Pity poor Philip Hammond. As Chancellor of the Exchequer, he is charged with ensuring the UK remains financially solvent during a time when many sense the country is about to commit economic suicide in the form of Brexit, however he has faced a battering in recent weeks.
Hammond infuriated Euro-sceptic MPs in the Conservative Party by telling business leaders in the Swiss ski resort of Davos that the government would seek only “modest” changes in its relationship with the European Union.
“Instead of doing what we’re normally doing in the trade negotiations – taking two divergent economies with low levels of trade and trying to bring them closer together to enhance that trade, we are taking two completely interconnected and aligned economies with high levels of trade between them, and selectively moving them, hopefully very modestly, apart”, Hammond said[1].
It is reported he was severely rebuked by his boss, Prime Minister, Theresa May
However, regardless of his political woes, Mr Hammond is unlikely ever to be short of cash. It has been reported[2] that he stands to make millions of pounds if green belt land he owns gets planning permission for new homes in the future, thanks to a cleverly negotiated option agreement[3].
What is an option agreement and how does it benefit landowners like Mr Hammond?
Option agreements are agreements between a property owner and someone who wants to purchase the land they own in the future. This is often a developer. In the case of Mr Hammond, reports state he came to an agreement with a housebuilder allowing him to buy the land back in the future and any uplift on the value of the land will be split between them.
Most option agreements involve the developer paying a non-refundable sum of money for the legal right to buy the land after a certain event, date, or on completion of a particular event (normally the granting of planning permission).
Whether the amount paid for the option agreement will be deducted from the purchase price is a matter for negotiation.
What are the advantages of an option agreement?
Option agreements are advantageous for the landowner and developer. The landowner not only receives a non-refundable deposit, but they know they will have an interested buyer, regardless of the state of the property market at the time the option can be exercised. The developer gets to minimise their risk; for example, if planning permission is delayed, they can be confident they will not lose the site. Options can be registered to secure the developer’s investment, and the final purchase price can be agreed on in advance.
Because an option agreement is a legally binding document, it is crucial that it is drafted by an experienced property solicitor. Your conveyancer will also ensure the option agreement is registered against the land title. To find out more, please read our more in-depth article or call our office.
Saracens Solicitors is a multi-service law firm based in London’s West End. We have dedicated and highly experienced commercial property solicitors who can advise you on all commercial property matters. For more information, please call our office on 020 3588 3500.
[1] https://www.theguardian.com/politics/2018/jan/25/britain-cowed-brussels-jacob-rees-mogg-theresa-may-brexit-eurosceptic-mps
[2] https://www.mirror.co.uk/news/politics/chancellor-philip-hammond-could-make-10765588
[3] https://saracenssolicitors.co.uk/commercial-property/keeping-your-options-open