With a housing shortage blighting our country, farmers may be tempted by the opportunity to sell off some surplus agricultural land for development purposes and bring in extra cash.

But what steps need to be taken and what are the challenges involved? Andrew Little, Head of Commercial Property at Pearsons & Ward in Malton (part of Ware & Kay Solicitors in York & Wetherby, explains.

First off, it is a good idea to engage a local land agent who will examine the land and advise you whether it has any potential for development.

If so, you should check the title of the property. Scrutinise the land’s deeds to ensure you have good title and that there are no restrictions on it, or if neighbouring landowners have rights which might constrain development on the land.

If the land is unregistered, now is a good time to get it registered with the Land Registry. If it is registered, again check the register to ensure there are no interests registered which might interfere with development plans.

Think carefully about access to and from the land you may wish to sell to ensure there are no encumbrances, but also make sure that you will retain access to the land you are keeping after the other land is sold.

If the land is designated for agricultural use, planning permission will be needed to change it to residential use.

Your land will probably fetch the best price if you obtain the planning permission, which would involve you engaging planning specialists to persuade your local council to add the land to its Local Development Plan.

However, this can be a complex and lengthy process and there is no guarantee of success. So you need to decide whether you have the time, money, and patience to go through this. If you decide this course of action is not for you, there are other routes to consider. These include:

Option agreement

This involves you granting a developer a legally binding option to buy the land at a reduced price (usually in the region of 80% to 95% of the market value) if they manage to obtain planning permission within an agreed time frame.

This method frees you from the stress involved in applying for planning permission. The developer should pay all the fees involved in the process, such as for surveys, architects, agents and consultants, as well as the legal costs involved in drawing up the agreement. You will also receive a lump sum of cash, known as the option premium, when you enter into the agreement.

If planning permission is granted, the developer is likely to want to claw back the costs from you, but this will be limited to a pre-agreed capped amount.

You are not allowed to sell the land to anyone else while the option agreement is in place – which can be for a number of years – and, if the developer does not manage to obtain planning permission, they are not obliged to buy the land.

Promotion agreement

This involves a promoter spending their own money to obtain planning permission for housing development on your behalf and then finding a developer on the open market to buy the land.

As with an option agreement, there is usually a minimum price which the land must be sold for, which serves as a useful safety net for you. However, the promoter will take a hefty percentage of the sale price from you – normally 15% to 20% – and will also claim back the costs involved in obtaining the planning permission.

How we can help

It is important to consult a solicitor specialising in agricultural land sales before you embark on selling your land or entering into any speculative agreement. We can explain the pros and cons of all the different options and the processes involved for each, to help you decide on the best course of action.

We can help you find the professionals you need to advise you on any planning issues or tax implications. We will be with you throughout the entire process to offer guidance and legal advice, carrying out any checks to ensure the sale process goes smoothly, and drawing up contracts to ensure you get the best possible deal.

For more information please contact Andrew Little on Malton 01653 692247 or email andrew.little@pearslaw.co.uk