FAQs

Before committing to a purchase, it is crucial to carry out early-stage due diligence, including:

• Planning status (existing use and development potential)
• Title and ownership (including rights, restrictions, and access)
• Access and services (roads, utilities, drainage)
• Environmental risks (contamination, flood risk)
• Covenants or overage provisions

Example:
A developer agrees to purchase land assuming residential development is possible. However, restrictive covenants prohibit building without third-party consent, delaying the project by months and increasing costs.

Many development site purchases are structured as conditional contracts or option agreements, allowing time to secure planning permission and reduce risk.

Common protections include:

• Contract conditional on planning permission
• Longstop date to withdraw if planning is not achieved
• Rights to carry out surveys and investigations pre-completion

Example:
A developer enters into a conditional contract subject to obtaining planning permission within 12 months. When planning is refused, the developer can withdraw without completing the purchase, avoiding a costly mistake.

Planning is often the key factor in site value and viability.

You should consider:

• Whether planning permission is already granted
• Whether the proposed development is realistic
• Local planning policies and restrictions
• Section 106 obligations and Community Infrastructure Levy (CIL) costs

Example:
A buyer secures land at a premium price but later discovers a significant CIL liability and affordable housing requirement, reducing the project’s profitability.

Overage (or “clawback”) provisions require the buyer to pay the seller an additional sum if the site increases in value, typically after planning permission is obtained.

Key points:

• Overage can apply for many years (often 10–30 years)
• It is triggered by events such as grant of planning or sale with permission
• It can significantly impact project profits

Example:
A developer buys land for £500,000 and obtains planning permission for 10 units. An overage clause requires 30% of the uplift in value to be paid to the seller—resulting in a six-figure additional payment.

Beyond the purchase price, you should budget for:

• Stamp Duty Land Tax (SDLT)
• Professional fees (legal, planning consultants, surveyors)
• Searches and investigations
• Site assembly or access costs
• Potential infrastructure contributions (CIL/Section 106)

Example:
A developer budgets for land acquisition only but later incurs additional unforeseen costs, including SDLT, surveys, and planning contributions—adding over 15% to the overall project cost.