Land Promotion Agreement Percentages

Land promotion agreements have gained popularity in recent years as a way for landowners to profit from their property without having to undertake any development work themselves. Under a land promotion agreement (LPA), a developer agrees to promote the land for development and, in return, the landowner agrees to transfer a percentage of the sale proceeds to the developer upon completion of the development.

When negotiating an LPA, one of the key considerations is the percentage of the sale proceeds that the landowner will transfer to the developer. This percentage can vary depending on a number of factors, including the size and location of the land, the potential value of the development, and the level of risk involved in promoting the land.

Traditionally, LPAs have involved a split of 50/50 between the landowner and the developer. This means that the developer would take 50% of the sale proceeds, leaving the landowner with the remaining 50%. However, in recent years, there has been a trend towards developers pushing for a higher percentage of the sale proceeds.

Some developers are now asking for as much as 60% or even 70% of the sale proceeds. This can be justified in cases where the developer is taking on a significant amount of risk in promoting the land. For example, if the land is in a high-risk flood zone or is in an area with uncertain planning permission, the developer may feel that they are taking on more risk than the landowner and may therefore seek a higher percentage of the sale proceeds.

However, it is important for landowners to be aware that a higher percentage for the developer can impact the overall profitability of the development. If the developer takes a large percentage of the sale proceeds, this can mean that the landowner ends up with a smaller profit than they would have otherwise.

Ultimately, the percentage split in an LPA will depend on a number of factors, and there is no one-size-fits-all approach. Landowners should seek professional advice before entering into an LPA to ensure that they are getting a fair deal and that the financial terms of the agreement are in their best interests.