At the time of writing, it is believed that hmrc has now accepted the principle that compensation can be obtained in a much simpler form as part of the collaboration documentation. This would eliminate the need for complex land trusts or cross-options. We expect this approach to receive considerable publicity in the coming months. Occasionally, developers take the initiative and identify land with residential, commercial or mixed-use development potential. They will present or want to present their own form of agreement to a potentially inexperienced landowner using their own standard terms, which are likely to be strongly formulated in their favor. It makes sense to seek full legal advice before entering into such a contractual obligation. Experienced legal counsel can ensure that the interests of the landowner are fully protected. For large multi-owner developments, it is very important to seek special tax advice when it comes to balancing the proceeds of the sale between land properties, as this can have unintended tax consequences, especially for those who thought they would be entitled to capital tax relief (such as relief for entrepreneurs or rollover relief), but who find that this only applies to part of the product generated by their own country. and not for their own country`s revenues. Compensation for the land of others. There are several tax-efficient balancing mechanisms, including cross-restrictive covenants, cross-options, and trust pooling.
For example, the legal agreement protects a party that owns land that is best suited to accommodate essential but less valuable facilities such as a school or playgrounds, and recognizes that this allows land in another party to accommodate a greater share of higher-value development, such as housing. Option agreements give the developer the right to acquire the property (or part of it) once the building permit has been granted. This generally does not give the landowner the right to force the developer to buy the land. Through GPA, the builder has the right to enter into the sale agreement on his share of the apartment, but no deed of sale is signed until the owner has received his share of the apartments/gain. Violation of this clause expires the agreement on construction costs and no right of claim of the owner. Similarly, with an option contract, a developer attempts to obtain a building permit for the development of the land on behalf of the owner, but once the permit is granted, he has the right to acquire the land at a pre-agreed price that is below the market value. This agreement gives the landowner and developer the same goal of working together to achieve maximum profit. Promotion agreements also offer greater security to achieve a sale, often in a shorter time. Compared to the total deals Sworders has made over the past two decades, hybrid deals account for less than 10% (but still more than option deals).
There are many pitfalls with hybrid deals, but the most important is that homebuilders typically want to be able to acquire a larger share of land than they originally pay, which immediately leads to misaligned interests and can incentivize a home builder to minimize value rather than maximize it. In our Spring 2018 newsletter, Robert Field looked at some of the tax considerations when landowners pool land for development. This article aims to outline some of the agreements that typically occur when landowners are brought together for development, and some of the most common issues that go beyond taxation. A conditional contract can be a useful way to reach an agreement with a developer where values are unlikely to change significantly during the conditionality period and where it is necessary to give the developer control over the final form of the building permit. Developers like them because in most cases, developers have control over the element of conditionality, and so it`s not uncommon for developers to create conditional contract projects that are actually no better than option agreements. However, they can be useful for landowners as they try to speed up a process over a short period of time and at an agreed price, and a good example could be the exchange of a conditional contract, which depends on third parties only after the expiration of a litigation period (with any dispute by third parties beyond the control of a developer and landowner) and facilitate the exchange and conclusion into rapid succession thereafter. There are several ways to approach development agreements, and Sworders is well positioned to help you decide which one is best for your situation. Here is an overview of some methods. Instead of a transportation agreement, some landowners enter into a conditional contract with a developer, where the developer obtains a building permit for the property and then purchases the property with planning. The net proceeds to the landowner are usually after deduction of all costs associated with obtaining the building permit. The above refers to situations where landowners do not intend to participate in the development process after receiving the building permit.