Buying a Development Site?

Finding the right development site is often only the beginning of the process. Before any construction can begin, there are legal, planning and commercial issues that can have a significant impact on whether a project is viable, and a site that looks like an excellent opportunity can quickly become far less attractive if restrictions, planning obligations or hidden costs emerge after contracts have been exchanged.

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Taking legal advice early and carrying out thorough due diligence can help identify these issues before they become expensive problems.

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Look beyond the purchase price

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Assessing a development opportunity means considering far more than location and asking price. A detailed review should cover legal title, ownership, access arrangements, planning position, environmental considerations and any restrictions affecting the land.

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For example, a site may appear suitable for residential development, only for restrictive covenants to prohibit building without a third party's consent. Discovering this after committing to the purchase could delay the project for months while negotiations take place, increasing both costs and uncertainty. Identifying these issues at the outset allows informed decisions to be made before contracts are signed.

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Should you commit immediately?

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Not every site should be purchased unconditionally. Many acquisitions are structured using conditional contracts or option agreements, allowing developers to investigate a site's potential and, in many cases, secure planning permission before becoming legally obliged to complete.

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A conditional contract may provide that completion only takes place if planning permission is obtained within an agreed period, with the buyer able to withdraw if it's refused. These arrangements can significantly reduce the financial risk of speculative development and provide greater certainty before substantial investment is made.

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Planning drives value

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Planning permission is often the single biggest factor affecting the value of development land. Even where consent already exists, it's important to understand exactly what has been approved and what obligations come with it, and whether the proposed scheme is realistic within local planning policy.

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Obligations such as Section 106 Agreements and Community Infrastructure Levy (CIL) charges can substantially affect overall project costs, sometimes reducing the profitability of an otherwise attractive site. Understanding these commitments before exchange enables more accurate financial planning and avoids unwelcome surprises later on.

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Don't overlook overage

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Overage, sometimes called a clawback provision, allows the seller to receive an additional payment if the land increases in value after completion, most commonly when planning permission is granted. These provisions can remain in place for years.

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For example, a developer might purchase land for £500,000 before securing planning permission for ten new homes. If the contract includes an overage clause requiring 30% of the increase in value to be paid to the seller, that could amount to hundreds of thousands of pounds. Understanding how these provisions work is essential to assessing the true cost of a site.

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Budget for the full cost of acquisition

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The purchase price is rarely the total cost. Developers should also budget for Stamp Duty Land Tax, legal fees, planning consultants, surveys, searches, environmental investigations, site assembly or access costs, and infrastructure contributions such as CIL and Section 106 obligations. These additional costs can increase the acquisition budget significantly, so building them into the initial feasibility assessment gives a much clearer picture of viability.

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At Marsons Solicitors, we advise developers, investors and landowners at every stage of the acquisition process, from negotiating conditional contracts and option agreements to carrying out due diligence, reviewing title issues and restrictive covenants, advising on overage, and working alongside planning consultants, surveyors and lenders. Getting advice early can help protect your investment and provide greater certainty before contracts are exchanged.

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