Option Agreement vs Promotion Agreement

Option AgreementPromotion Agreement
Typically entered into with a housebuilder looking to buy land as cheaply as possible.

Land value arrived at by negotiation between the parties with no exposure to the market.
Interests of landowner and promoter are aligned: both are looking to secure the best possible price as the proceeds of sale are split between the parties on a pre-agreed basis.
Single buyer identified at outset and price is negotiated upon receipt of planning.

Limited to one party: can therefore depress value.
Planning is secured and site openly marketed with the benefit of that planning. A competitive bidding situation can drive up value.
Housebuilder can choose to walk away if market conditions or priorities change, as not obliged to buy. Promoter paid upon sale of land and is therefore fully committed to the process, however long it may take.
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