There are several types of purchase Contracts. These are either unconditional Contracts, Options to purchase or Contracts conditional upon obtaining planning permission and, on some occasions, defective title indemnity insurance in respect of restrictive covenants which might prevent development or to cover the absence of easements in respect of rights of way or utility services.
When acting for a Developer it is the Developers solicitor’s job to check the Seller’s title to establish that the Seller is the true owner and to confirm that there are no onerous restrictive covenants and that all necessary easements are available. We also send the title plan to the Developer for them to establish the full extent of the land which the Seller owns.
We send enquiries to the Seller’s Solicitors to clarify issues arising from the Seller’s title and any questions which the Developer may have.
In addition to approving the terms of the purchase Contract it is necessary to conduct searches with the local authority, (to establish whether there are any Tree Preservation Orders, Agreements involving payments to the local authority, Enforcement Notices or other significant matters) with the water authority in relation to drainage, (to establish whether there is mains foul and surface water sewers and the availability of a water supply), the County Council in relation to the extent of the adopted highway abutting the property and also to obtain a Chancel search (to establish whether any payment is due in respect of the repair to the Chancel of a local Church) and an environmental search (to establish flooding, ground subsidence, energy establishments and contamination).
With a Contract conditional upon planning permission being obtained, it is often the case that the Seller will impose an Overage provision allowing for a purchase price being increased in the event of property inflation during the conditional period. We have seen in the past property inflation during the course of 12 months of between 10 and 30 percent. The conditional period in a purchase Contract can often exceed 12 months, particularly if a planning appeal is involved.
Land being acquired is usually on an adopted public highway. However, sometimes land is purchased in a private road in which case it is necessary to establish the ownership of the road. Usually ownership will be by a Residents’ Association or an informal Roads Committee. In the event that the purchase is a “knock down” or “one for one” the formalities are quite straight forward. However, if the density is increased it may well be necessary to negotiate terms with the road owners in order to secure the necessary rights of way. Often a levy is payable to the road owners. Once the Developer client has completed his purchase and obtained planning permission and built the houses or flats it will then fall upon the solicitors to deal with the sales. These are either detached, semi or terraced houses or flats. We have experience of dealing with smaller schemes which might comprise of several units to larger developments of 100 plus units. In fact, recently a Developer client purchased a disused hospital near Twickenham and converted it into 100 apartments the sales of which we dealt with.
Often, we are “poacher turned game keeper” in acting for clients who are selling land to a Developer. When doing so our main concern is to make sure that we are satisfied that our clients have obtained the correct professional advice concerning the value of the land which they are selling. It is our job to draft the Sale Contract to send to the Developer’s Solicitors. As mentioned above in the event of the Contract being conditional, we would recommend that our clients add an Overage clause. If appropriate we would also advise our client to consider imposing an Uplift Clause to cover the situation where the Developer obtains planning permission for a larger development than anticipated. Hypothetically, terms might be agreed on the basis of the buyer wishing to build 2 houses and subsequently obtains planning permission for more units, say 3 or 4.
On the sale of land we would make sure that the Contract contains provisions requiring the buyer to apply for planning permission (e.g. within 4 weeks of exchange of Contracts) and if the planning application was refused to lodge an Appeal if the chances of success were considered to be good.
Peter Meadows, Senior Partner of Meadows Ryan, has over thirty years’ experience of acting for developers in complex transactions. Prior to establishing his own firm, Peter worked in house for several house builders. Please get in touch with Peter at firstname.lastname@example.org or 01932 852 057 if you require any advice on development land.