Options and conditional contracts
These are the preferred arrangements for developers looking to buy potential development sites – particularly in the current economic times – however there remain traps for the unwary (and even for the experienced developer as a recent Court of Appeal case has shown).
Promotion agreements for strategic land are also becoming an alternative to option agreements whereby a developer agrees to promote a landowner’s property by securing planning permission and then marketing the property for sale.
It is critical that both parties know what they are signing up to and in the case of the developer in particular that it is certain it can comply with the letter of the obligations it has entered into.
The use of options and evermore complex arrangements (with adjustable price mechanisms and so on) is set to continue as developers look to “hedge their bets” while at the same time looking to the prospects in the future when the property market starts to show signs of recovery.
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