Selling to Property Developers - Any advice?

Richard_Webster

I will refuse to sign the option agreement unless it specifically states the agreement will have to be re-negotiated after a year if they do not have Planning Permission by then as I am not commiting to sell to them unconditionally.

Don't really understand this. If the option is for a year then it falls after that time and the builder has to renegotiate. Why shouldn't that be the case? An option never compels a builder to buy - but you can't sell to anyone else so usually the price for the option (as opposed to the eventual price for the land if exercised) should reflect this hassle factor to you.

Most option agreements simply run for a fixed period and if the builder gets his permissions in that period, and it is still viable to develop, he exercises the option, if he doesn't do so, then he loses the right to buy at the end of the period unless he renegotiates. Of course, the other thing you have to watch is the builder saying that the development is no longer viable at £X and he can only afford to proceed if he pays you £Y. You then have to decide that if you wait out the period whether you would get £X for it from someone else or not?

horndean_hopeful

Richard_Webster wrote: »

Don't really understand this. If the option is for a year then it falls after that time and the builder has to renegotiate. Why shouldn't that be the case? An option never compels a builder to buy - but you can't sell to anyone else so usually the price for the option (as opposed to the eventual price for the land if exercised) should reflect this hassle factor to you.

Most option agreements simply run for a fixed period and if the builder gets his permissions in that period, and it is still viable to develop, he exercises the option, if he doesn't do so, then he loses the right to buy at the end of the period unless he renegotiates. Of course, the other thing you have to watch is the builder saying that the development is no longer viable at £X and he can only afford to proceed if he pays you £Y. You then have to decide that if you wait out the period whether you would get £X for it from someone else or not?

We haven't got to the stage of a contract yet, Richard, but my understanding is that the developers do not propose to pay for the option. This is the point that interests me. Is it normal to ask for a fee for the option to buy at a set price? If so, what percentage of the selling price is the norm? The developers are telling us that we need to commit to selling because of the cost involved to them in applying for Planning Permission and that the price they are offering includes a premium for us giving up the right to sell during the period planning permission is obtained.

Doozergirl

It only costs a few hundred to actually apply for planning permission. Outline PP should be more than enough to know that your house is worth buying for the development potential.

horndean_hopeful

Doozergirl wrote: »

It only costs a few hundred to actually apply for planning permission. Outline PP should be more than enough to know that your house is worth buying for the development potential.

It's about £800 for outline permission. I agree with you. In my opinion it's a way for the developers to get the option to buy without commiting themselves to anything. However, I've looked at other Planning Applications in my street and although they've all been passed they all have a huge number of conditions to be satisfied before building can take place. I assume the developers don't want to have to pay until the last possible time before they have to i.e. before building commences. They have, however, said that we will have 6 months after payment to find a new home before moving out which seems pretty generous to me.