There are a number of important first steps before entering into a promotion or option agreement, and as you might expect, an interview with a real estate lawyer and an experienced tax advisor is the best starting point. The main alternative to a promotion agreement is an option agreement – often used by developers to ensure control of a website. Option agreements give developers a fixed time to get the building permit and buy the site, usually at a discounted price. For the landowner, an option contract can often guarantee a down payment and obtain a strong commitment from the developer to look for ways to purchase and develop the land after the building permit. Option agreements are therefore the most widely used and most landowners are familiar with this model. Chapter 2 – What are the benefits of a transportation contract for the landowner? The country still belongs to them – while the developer works to get the building permit, you can continue to use it for everything you`ve used before. You are asked not to do anything that would increase development costs, or to sell it without informing the developer, but otherwise your use of the country is unfettered. While the competitive nature of a promotional agreement is a good thing, the potential drawback is that the promoter is not necessarily in the best position to understand what local developers are looking for. There is a risk that huge amounts of money and time will be spent on obtaining planning approval for a system that no one wants to buy or build, either because of the different requirements of the local market or because it is not economically viable.
Once a buyer is secured, the owner of the land is required to sell. After closing, the organizer receives a royalty which, as a rule, is a percentage of the proceeds of the net sale after deducting promotional fees. The cost-effective option for the landowner could be to get the planning itself and appoint a contractor to build. The negotiation process remains a challenge for both parties, but the partnership approach of the promotion agreement is increasingly the preferred choice for those willing to share rewards against efforts. However, this option is unlikely for a developer if the planning is uncertain and the profitability of the project is not easily noticeable. If the outlook is less secure and more remote, an owner may acquire a certain degree of planning security himself or, to pass on the risk of costs, enter into an agreement with a third party that encourages the site to take its risks. These agreements have two main forms: it is preferable for the landowner to identify a developer with relevant local knowledge, contacts, expertise and balance sheet, to ensure that the promotion agreement has the best chance of succeeding. While landowners may decide to question the assessment, it takes time and is costly. The developer always has the advantage, because the estimate is based on the building permit and the technical information it provides. In some cases, other planning skills may be acquired after the exercise of the option and, therefore, overload provisions may be included in the original agreement to take into account capital gains when a developer gradually obtains a building permit.B.