Every land deal answers one question: who carries the risk that planning permission never arrives? Get that wrong and you own a field you cannot build on, bought at a price that assumed you could.
There are four structures in common use in the UK. This post sets out what each one does to your cash, your control and your planning risk, plus the tax trap that catches people using options for the first time.
This is general information, not legal or tax advice. Every one of these structures is drafted by a solicitor and has tax consequences that depend on your circumstances — take advice from a solicitor and an accountant before you sign anything.
1. Outright purchase
You agree a price, exchange, complete, and own the land. The simplest structure and the one that carries the most risk, because you are paying for potential you have not yet proved.
Use it when permission is already in place, or the land has standing value that does not depend on consent — an existing building you can let, agricultural land that farms, a yard that earns rent. Then a planning refusal is a disappointment rather than a disaster.
Avoid it when the whole value is the hope of permission. That is the deal where new developers get hurt, and it is entirely avoidable by using one of the next three.
2. Option agreement
You pay the landowner an option fee for the right — but not the obligation — to buy the land at an agreed price or formula, within an agreed period. You spend the option period pursuing planning. If it works, you exercise and buy. If it does not, you walk away, and your downside is the option fee plus what you spent on planning.
Price is usually a percentage of open market value with permission, less your planning costs, rather than a fixed number — which keeps both sides pointed at the same outcome.
The SDLT trap. People assume no land changes hands, so no tax. That is wrong. HMRC treats the acquisition of an option as a land transaction: SDLT is due on the option price at the rates applicable to the land when the option is granted. And the grant and the later exercise are linked transactions, so the consideration is aggregated and more tax can fall due at completion. Price that in at the start, and have your solicitor confirm the position for your deal.
Protect it on the register. An option is an interest in land, and it should be noted against the title at HM Land Registry. An unprotected option against a seller who sells to somebody else is a lawsuit rather than a site.
The close cousin: the conditional contract. A contract conditional on planning binds both parties — once the condition is satisfied, you must buy and they must sell. An option leaves the decision with you. Sellers often prefer a conditional contract for exactly that reason, and buyers usually prefer an option. Which you get is a negotiation, and the difference is not cosmetic.
3. Promotion agreement
You do not buy the land at all. You act as promoter: you fund and run the planning process, and when permission is granted the land is marketed and sold on the open market. You take an agreed share of the proceeds, usually after your costs are repaid.
The incentive structure is the cleanest of the four. Both of you want the highest possible sale price, which removes the argument that poisons options — the buyer wanting the land cheap and the seller wanting it dear.
Use it when your value is planning expertise rather than construction, and the site is too big for you to buy. Accept that you are paid a share of the uplift rather than the full developer’s margin, and only at sale, which on a strategic site can be years away.
Watch the detail on what the share is calculated from — gross proceeds, or proceeds net of costs, and which costs — and how long the agreement runs. Those two clauses decide what you actually receive.
4. Joint venture
You and the landowner (or another partner) develop the site together, usually through a company or a partnership. Typically they contribute the land, you contribute the planning, the build and the management, and you share the profit on an agreed split.
Use it when a landowner wants development profit rather than a land price, or when you need a partner’s capital or track record to make the scheme happen at all.
The clause that matters is the exit. What happens when one party wants out, when the market moves, when the build costs more than the appraisal said, or when you disagree about when to sell. Get the deadlock and exit provisions right at the start, when everyone still likes each other.
The four side by side
| Structure | Capital at risk before consent | Who carries planning risk | Control of the land | When you get paid | SDLT trigger |
|---|---|---|---|---|---|
| Outright purchase | The full purchase price | You, entirely | Total, from day one | On sale or refinance | On completion |
| Option | Option fee plus planning spend | You | A right to buy, not ownership | On exercise and resale | On grant, on the option price; grant and exercise are linked |
| Promotion agreement | Planning spend only | You | None - the owner retains it | On open-market sale, as a share of proceeds | None on the agreement itself |
| Joint venture | Your contribution to the venture | Shared | Shared, on the terms of the agreement | On completion and sale of the units | Depends on the structure |
How to choose
Three questions, in this order:
- Does the land have value without permission? If no, do not buy it outright.
- Can you fund the planning phase and survive losing it? If yes, an option keeps the upside with you. If no, a promotion agreement or a funded partnership moves that risk off your balance sheet.
- Do you want to build it, or sell the consent? Building means an option or a JV. Selling the consent means a promotion agreement.
Whichever you land on, the structure only protects you if the site was worth pursuing in the first place. That work happens before any of this — see finding off-market sites for how to build the shortlist, and settlement boundaries for the single policy line that decides most of them.
