Month: April 2025

With the solicitors working away to get our deal concluded, let’s talk about the costs of getting this deal through planning.

Solicitor Fees: £2,500

To sweeten the deal for the other side, we have agreed to pay a contribution of £2,500 on their legal fees. Legal costs can escalate if left unchecked, so we would only suggest a contribution to legal fees, rather than covering them entirely. That way, it ensures the landowner is prudent when appointing a solicitor and considers the costs involved, as opposed to having a blank cheque.   

Site measure/topography survey of the site: £1,200

Architect to draw up initial Class Q application for eight units, over 1000m2: £6,000

Planning consultant to make initial application: £1,750

Traffic management survey/report: £1,250

Local authority Class Q application fee: £328

Phase 1 costs covering the Class Q application: £15,528

 

Pre-App / Full Plans application after securing Class Q

Local authority Pre-App fee: £1,150

Planning Consultant Pre-App Fee: £3,000

Architects Pre App fee: £1,500

Planning consultant full plans application: £2,000

Architects full plans application: £6,000

Local Authority Fee: £3,450

Ecology report: £1,500

Bio-Diversity report: £1,500

Bat Surveys: £3,500

Phase 2 costs covering full plans application: £23,600

 

As detailed above, the two phases will cost a minimum of £39,000.

However, the above makes no allowance for any additional reports required, which in this case could be structural engineers’ reports (due to the Class Q application on the existing barns), design changes required requiring additional work from the architect, or just simply getting a refusal where we have to pay the planning fee again, planning consultants again, and so on.

It’s safe to say the best case for getting this site through planning will be around £50,000.

The £900k figure agreed upon, with a reasonable upside of £1.1m, gives us £150k profit after accounting for the planning fees. We wouldn’t want to work on anything less than this.

Based on these costs above, it’s essential to hold firm when people ask for an option fee, which on a deal of this size would likely be £10,000. The costs to take the scheme through planning are already significant,  so it is best not to add on to this with hefty option fees. We would always hold firm on securing using a nominal £1.

I expect the solicitors to take 6 – 8 weeks to agree on the paperwork. It’s a simple agreement, so it doesn’t need to be complicated, although these things can drag on if allowed to.

Over the next few weeks, whilst the solicitors get the paperwork done, we’ll share tips on how to find deals, what to look for, and the steps to take.

This week we have agreed the deal in principle, now we just need to get the solicitors working on it.

The outline of the deal:

We have secured a 24-month option for a nominal figure of £1, at the agreed price of £900,000. This means we have 2 years to obtain planning permission, and then we will have the right, but not the obligation, to purchase the site for the agreed-upon figure of £900k.

Planning will be a two-stage process, first involving an application under Class Q, where we will obtain a change of use from agriculture to residential under permitted development. This will enable us to establish residential use for the site and set out the number of units and total square footage of the site. Under Class Q, we will achieve 8 units, with a total area of 1,000 m².

Once we achieve approval for this, we will revise the scheme, based on the understanding that converting the existing barns would not create quality living accommodation (these are not well-maintained existing barns), and submit a new planning application. Having the Class Q in place will create a fallback position for the site, in terms of planning, giving great weight to any new application.

The new application will then look to slightly reduce the approved built area to 950m2 and reduce the number of units from 8 to 6. Both of which will make it appealing to the planners, as the revised scheme reduces the built area and number of units from that already approved.

We have appointed our solicitor to conclude this, who is experienced in options and promotion agreements, and we hope for a swift conclusion of the matter.

To summarise this opportunity and how it came about:

1. We initially worked on a numbers game by sending out over 100 letters to prospective landowners.

2. We received a reasonable response rate, with around fifteen responses, which broke down into three solid leads.

3. Out of the three leads, we focused on the one we felt had the greatest chance of success and the one where we managed to establish rapport with the owner.

4. Having established a good relationship through several meetings with the landowner, we were able to discuss the price and agree on a figure that worked for both parties.

Once we get it through the solicitors, we will start the challenge of trying to achieve planning permission, which, even with the Class Q rules being beneficial to us, will still be a challenge.

If you missed last week’s newsletter, catch up on it by visiting LANDpreneur.co.uk.

Our offer of £800k on the site has been rejected. It was disappointing, but the first offer was partly made to test the waters. We had some margin in it, and it was submitted to test the owner’s thinking on valuation. You never want to make your best bid first, you need some wriggle room.

In an ideal world, landowners would say what they want for their land, but in most cases, they want to see what you’ll offer before sharing such information. We want to know their price just in case it’s lower than our offer, and likewise, from the seller’s point of view, they don’t want to say what they want just in case we offer more than they think it’s worth.

The landowner on this deal has said we need to be at £900k. By making the first offer, we now know where we need to be. So, it’s time to sharpen the pencil. Can we make it work with that figure?

I’ve spoken to local land agents this week to get a feel for the price. I don’t want to be too specific about the deal as that exposes me to someone else finding out about the deal. However, making some calls to see where the market is and where values are is essential.

I was pretty disappointed with the feedback, with values being put at 25% of GDV. I am considering this, but I am also basing the values on my own experiences and thoughts on the market. When I see deals listed on the market in my area, they are never listed at 25% of GDV, more like 35% of GDV.

If someone has done all the hard work in putting a deal together, getting planning, and offering a ready-to-go deal to the market, the margins on the deal get squeezed as all the hard work has been done. If someone can just buy ready-to-go sites at reasonable prices, nobody would go to the trouble of creating deals and struggling through the planning process.

Based on all of this, my revised breakdown of the deal is:

10,760 x £375/sq ft = £4,050m GDV (I’ve pushed the sales value up slightly, which I still think is a prudent valuation. I would hope to achieve closer to £400/sqft in reality).

10,760 x £200 = £2,150 Build Cost

20% margin on the GDV = £800K

Land Value £1,100m

I see £1.1m as a realistic value if I listed the deal on the market, with planning permission in place, which puts the land at a very reasonable 27% of the GDV.

You can’t just go off ballpark figures, but when I look for a deal that is listed on the market, I can never find anything where the land value is 27% of GDV. The prices in my area are always more than 30%.

I would work on the assumption that £1.1m is the bottom end of the valuation. I would hope for closer to 30% on the day, valuing the site at £1.2m.

Based on these assumptions, I have submitted a revised offer to the landowner for £900k, which is their desired valuation.

The planning costs are going to be in the region of £50k. If we sell for £1.1m we will get a 3x return, which is at the bottom end of where we would want to be, although we do feel this could increase over the 24 months option period, along with the fact that the very earliest this deal would be on the market is 3 years accounting for 12 months on site. We would expect some price inflation over this period.

This revised offer has been submitted and we will await the outcome.

If you missed last week’s newsletter, catch up on it by visiting LANDpreneur.co.uk.

The first thing in being able to value any site is figuring out what you can get on the site.

For this deal, we will work back from the Class Q permitted development rules, which allow for the conversion of agricultural barns into residential units. The rules allow for creating a maximum of 10 units with a maximum cumulative floor space of 1,000 sq m. However, the maximum size of any one unit must not exceed 150m2.

Our site has just over 1,000 m2 of barns on the site, although it is a very compact site, so we have to bear that in mind. For example, we could squeeze 10 units on the site but wouldn’t have any space for gardens.

The strategy of this scheme would be over two stages. First, achieve Class Q approval by getting Class Q permitted development on the site, which is much easier to achieve than outright planning permission.

Once we get approval under Class Q, we will submit a new planning application for a new build scheme based on the parameters achieved on the Class Q approval. This new build proposal will have the benefit of the site having permission in place already, via the Class Q approval, giving us a fallback position, meaning the planners will be much more amenable to the new application.

For the first stage, we will maximise the rules under the permitted development and get the 1,000 m2 of floor area, although rather than 10 units, we will do this over eight dwellings due to the site being too tight to achieve the 10 units.

Converting the existing agricultural barns wouldn’t work for us, so we are working on the presumption that we will achieve the new build scheme, which will follow the rough layout of the barns and deliver a courtyard development of barn-style houses.

The final scheme would be for eight units at 1,000 m2 / 10,760 sq ft, with each unit around 1,794 sq ft. The sales values in this area are £365 – £425 / sq ft. We will pitch at the low end at this stage of proceedings, hoping we can increase it later.

10,760 x £365/sq ft = £3.927m GDV

10,760 x £200 = £2,152 Build Cost

We would expect a 25% margin of the GDV = £982K

Land Value £800k

This is where we have pitched our first offer, £800k.

We have made many assumptions using ballpark figures, such as build cost, in some areas. However, based on our experience and assessing the site, we feel comfortable with this cost assumption because the site has no onerous issues.

This offer to the owner was broken down in a letter, which shared our work on the valuation. The offer was based on the owner giving us an option for 2 years to achieve the planning, thereafter, we will purchase at the agreed sum.

Ideally, we would work as a land promoter for the land owner, simply achieving planning and then taking 20% off the land value when it sells (with planning) as our fee. However, through discussions with the landowner, they advised that this wouldn’t be acceptable to them, as they want a firm offer.

We are looking to make the figures work for us where we believe we can flip on to a builder/developer once the planning permission is granted, who will work off tighter margins than ourselves. We would value this site with planning permission in place at 10,760sq ft x £385/sq ft sales value = ££4.143m x 30% land value = £1.243m.

Land values in our area typically compute to more than 30% of GDV, so our presumption is prudent.

Next week, we will update you on how the offer was received.

If you missed last week’s newsletter, catch up on it by visiting LANDpreneur.co.uk.