When purchasing land for development, it is unlikely you will want to buy the land straight from the landowner. This is due to the risk that you will not be able to obtain suitable planning permission or there might be third parties involved that are difficult to remove.
Possible solutions that allow the developer to secure the land without the obligation to pay until they are sure that the land is suitable are conditional or option agreements. Our Commercial Property team have considerable experience in both conditional agreements and option agreements.
A conditional agreement outlines the conditions that need to be met and both parties are bound by the terms of the agreement. If the conditions are met, then formal completion will occur.
The most common conditions in a conditional agreement are:
- Planning permission being obtained
- Vacant possession being obtained
- Consent for assignment in the case of leasehold property
- The buyer obtaining a satisfactory survey
There are many benefits of a conditional agreement. The advantages for a buyer are that the seller is committed to selling the property at the set price if the conditions are satisfied within the time frame. If the conditions are not satisfied, the buyer can walk away from the purchase, however, they may have already incurred wasted costs, particularly in the case of a planning application.
Benefits for the seller are that if the conditions are satisfied, they may receive a higher price for the property than if it had been sold on an unconditional basis. This agreement provides the seller protection by preventing the buyer from walking away if the conditions are met.
Problems can arise if the parties have not been clear about the conditions and who is responsible for them. It is crucial to involve your solicitor at an early stage to ensure clear contract terms are agreed upon.
Our proactive and professional team can assist in the drafting and negotiation of a conditional agreement and will always be on hand to answer any questions you may have or deal with any issues that may arise.
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