Option Agreement Or Promotion Agreement

It is often argued that the interests of the landowner are best served by a transportation agreement and that it is the developer who benefits most from an option agreement. But the lines are very blurry these days and the best deal for all parties is usually achieved through negotiation to split the rewards. While this may seem very favourable from a landowner`s point of view (and there is indeed a general consensus that such agreements should be preferred to landowners), an option agreement will often clarify each party`s obligations and will not include a mechanism to deduct planning costs from the purchase price. The two forms of agreement are also very different in terms of the relationships it has between the parties concerned. A promotion agreement creates a much more collaborative relationship, with both parties wanting the best value for the country so they can contribute to the revenues. With an option agreement, there is much less cooperation, with the interests of the parties largely divided; the developer will want to secure the country as favorably as possible, within a period of time to adapt it. However, the main drawback is that the landowner and developer sit on opposite sides of the option table and are thus on the hot seat under many conditions, including the purchase price and the amount of the overrun. This adversarial approach could complicate the conclusion of the agreement and even potentially derail the agreement. The transport contract, in which landowners and developers work in the same way for a common purpose, could therefore be negotiated more easily and therefore concluded. Under an option agreement, if the terms of a section 106 contractual contribution are too demanding in the developer`s eyes, the developer would not exercise the possibility – only the cost of the building permit application and option fees – of the costs actually sunk. There are many other agreements that can be considered (see the following article “What are a landowner`s options for strategic land development?” for more information), but option and transportation agreements are generally the most popular.

Whichever agreement is chosen, a landowner should be advised and carefully considered the tax situation. If a promotion contract is chosen, there are two immediate concerns. First, that the developer is required to collect VAT on all payments it receives (i.e., reimbursement of its transportation and development costs and its percentage share of the proceeds of the resulting net sale); second, landowners and developers run the risk of being treated in partnership and taxed as such. Conversely, one of the main advantages of a transportation agreement is that the landowner and the project proponent converge their interests to obtain the best price for the land once a building permit has been issued. A landowner does not have to worry about being briefly changed at the Point of Sale, knowing that the market has been properly tested and that the best price has been obtained. A promotion agreement generally exploits the assets of the promoter, who uses his skills and often local knowledge to promote the country and its development within the framework of local development. Here at Newmanor Law, we have experienced real estate lawyers to talk to before you put the pen to an agreement, so if you have land for sale or if you would like to develop a website, please contact Karen Mason at (0)20 7464 4081 or email karen.mason@newmanor.com First, we look at the simple difference between the two.

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