Incentives during planning from property developers

VirtualOli

Hi,

Our house has been on the market for a couple of months and we've been approached by a private property developer asking if they can apply for planning in exchange for an incentive. I presume we'd have to take the house off the market for the 8 weeks while this goes ahead. (But it's November and we've only had one viewing anyway so this doesn't bother us hugely). They want to apply for planning to knock our house down to provide access to next door (which is also up for sale). Also fine, if they give us what we want for it.

So my question is, what level of incentive should we be asking for? Is it usually a % of the asking price (625k) or just a figure plucked out of the air? What are we pricing it up against? The risk of not selling it over the next two months? (Very low) The risk of having to declare that planning was refused when we eventually sell? (I can't believe that any normal buyer would want to do anything this drastic anyway), and erm, no can't think of any other disadvantages.

So there must be a catch because you hear awful things about developers. Why would anyone want to give us free money at this time of year? And how should we act/what should we be looking out for?

Thanks!

Slithery

What are they offering you an incentive for? Is it just to take the property off the market while they apply for planning?

VirtualOli

Well that's all I can think of. They said 'because we would need to get planning first and because there's a risk planning can fail then we can give you an upfront incentive fee for your cooperation'

ProDave

Be careful.

You might without knowing it, be sitting on a "ransom strip" that will allow access to a large development. Your ransom strip might be worth a lot more than the value of the house.

Whatever they offer, get a professional opinion by a solicitor before signing.

Be careful it might not be an offer to buy now, but some undefined time in the future when they get PP for the development, AND when they feel the market for building and selling the houses is right.

eddddy

VirtualOli wrote: »

I presume we'd have to take the house off the market for the 8 weeks while this goes ahead.

8 weeks sounds very optimistic. Option agreements / conditional contracts I've seen specify 18 months.

e.g. If planning consent is initally refused, the developer may appeal - and a decision can take about 40 weeks.

VirtualOli wrote: »

They want to apply for planning to knock our house down to provide access to next door (which is also up for sale).

Are you sure that's all?

You should say that the agreement is to be related to a specific planning application - and you want to see the planning application details before you sign.

Otherwise, they may pay you a 'pittance' and you later find out the planning application is to build a block of flats or a large development worth millions.

VirtualOli wrote: »

So my question is, what level of incentive should we be asking for? Is it usually a % of the asking price (625k) or just a figure plucked out of the air?

It's unusual to be offered an incentive up-front. Normally, the incentive would be a higher sale price, if planning is granted.

So ask them what they're prepared to offer as an incentive, and as the eventual sale price. Check what they plan to build, and maybe get valuation advice from a Land Agent.

And get a specialist solicitor to check over the option agreement / contract etc before you sign.

Tom99

[FONT=Verdana, sans-serif]That could only work for the developer if they also tie you in to an option to sell at a certain price, what price are they offering you the option to sell at?[/FONT]
[FONT=Verdana, sans-serif]You don't need planning permission to demolish a house so what is it they are applying for?[/FONT]
[FONT=Verdana, sans-serif]I think 8 weeks is the time a planning authority has to make a decision after an application has been made. It could take several months to prepare all of the documentation necessary to even submit the application.[/FONT]

davidmcn

I would get professional advice about what this is actually worth. As above, I would expect a full conditional contract to sell, and the conditional period is surely going to be longer than 8 weeks.