needs to happen before the JV is triggered—planning permission, for example?); what happens if a party can't or won't perform; exit mechanisms (how can a party exit? What happens if they want to sell their interest?); and dispute resolution (what happens if the parties disagree?). I help structure these agreements to align incentives and minimise conflict as the project progresses.