Buying Land With or Without Planning Permission: Risk, Value and What to Check

Buying land without planning permission: what you are paying for

Land without planning permission is priced on hope. The seller and the buyer both know a consent could make it worth much more. They also know it might never come.

That hope has a price. Valuers call it hope value: what a buyer pays above the current use, for the chance of permission. Our guide to development appraisal and residual land value explains how it is worked out.

The upside

1. A lower entry price. You pay for the land as it is, plus some hope.
2. You shape the scheme. You choose the design, the mix and the planning strategy.
3. The uplift is yours. If permission comes, the value created by the consent goes to you, not the seller.

The risks

1. Refusal. If the council says no, the land may be worth little more than its current use.
2. Time. Surveys, pre-application advice, the application and any appeal can take a long time.
3. Cost. Design, consultants and reports are spent before you know the answer.
4. Finance. Lenders are more cautious on land without permission, so you may need more of your own cash.

Buying land with planning permission: what the consent gives you

A planning permission is a big step. It also leaves more open than most buyers expect.

What you do get

1. Certainty on the principle. The council has accepted the use and the amount of development shown.
2. It runs with the land. In England, a permission benefits whoever owns the land, unless it says otherwise.
3. Easier finance. Lenders and valuers can work from a defined scheme.

What you do not get

1. A buildable design. Planning drawings are not construction drawings. Structure, services, fire safety and building control come later.
2. A fixed cost. Nobody has priced the scheme at the level a builder needs.
3. Freedom from conditions. Conditions and Section 106 obligations can add cost and delay before you can start.
4. Unlimited time. In England, a full permission usually lapses if work has not begun within three years.

So the question is never just "has it got planning?". It is "can this permission be built, for this price, and still make a profit?". Our article on why planning permission does not mean a site is viable goes deeper.

Land with vs without planning permission side by side

Types of planning permission and what each one means for a buyer

Not every consent is equal. Read the decision notice, not the agent's summary.

1. Full planning permission. Detailed consent for a defined scheme, subject to conditions. In England, work must usually begin within three years of the grant.
2. Outline planning permission. Agrees the principle. The details, such as layout and appearance, are left as reserved matters for a later approval. Reserved matters must be applied for within three years, then work begun within two years of the final approval.
3. Permission in principle. Covers only location, land use and the amount of development. You still need technical details consent before you can build.
4. Prior approval or permitted development. Some changes, such as some office to home conversions, use a lighter route. The scope is narrow and the conditions are strict.

Two more points are easy to miss. Pre-commencement conditions must be discharged before work starts, which means the council has approved what they ask for. And a permission granted years ago may have lapsed, or may need a lawful start to stay alive. A lawful start is real work begun under the permission within its time limit. Ask for proof.

How to buy land subject to planning permission

You do not have to choose between paying full price for a consent and carrying all the risk. Two common structures share the risk with the seller.

1. A conditional contract. You exchange now, but completion only happens if a satisfactory permission is granted. The seller takes the land off the market while you apply.
2. An option. You pay for the right to buy within a set period, often at an agreed price or a discount to market value. You apply for planning during that time.

Both live or die on the drafting. What counts as "satisfactory" permission? Who pays for the application? What if there is an appeal? Use a solicitor who does land deals.

Landowners see the same structures from the other side. Our guide to options, promotion agreements and joint ventures explains them. If the seller wants a share of future value, read about overage clauses.

Why the price you pay must come from the build cost

Here is the trap we see most often. A buyer agrees a price because it "feels right" against other land sales. Then the scheme is priced properly, and there is no profit left.

Land value is what is left after everything else is paid. Take the sales value of the finished scheme. Take off the build cost, fees, finance, planning obligations and a fair profit. What remains is what you can afford to pay for the land.

Overpay, and the loss is yours: the council will not cut its requirements because you paid too much. Before you agree a price, check the real numbers on the site.

Take a made-up example with round numbers: homes that sell for £6,000,000, and a 15% profit. A build cost £600,000 higher, plus £100,000 more in fees, moved the land value from £1,200,000 to £500,000. If you paid £1,200,000, the profit has gone.

That is why we cost a scheme as builders before a client exchanges. Our article on how development sites are oversold works through a full example and shows where those gaps come from.

Checks before you buy, with or without planning

The full checklist is at the end of this guide.

Our development site due diligence checklist covers each check in detail. If it is your own land, start with what you can build on your land.

How we help land buyers

We work on development schemes from £3M to £150M gross development value. Before you buy, our team can:

• review the planning position and the risk of refusal;
• test design options for the site;
• cost the scheme as a builder would price it, with a contingency of usually 5% to 10%;
• run the appraisal and tell you the most you should pay.

At Allitsen Road in St John's Wood, we tested four design options for a building in a conservation area, for up to seven apartments. See the Allitsen Road feasibility study and our development feasibility and site appraisal service.

Buying with or without planning permission can both make money. The difference is whether the price was set from real numbers. If you are about to commit, book a site visit and we will cost the site with you first.