Land promotion agreements: a landowner’s guide

Many landowners have land ripe for residential development but may lack the expertise to secure planning permission themselves. A land promotion agreement can help by enabling them to appoint land promotion specialists to manage the process and unlock the land’s potential.

Lauren Pearson, senior associate in Lodders’ Real Estate group, explains land promotion agreements, how they work, the key terms landowners should understand, and the benefits and risks to consider before entering into one.

What are land promotion agreements?

A land promotion agreement is a contract between a landowner and a land promoter. The promoter is not usually a developer or a housebuilder but has specialist expertise in securing planning permission for land with development potential.

The land promoter’s goal is to maximise the development potential and value of the landowner’s land and they are responsible for securing planning permission for development, and for the sale of the consented land.

The promoter typically leads the process by assessing the feasibility of development, identifying its proposed strategy and timescales, preparing and submitting the planning application (which will involve commissioning surveys and reports from various other experts), engaging with the local community and stakeholders and generally navigating the planning process.  

They will then work with the landowner’s land agent to sell the consented land on the open market to a housebuilder, aiming to achieve the best possible price and terms.

What key terms should feature in a land promotion agreement?  

A land promotion agreement can be a long and complex document. It will need to fully detail the agreement between the parties, including all commercial terms and the respective obligations and rights of both parties. Matters typically found in a promotion agreement include:  

• Promotion fee:  A promoter will often pay a sum of money to a landowner upon exchange of contracts in consideration of entering into a promotion agreement. Such sums can be substantial but are usually refunded to a promoter out of the sale proceeds.   
• Obligations: The agreement should outline the rights and responsibilities of both parties, although the majority of these will fall on the promoter as the actioning party in terms of marketing, obtaining planning permission, and promoting the land for development. The landowner’s obligations can include providing necessary details about the land, cooperating with the promoter, signing certain documentation, and generally assisting the promoter in achieving the aims of the promotion agreement. 
• Timescales: The agreement should set out how long the promoter has to try to obtain planning permission (“the promotion period”) and thereafter how long the promoter has to try to sell the consented land to a housebuilder (“the disposal period.”) These timeframes can be long; it is not uncommon for a promotion agreement to last for ten years or more.  
• Tranches: The agreement should address whether the property could be subject to more than one planning permission and whether the consented land will be sold as a single parcel or in separate parcels, known as “tranches”. Tranche sales raise additional issues for landowners. For example, a landowner may retain land that remains subject to planning permission and its obligations after selling part of the land to a purchaser who will develop under that permission. In those circumstances, protections will be needed to ensure the landowner is not liable for obligations or financial payments arising from the sale of that part.
• Minimum return: Promotion agreements typically contain a sum under which the landowner cannot be obliged to sell. This sum is often a sum per acre of the consented land. Where the proposed purchase price does not leave the landowner with at least the minimum return after all deductions and payments to the promoter, the landowner can veto a sale.   
• Success fee:  As well as its costs being refunded, a promoter will be due an agreed percentage of the sale proceeds received. These percentages can vary from agreement to agreement. Even just a 1% difference could add up to many thousands of pounds. However, it is this success fee that feeds the commercial incentive of the promoter. 
• Termination: As with any agreement, a party may simply fail to comply with its obligations. The promotion agreement should therefore include a right for the landowner to terminate if the promoter breaches its obligations or becomes insolvent. The promotion agreement should then detail what happens when the agreement is terminated in such circumstances, or where it expires due to effluxion of time, including whether the promoter must hand over any documents to the landowner and whether the landowner can rely on existing technical reports or progress ongoing planning applications or appeals. 

How do land promotion agreements benefit landowners?  

The promoter pays for all expenses incurred in the promotion of the land at the outset. Depending on the size and scale of the site, these costs can be considerable. Where the promoter is successful in obtaining planning permission and the consented land is ultimately sold, the promoter will be refunded its expenses incurred out of the sale proceeds. Caps are often negotiated to limit the amount the promoter can be refunded.  

The landowner will also have access to the expertise and experience of the land promoter in promoting land for development. Simply put, many landowners would not be able to secure planning permission for residential development on their land without engaging a professional such as a land promoter. Land promoters often have established relationships with planning authorities, highways authorities, professional consultants and land developers, all of whom can be crucial to obtaining planning permission and selling the consented land.

In addition, both parties have commercial incentives to obtain the most valuable planning permission to maximise the sale price. This differs from alternatives such as an option agreement, where a developer would want to buy the land for as little as possible to increase their own profit margin.  

Finally, the consented land will be put on the open market for sale through a competitive bidding process, allowing market appetite to be tested and giving a clearer indication of its value. This means that the ultimate purchase price will not be based on a hypothetical valuation.  

What are the disadvantages of land promotion agreements for landowners?

No type of contract is without risk. Issues for landowners to consider in deciding whether to proceed by way of a promotion agreement include:  

• Timescales: Obtaining planning permission can be complex. Whilst there can sometimes be good reasons for delays (e.g. both parties may agree that it would be wise to delay submitting a planning application in light of prevailing planning conditions in the local area), sometimes delays can occur. A land promoter will not be able to guarantee success to a landowner.  
• Market fluctuations:The market for the sale and purchase of land for residential development may be buoyant when the promotion agreement is entered into. However, there is no guarantee that will remain so. Market conditions may mean that land prices dip or the market becomes oversaturated. A land promoter cannot control this, regardless of their expertise and experience.  
• Exclusivity to the promoter: Whilst the promotion agreement is in force, the landowner cannot enter discussions or negotiations with another land promoter or a housebuilder as the promoter will have the exclusive right to try to promote and thereafter sell the land. Unless the promoter is in breach of the promotion agreement or becomes insolvent, the landowner must let the promotion agreement run its course. As mentioned, promotion agreements can last for many years, and the land will be tied into that arrangement for all that time.  
• Control on use of the land:The landowner will be subject to restrictions on what they can do with the land. For example, the landowner may require the promoter’s approval on any proposed change in use or any potential grant of a lease or tenancy over the land. This is because the promoter will not want anything to be done to the property that could impact the chances of obtaining a planning permission or selling the land thereafter.  

What are the tax considerations for landowners entering into a land promotion agreement?  

The tax treatment for landowners will vary on a case-by-case basis. However, issues to consider include the fact the landowner may be liable for capital gains tax (CGT) on the increase in value generated by the planning permission upon a land sale.

The promoter will also be required to charge VAT on their success fee. Landowners should therefore consider whether it would be appropriate to submit an option to tax to try to recover that VAT due. Options to tax can make a site less attractive to a purchaser, as it means they will be required to pay VAT on the purchase price, but that is often just a cashflow issue. 

Moreover, it is often the case that terms are agreed with purchasers to pay the purchase price for the land in stages e.g. 50% on the completion date and 50% on the first anniversary of completion. In such circumstances, landowners must structure deals to ensure they can pay the tax due to HMRC on its due date.   

It is not possible to foresee all changes to the tax regime during a promotion agreement. However, consideration may be given to whether the landowner can be given a right to delay a land sale if the level of headline tax burden payable by it exceeds a certain threshold. This is known as a “tax suspension” regime.  

Due to the complexity of tax matters in these types of agreements, it is crucial that a landowner seeks specialist tax advice both before and after exchange of contracts. 

Contractual control agreements registration

Landowners should also be aware of the new contractual control agreements regime, which includes land promotion agreements. The regime is intended to improve transparency around who controls land that may be developed in the future, with qualifying agreements entered into on or after 8 June 2026 falling within scope and registration requirements with HM Land Registry due to come into force from 6 April 2027. Read more in our blog here.

Get in touch

Lodders’ award-winning Real Estate group advises developers, landowners, promoters and investors on a wide range of property transactions. If you would like expert advice on putting together a land promotion agreement, please get in touch with our team.