Expert opinion: Development land: windfall or pitfall?

Kerry Addison, partner at Barker Gotelee Solicitors, Martlesham Heath, Ipswich, says preparation is crucial when embarking on a development land deal.

For the past two years specialists in our commercial property team have been busy with development land deals. Some changes in Government planning policy, an uplift in the economy and suddenly the prospect of a windfall planning gain becomes a reality for a number of farmers and landowners.

So much is at stake in these complex deals that specialist advice from an early stage can make the difference between successes and failure. You will need advice from a planning consultant, a land agent, a property lawyer with experience of development land deals and a tax specialist (lawyer or accountant).

The cost of specialist advice will be a significant investment, but it will usually pay for itself in a development land deal.

Preparation is crucial.

It is important that the investment in planning is not derailed by title issues, particularly ones that could have been resolved at less cost at an earlier stage.

Landowners with potential development land should consider a voluntary registration at the Land Registry. Registration has various advantages but in particular will flush out potential title problems. Typical title issues that can arise are:

• Part of an access road not being public highway even though everyone always thought it was. Many so called “ransom strips” are not deliberate but often arise as a result of a discrepancy between plans;

• Encroachment and registration of possessory title by third parties. Can their claim be defeated?

• Parcels of land not having a paper title as a result of title deeds having been lost.

• Land being sold for road improvement schemes that actually never happened. Can the land be repurchased or can you claim possessory title?

• Can the developer provide all the necessary services and access – a right of way may be restricted to agricultural use only.

Opportunities to develop can be thwarted by covenants restricting the use of the land. Sometimes the covenants can be varied by agreement. More often, an application will need to be made to the Lands Tribunal for removal or modification of the covenant. This will take time and forward planning is essential.

Obtaining planning permission for development can trigger an overage or clawback arrangement where an additional and sometimes unexpected payment needs to be made. It is much better to flush this out at an early stage rather than wait until land values have crystallised on the grant of planning permission.

All these issues should be considered at an early stage in conjunction with a land agent and lawyer. Correcting any title defects will reduce delays later on and help prevent a transaction falling through, thereby minimising the risk of wasted costs.