There are many types of commercial contracts which can be entered into by a seller and buyer of a commercial site. These contracts will cater for different circumstances and specific arrangements between the parties.
Common alternatives include:
Option Agreements are often useful where planning permission has not yet been obtained for a parcel of land and a buyer wants to secure planning permission prior to committing to purchase the land.
The usual form of option agreement provides the buyer with the right to purchase the land from the seller (known as a call option). A buyer is in control and will only exercise their option by giving notice in accordance with the agreed terms.
Where one party is unable, or unwilling to immediately enter into an unconditional agreement for the sale or purchase of a property, a conditional contract is drawn up for the parties.
Whilst conditional contracts are appealing to buyers, especially those who are anxious and want to avoid losing the property to another buyer, they are not so attractive to a seller who would usually try and avoid entering into a contract, where completion is conditional upon the happening of a particular event.
Conditional contracts are usually entered into in circumstances where planning permission has not yet been obtained; the buyer is waiting for vacant possession of the property; or, there are still outstanding searches and enquiries to be undertaken.
Land Promotion Agreements
Usually, this involves a third-party land promotor who agrees to apply for planning permission for development on the land and once planning has been obtained, market the property for sale on the open market, with a view to obtaining the best price possible.
The promotor will initially fund a planning application and relevant land, geotechnical and environmental surveys together with any other costs relating to marketing and ultimate sale of the property.
Once a buyer has been found and the seller agrees the deal, the promotor will receive a percentage (as per the agreement) of the sale proceeds. In addition to this, the promotor will be reimbursed for the planning and marketing costs. If however planning permission is not obtained then the agreement is automatically terminated.
A joint venture differs from the above commercial contracts as it can include various parties, for example, the landowner, the developer, the funder and even the ultimate occupier of the completed property.
All parties would enter into a single contract which would set out the terms of agreement between them and would deal with the benefit that each party could bring to the proposed arrangement.
If you would like further information regarding the above, please speak to the commercial property team here at Fisher Jones Greenwood LLP on 01206 700133 or email [email protected]
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