One of the country’s largest home builders wants to lure farmers into partnerships that could potentially net them higher-than-normal land prices.
In some cases, Glenveagh Properties is willing to pay substantial non-refundable deposits to secure a farmer’s support for a project that is described as a ‘win-win’ for both parties.
They have launched a campaign aimed at overcoming what they see as a “huge drop” in the amount of building land coming onto the market.
The deals will pay farmers an upfront payment on the condition that the developer can apply for a building permit. Glenveagh then bears all the costs associated with an extensive application to a local authority.
If a development permit is granted, the final selling price will be higher than the farmer would have expected if he had sold at the beginning of the process.
“If the farmer were to sell the land today with existing issues (planning or lack of services), it would be sold for X,” Glenveagh Investment Director Eoin Hughes told Independent.ie.
“While they come on the journey with us and we add value through the planning process or the services, they are paid a different amount as that value is added to the land.”
It comes as local authorities are set to release maps showing which landowners will face a 3-part property tax due to be introduced next year.
The tax will be based on the market value of the land, and the Housing Department has said there will be 20,000 to 22,000 acres of land in the region covered by the tax by the end of 2022, with about 90 percent of that understood to be currently in agricultural use.
Mr Hughes said the new tax was “crucial” for all residential property owners and said they were “very vigilant”.
“The property tax has been coming for some time. It remains to be seen what impact this will have, but I would imagine that if they are written to by local authorities, landowners across the country will try to do something about it,” he said, adding that Glenveagh believes it can maximize the value of the land if they want to sell or develop it.
“Development land is the primary raw material we need to develop homes for families. We are looking for landowners who would like to get in touch and we would love to work with them.”
Building land traditionally only becomes available when property owners decide to sell suitable land either privately or on the open market. Developers then buy the land and build houses.
Glenveagh is now seeking landowners to work with them through the development process.
It claims such partnerships are a “win-win” situation for both the property owner and the developer.
Mr Hughes said the value for Glenveagh was that it did not pay for that land upfront and risked not getting planning approval, while saying the landowner was getting maximum value for their land and could still farm it until it was be ready for development.
“We have a planning team, a service team, a supply team. We have the know-how in-house to manage these local restrictions.
“We also have the financial resources, for example if a canal needs to be laid or a road needs to be supplied.
“Of course we want a farm as high up the food chain as possible because we want to deliver to homes next year and the year after, but we’re not afraid of problems.”
Regarding the timeline for such deals, Mr Hughes said an agreement between Glenveagh and the landowner could be finalized in a few weeks “provided there are no complex issues”.
However, he said the planning could take “12 to 20 months” depending on “location restrictions and things like that.”
Mr Hughes said there has been a slowdown in land availability over the last 12 to 18 months.
“This is due to a number of factors, but mainly the national planning framework, which has blocked more land from being built. We don’t see any country getting through,” he said.
The lack of zoned land also impacted developing land prices, Mr Hughes said.
“Locations with planning permission are valuable; Sites with no planning or zoned land with supply or road shortages, the value of this land has gone down in recent years because this land is difficult to monetize,” he said.
Fictional case study: How a partnership could work
As a fictional example, Glenveagh enters into a contract structure, which is subject to planning, with the Corrigan family, who own land in a large town in the region.
After a short period of negotiation, the following is agreed for a 25ac location:
- €5,000,000 subject to obtaining planning permission from Glenveagh at own expense.
- A non-refundable deposit of €250,000.
- Financial costs of obtaining planning permission.
- Defined schedules.
- Pay a deposit on the exchange of contracts.
- Whole sale after obtaining planning permission.
Duties of the Corrigans
- Provide access to properties for surveys and reports.
- Provide approval letters for the planning application.
- Glenveagh has 24 months to receive the planning grant.
- With the granting of PP, the transaction is completed.
Advantages of a deal structure that requires planning
- No legal transfer of land ownership until PP is obtained.
- Glenveagh brings expertise and covers all costs associated with the application.
- Simple structure.
- Land value is maximized and ultimately there is viable planning permission for new homes to be built.
https://www.independent.ie/business/farming/farm-property/developers-lure-farmers-with-special-land-deal-to-build-homes-42074133.html Developers lure farmers with special land deals to build houses