With a subsidy contract, once a satisfactory building permit has been issued for both the landowner and the developer, the land developer can, as a general rule, compel the landowner to sell the land as long as certain conditions are met. For example, the landowner may require that a minimum price be met before being held to the sale. This can be a disadvantage for the owner if they have to sell to a developer who might not be their preferred bidder or at a time when broader economic influences can reduce the price (although with the “minimum price” safety net). It is clear that the decision to proceed with a transportation option or agreement depends on the personal choice of the landowner and what leads him to follow the evolution of his land. Many of the disadvantages of any type of agreement can be mitigated by granting appropriate conditions in advance, for example. B a minimum price for which a landowner must sell, extend the planning cost exemptions and ensure that the landowner has an adequate level of authorisation control at each relevant planning and marketing phase. Promotional agreement: the organizer undertakes to promote the site and to obtain either an allowance or a building permit. The landowner then sells the land and pays a royalty to the organizer. Well designed and agreed, option agreements can be a practical method that allows landowners to offer their land for development and reap the benefits without having to participate directly in the design or construction. The main advantage for a landowner is that their interest is fully tailored to the developer in order to get the best possible price for the land, while a developer who buys under option is interested in paying the lowest possible price.
The landowner may wish for a more active role in monitoring or supporting the transportation process, but is not required to do so and does not have to risk their own resources. Tax planning: Your accountants and other professional consultants need to be involved at an early stage to ensure that you won`t face unforeseen tax fees or penalties. The agreement must protect your right as a landowner to suspend or delay the exercise of the option if the tax system is changed significantly or negatively. As a landowner, you can use the skills, knowledge and means of an experienced developer. Since most options are “take” options, unless there is a sharp slowdown in the market or the conditions imposed by planners on a successful deal are too onerous for the developer to continue, you can be sure of an interested buyer at some point in the future. Louise Norris, partner in our commercial property team, explains what an option agreement is and why parties to a land purchase transaction want an option agreement. Whichever agreement is chosen, a landowner must be advised and carefully weigh the tax position. When a contract of carriage is chosen, there are two immediate concerns. First, the promoter is required to collect VAT on all payments it receives (i.e. reimbursement of its advertising and planning costs and its share as a percentage of the resulting net proceeds of the sale); second, the landowner and developer risk being treated as partnerships and taxed as such. .