Developing a large strategic site always has its challenges, but they can be particularly acute when there are multiple owners with multiple tax positions and multiple interests. Getting a successful project off the ground requires an understanding of the individual agenda of each landowner, determining a fair price for their land and creating a coherent proposal for the planner.
The Government’s post COVID-19 recovery package includes a £900m Getting Building Fund designed to deliver 45,000 homes, plus another £360 million investment to deliver 26,000 new homes on brownfield land. Managing large parcels of strategic land will be integral to delivering on these promises.
However, much of the low-hanging fruit has been picked. Increasingly, strategic land sites are more complex and may have multiple owners. A strategic site may comprise large segments owned by individuals or companies, alongside smaller ‘ransom strips’ that nonetheless may provide a crucial access point. Failure to agree with any one of these landowners can jeopardise the whole project.
In managing the various landowners, it is vital to understand their motivations. Some will simply want to achieve the highest price possible; others may live nearby and could be motivated by a desire to see the project completed sensitively and in keeping with the local environment.
Some may be highly organised, working together as a collective to achieve the best price. This can create problems if each knows the price the other is receiving. It is possible that a developer is forced to pay more for a vital piece of land, even if it looks rather scrappy and unimportant to the other owners. Others may be disparate, struggle to agree on priorities; they may even have competing interests.
Key to their motivations will be their tax position. The same £1m payout to two landowners may be worth £900,000 to one and £600,000 to another. This will affect their motivation to sell. At the same time, working out their tax position isn’t always easy – most people are not willing to share intimate financial details.
It may also be necessary to navigate different ownership structures with some larger landowners using company structures. There are other considerations: Business Asset Disposal relief (previously known as Entrepreneurs’ Relief) may be available to some landowners if the structure is right. They will understandably be keen to preserve it where possible.
A failure to manage these interests may see the project not happen at all or it take so long that valuable time is lost in submitting planning applications. Single, intransigent landowners can stymy the entire process.
There are solutions. Smith & Williamson partner Ray Abercromby discusses some innovative options here. Hiring a tax adviser can also help iron out problems early. Smith & Williamson partner Penelope Lang discusses some of the challenges involved in accounting for CGT on individual parcels of land here.
Multiple landowners can be a headache, but they need not stall an otherwise compelling development project. With the right structuring and advice, even the most intransigent landowner can be won round.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.