Site assembly: wrapping up land parcels

This week, we look more closely at site assembly, and the challenges of working with option agreements and conditional contracts when knitting land parcels together.

We often take for granted the amount of time and expense that goes into site identification and assembly. A keen commercial eye is needed to unlock the full potential of collective land; entering into option agreements, and/or, conditional contracts with multiple landowners to realise the true value of a site.

Parcels of land have been identified, the relevant agreements are in place, the development gets the go-ahead, and legal due diligence has been undertaken. Crucially, the legal interests in the land parcels will need to be combined, which means dealing with various legal rights and restrictions that exist on various parcels of land that are being ‘knitted together’. Will the site still work if the legal restrictions cannot be overcome? And crucially, will the deal still be profitable?

With this in mind, legal advisors look at various ways of overcoming these legal title issues, including exploring the cost of insurance prior to submission of your planning application, with a view to taking out any cover once planning permission has been granted, and options on land parcels are exercised.

You may consider managing risk prior to submitting your planning application in order to capture accurate development and feasibility costs – this is particularly relevant should you have an interest in the land, either under option or contract. In doing so, you may be able to gain access to development finance at an earlier stage.

However, there is also some middle ground, which may enable the management of cost and risk exposure for land promoters and developers prior to taking full ownership of a site. Many insurers now provide insurance policies designed with option agreement(s) and land promotion agreement(s) in mind, known as a two-stage premium insurance policy. The premium cost is fixed upfront, but rather than paying 100% of the premium upfront, a percentage of the premium (agreed by the insurer) is paid to secure cover; the remainder of the premium is paid once planning permission is granted (or if a claim occurs, whichever is sooner). This enables certainty around the ability of managing legal title risk as well as reducing initial cost outlay and reducing financial risk exposure.

What may affect access to insurance after planning permission is granted?

Scheme objectors could be those with access rights over part of your site, beneficiaries of restrictive covenants, owners of mines and mineral rights under the site; all of these representations during planning can make it more difficult to obtain insurance further down the line.

It is important to consider whether insurance will be available after planning permission is granted, and if it is not, what risk management strategy will be employed?

Amanda Armitage and Matt Rutter at Legal & Contingency are on hand to discuss all of the topics that we cover on Place Insight and will take the time to explain how they may be relevant to your development work. Contact us: amanda.armitage@legal-contingency.co.uk.