Development Agreements UK: Landowner & Developer Guide

What this document is

A commercial property development agreement is a contract between a landowner and a developer that sets the terms on which a site will be brought forward for development. It is not a single, standard form. The shape of the agreement depends on the deal.

Sometimes the developer takes a long lease once planning is secured. Sometimes the landowner sells the site outright at a point tied to a planning milestone. Sometimes the parties share the uplift in value through an overage or profit share.

In each case, the agreement has to handle the same core questions: who applies for planning, what standard of consent is acceptable, who funds the early costs, what happens if planning is refused, how the build is procured and supervised, when payment is triggered, and how disputes are resolved. These agreements sit alongside, and often trigger, other documents such as option agreements, conditional contracts, building leases, collateral warranties, and section 106 planning obligations.

Because the money at stake tends to be significant and the timelines stretch over years, the drafting needs to anticipate changes in market conditions, planning policy, and the parties' own circumstances.

How to use this document

1. Agree the commercial structure before drafting starts. Work out whether the deal is a straight sale, a conditional contract, an option, a promotion agreement, or a joint venture. The structure drives everything else in the document, including tax treatment, who controls planning, and how proceeds are shared. Getting this wrong at the heads of terms stage costs far more to fix later.
2. Deal with planning carefully. The agreement should define what counts as a 'satisfactory' or 'acceptable' planning permission, who has conduct of the application, how appeals are handled, and what happens if conditions attached to a consent make the scheme unviable. Planning is usually the biggest single risk in the deal, so the drafting here needs to be precise rather than left to general wording.
3. Set out funding, costs, and payment triggers. Decide who funds the promotion and construction costs, whether those costs are recoverable from sale proceeds, and when the landowner gets paid. Payment can be on grant of planning, on practical completion, on unit sales, or a mix. Each option carries a different risk profile for both sides.
4. Allocate risk between the parties. Think through what happens if planning is refused, costs overrun, the developer becomes insolvent, the market moves, or a key consent is judicially reviewed. Termination rights, step-in rights, security over the site, parent company guarantees, and performance bonds are all tools used to manage these risks. The agreement should be explicit about who carries which one.
5. Plan for completion, overage, and handover. Define what 'completion' means for the scheme, how any overage or profit share is calculated, how disputes over those calculations are resolved, and what collateral warranties, as-built information, and snagging obligations the landowner or end purchasers can expect. This tail end of the deal is often where arguments arise, so clear drafting pays off.

Common questions