Planning permission usually adds the most value a site will ever gain in one step. The owner then has a choice: take that value now by selling, or take on the building work in return for a share of the development profit.
Selling with consent
Selling turns the consent into money within months. There is no build cost to fund, no development finance, and no exposure to construction or sales risk. The buyer, usually a developer or housebuilder, prices those risks into what they pay.
Building it out
Building keeps the development profit for the owner, but it brings everything that comes with it: the build cost, finance, a contractor or builders to manage, sales or lettings, and a market that can move during construction. It also takes longer, often two years or more from the decision to the last sale.
The routes in between
- Sell subject to planning. Agree a sale with a developer who pays for and runs the planning application, with the price paid once consent is granted.
- Sell part, keep part. Sell the plot with consent and keep or convert an existing building.
- Joint venture. Put the land in alongside a developer who funds and builds, and share the profit.
- Build and keep. Let the finished homes or space for income rather than selling them.
- Improve the consent before selling. A better or more certain permission can be worth more than the time it takes.
What decides it
- The size of the scheme and how many buyers there are for it. Small sites can attract many local developers; large ones fewer.
- Your appetite for risk and your capital. Development finance usually needs equity and a track record.
- Time. Most planning permissions must be started within three years, and some charges, such as the Community Infrastructure Levy, usually become payable when work starts.
- Tax. Selling land and building and selling homes can be taxed very differently. Your accountant should see the options before you decide.
Compare them on the same basis
For each route, set out what you would receive, when, what you would have to put in, and what could go wrong. A sale price today and a development profit in three years’ time are not the same money. Once time and risk are counted, the gap between them is often smaller than it first looks, and sometimes it reverses.
In Kingston upon Thames, the owner of a stonemason’s yard wanted to sell without funding a planning application. We ran a competitive process among developers and agreed a sale subject to planning. The buyer secured consent for nine homes 18 months later. Read the case study.
In North London, consent was secured for four houses on land behind a client’s house. The likely route is to sell the consented rear site and convert and let the house, rather than sell both together. Read the case study.