No Land Is An Island – Landpooling To Promote Development

In urban areas and on sites which are physically constrained (due to size of the site or the presence of adjoining railways, roads or other infrastructure or constraints) we are increasingly seeing clients look at how they can work with neighbouring landowners to combine land interests in order to promote development. In the absence of one party acquiring all of the land required for a viable development site, another option is to enter into landpooling arrangements with the adjoining landowner(s) under which the parties agree to contribute land (and other resources) to bring forward development. In recent years, we have worked on several landpooling arrangements for the disposal of development sites and set out below an overview of how such agreements work in practice and how they can assist in promoting development.

So what is a landpooling agreement?

In essence a landpooling agreement (which may also go by other names such as a land collaboration agreement, a sellers' agreement or master agreement) is a contractual joint venture which binds the parties to transfer or otherwise dispose of their land interests in prescribed circumstances (in the agreements we have worked on, once the sale of the site to a developer has been agreed and become unconditional). It may also require the landowners to contribute other resources which could include investing time and expertise in the project.

What are the key features of a landpooling agreement?

1. Strategy and objectives – The agreement will set out the objectives of the landowners and the strategy for achieving those objectives.
2. Dealings in land – There will be a mechanic for how the landowners will dispose of their land interests at an appropriate stage (which will be linked to disposal of the site). If there are any occupational interests there may be provisions around how the landowner(s) will obtain vacant possession.
3. Negotiations with third parties – There will be an exclusivity provision preventing the landowners from disposing of their land to a third party while the landpooling agreement subsists (other than the sale of the site by the landowners as envisaged under the landpooling agreement). The agreements we have worked on have also contained provisions on the process landowners should follow in negotiating the sale of the combined site with third parties (which may include parameters such as a minimum sale value and how bids are evaluated by the landowners).
4. Conditionality and longstop – It will set out conditions to be satisfied for the landpooling to complete and a longstop date so that the landowners are no longer bound if the landpooling agreement does not achieve its stated objectives (for example sale of the site) within a prescribed timeframe.
5. Termination – There will be termination rights in favour of each landowner should the other be in material breach of their obligations or become insolvent.
6. Project Management and Decision-making – There will be a project management aspect to it where the landowners will agree to meet on a regular basis and make decisions regarding the project. There may or may not be an indicative programme for the development and the sale of the site.
7. Share of Proceeds – There will be a mechanic dealing with how the proceeds of any sale are to be distributed amongst the landowners.
8. Costs – The landpooling agreement may provide for the parties to incur external costs such as fees for surveyors, planning consultants, architects, solicitors or other consultants. The agreement will set out how costs are to be incurred and apportioned between the landowners.

How can landpooling agreements help promote development?

Landpooling agreements provide a formal and legally binding framework for the neighbouring landowners to agree a strategy for the development and sale of a combined site. The exclusivity provision allows the parties to work together in the knowledge that the other landowner will not dispose of its land and it gives the landowners protection on costs before the landowners commit resources to the project.

So no land is an island and landowners should consider whether combining land interests with adjoining landowner(s) may help to create a viable development site. Landpooling agreements can be an effective tool in promoting the sale of development sites that would otherwise not be capable of development.

The Levelling Up Bill – Greater scrutiny of landpooling and other land agreements in the future?

The Levelling-up and Regeneration Bill is currently making its way through the Houses of Parliament and one provision (section 178 of the draft Bill) provides for regulations to be made for the registration of interests in land not only in relation to legal or beneficial ownership but also by virtue of a party exercising "control or influence" over property which "includes control or influence by reason of interests or rights in or under a company, partnership, trust, foundation, or legal structure or arrangement similar to any of those." Landpooling, land agreements and contractual joint ventures that are not currently registrable at HM Land Registry would be caught by this definition. The Government's view is that increased transparency on the ownership and control of property will help drive development but the increased transparency may cause concern to some as it could impact existing commercial relationships and land investment and acquisition programmes. Parties considering entering into landpooling agreements or other similar arrangements should be aware that there may soon be a legal requirement to register such interests on a public register (although the detail on exactly what will be required is still to be confirmed).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.