Buying land without planning permission can sound like a significant risk.

After all, why would you commit a substantial amount of money to a development site when you don't yet know whether you'll actually be allowed to build on it?

The answer is that buying land without planning permission doesn't necessarily have to be as risky as it first appears.

The important thing is how you structure the deal.

There are legal structures that can allow property developers to secure or control a development site while reducing their exposure before planning permission is obtained.

Understanding these structures can make a considerable difference when you're looking for development opportunities — particularly when dealing directly with landowners and finding off-market land.

Finding Land Is Only the Beginning

Many aspiring property developers focus heavily on finding land.

Finding a potentially suitable site is obviously important, but that's only the beginning of the development process.

Once you've identified a site, you need to consider:

• Is development likely to be acceptable?

• What could realistically be built on the site?

• What are the planning risks?

• What is the land worth based on its development potential?

• How will you negotiate with the landowner?

• How can you secure the site without taking unnecessary financial risk?

That final question is particularly important.

If a piece of land doesn't already have planning permission, simply purchasing it outright could expose you to considerable risk.

Instead, you need to think about how you can control the land while you work towards securing planning permission.

Why the Legal Structure of the Deal Matters

The structure you use to secure a development site can be just as important as the site itself.

There are several ways a developer may potentially structure an agreement with a landowner.

The appropriate structure will depend on the circumstances of the site, the landowner's objectives, the planning position and the commercial agreement between the parties.

The goal is generally the same:

Secure sufficient control over the development opportunity without unnecessarily committing significant capital before you understand whether the development can proceed.

This can give you time to investigate the site, assess its development potential and progress the planning process.

Three Ways to Consider Securing Development Land

There are three legal structures commonly worth exploring when dealing with land that does not yet have planning permission.

1. Conditional Contract

A conditional contract allows the purchase of the land to be made subject to certain conditions being satisfied.

For a development site, one of those conditions could relate to obtaining satisfactory planning permission.

Rather than completing the purchase immediately and then discovering whether development is possible, the transaction progresses according to the conditions agreed between the parties.

2. Option Agreement

An option agreement can give a developer the right — but generally not the obligation — to purchase land within an agreed period and subject to the terms of the agreement.

This can potentially provide time to pursue planning permission before deciding whether to complete the purchase.

For developers looking at off-market sites, an option agreement can therefore be an important structure to understand.

3. Promotion Agreement

Another possibility is a promotion agreement.

Rather than simply agreeing to buy the land, a developer or land promoter may work towards obtaining planning permission and increasing the site's value.

The land may then be sold, with the proceeds distributed according to the terms agreed with the landowner.

Again, the exact structure needs to reflect the circumstances of the site and the objectives of everyone involved.

Protect Yourself Before Committing Significant Capital

The fundamental lesson is simple:

Don't confuse controlling a development site with immediately buying it.

If you can establish appropriate control over a site, you may be able to carry out much more of your due diligence before committing the level of capital required for an outright land purchase.

That due diligence could include examining:

• Local planning policy

• Settlement boundaries

• Access and highways

• Drainage

• Utilities and services

• Ecology

• Ground conditions

• Restrictive covenants

• Site layout and density

• Likely GDV

• Build and development costs

Each of these factors can influence whether the site is genuinely viable.

A piece of land can look attractive at first glance but become a very different proposition once the numbers and constraints have been properly investigated.

Negotiating With the Landowner

Securing land successfully isn't purely a legal exercise.

It's also a negotiation.

You need to understand what the landowner wants and explain why the proposed structure can work for both sides.

A landowner may initially focus on the headline value they believe their land is worth.

As a developer, however, you need to work backwards from what can realistically be built and sold.

That means considering the Gross Development Value (GDV) and deducting the costs associated with delivering the project, including construction, professional fees, finance, contingency, developer's profit and other development costs.

Only then can you begin to establish what the land may realistically be worth to you as a developer.

Planning Permission Is Only One Part of the Risk

Planning permission is obviously important, but obtaining planning doesn't automatically mean you've found a profitable development.

You still need to understand the entire project.

A successful development site needs to work commercially as well as from a planning perspective.

That's why I encourage developers to look at the complete process:

Find → Assess → Secure → Plan → Fund → Build → Exit

Each stage affects the next.

If you make a mistake when securing the site, that mistake can follow you throughout the entire development.

Build a Development Site Pipeline

Another important principle is not becoming emotionally attached to one piece of land.

Not every site you investigate will become a development.

In fact, you should expect some opportunities to fall away once you've completed your assessment.

That's why building a pipeline of potential development sites is so important.

When you have several opportunities under consideration, you're in a much stronger position to reject a site when the numbers, planning situation or risks don't make sense.

The objective isn't simply to buy land.

The objective is to secure land that can become a viable and profitable property development.

Learn the Complete Property Development Process

This subject forms part of my Property Developers Mastery series.

The series contains 21 videos designed to take you through the journey of creating a successful property development business, covering areas including:

• Finding off-market land

• Contacting and meeting landowners

• Laying out development sites

• Carrying out desktop appraisals

• Identifying potential site pitfalls

• Securing land legally

• Negotiating with landowners

• Obtaining planning permission

• Complying with Building Regulations

• Planning your construction programme

• Funding developments with traditional finance

• Raising money from private investors

• Setting up and preparing the development site

• Building the superstructure

• Completing the development

• Exiting the project profitably

Property development isn't about mastering one isolated skill.

It's about understanding how all these stages fit together.

Final Thoughts

Buying land without planning permission can involve risk, but that doesn't mean you always have to purchase the land outright and simply hope planning permission follows.

The way you structure and secure the deal can help you manage that risk.

Understand the site.

Understand the numbers.

Understand the landowner.

And make sure you have appropriate professional advice and legal documentation before committing yourself.

The aim isn't simply to find land.

It's to control the right development opportunity, secure it correctly and move through the planning process without exposing yourself to unnecessary risk.

The legal structures discussed here are general educational information. Always obtain advice from an appropriately qualified solicitor and other relevant professionals before entering into a land agreement.