A Client, Mr. Godfrey Beard, has just come in to consult you about an Option Agreement (‘the Option’) that he entered with PRP Developments Ltd (‘PRP’). The Option granted PRP an option to purchase land owned by Mr. Beard (referred to as the ‘Property’). A copy of this Option is attached.
Subsequent to the signing of the Option PRP has at its own expense secured from the Local Planning Authority (‘the LPA’) a resolution to grant planning permission for the Property to be developed for a mix of 550 dwellings, shopping centre, hotel, bars, associated green space/parks and all of the necessary infrastructure works. The LPA said it will not formally grant the permission (via issue of a positive decision notice) unless until all of those with an interest in the Property enter into an agreement with the LPA made pursuant to s.106 of the Town and Country Planning Act 1990 (‘s.106 Agreement’). The purpose of the s.106 Agreement is to ensure that development of the Property is linked with financial payments made to the LPA so that it can pay for public roads, new school places, libraries and maintenance of public parks and green spaces necessitated by the new development.
The Client says that although he took legal advice when he granted the Option, it was a long time ago and he is not sure exactly how the Option is intended to work and where he currently stands in respect of his rights and obligations.
He has several questions for you which he has written out below. The Client asks that you please respond in writing to his questions in the form of a formal client letter that will be consulted by his team going forward (I will attach guidance on how to write a Client Letter).
When writing the letter be sure to
use careful and clear yet plain language that as a non-lawyer he will understand;
refer him to the clauses and subclauses in the agreement that are relevant to your answer.
He also wants to amend the existing Option. He wants you to draft the amendments he seeks so he can put them forward for negotiation with PRP.
Questions:
What does PRP have to do to exercise its Option to buy?
Can I refuse to sell if PRP wants to buy?
How long does PRP have the Option for – when does it expire?
I never agreed a price with PRP when I granted the Option. How is the price now to be agreed?
What if I refuse to agree a price – will this allow me to ‘walk away’ from the Option so that I don’t have to sell?
Now that is seems the LPA is going to grant planning permission for the Property to be developed, can I ask for a price that reflects the new development value of the Property?
I was told that if PRP developed the land I would get additional payment – a Planning Overage Payment. Is this actually set down in the Option? And how does it work – when do I get it?
PRP told me that if it secured planning permission for the development of the Property and then sold the Property on to someone else, I would a Resale Overage Payment. Is this actually set down in the Option? How does it work? Am I entitled to this in addition to the Planning Overage Payment?
9. Does the Option oblige me to enter the s.106 Agreement that the LPA are asking for? Would it be in my interests to refuse to enter into the s.106 Agreement?
10. The draft planning permission that the LPA has agreed to grant (subject to the s.106 agreement) allows for infrastructure works to be carried out on the Property. These include large water attenuation ponds that will facilitate drainage not only of the Property (so that it can be developed), but also of land to the north of the Property that is owned by PRP. PRP have no other way of draining its land to the north. Should the price I get for the Property be increased to reflect the fact that building the attenuation ponds on it will facilitate the development of other land owned by PRP?
Amendments:
The Client has asked for the following amendments:
I am minded not to sign the s.106 Agreement unless PRP agree to amend the Option so that it makes clear that the price I get for the Property should include a percentage that reflects the fact that situating the water attenuation ponds on my land enables PRP to development its land to the north. I think it is fair that I should get one third of the increase in the value of the land to the north that comes about as a result of its development. Can you please a draft a clause that makes this clear so I can ask PRP to incorporate it into an amended option? Which bits of the existing Option would need to be deleted or amended to make sure that the Option as a whole is consistent with this new provision about price?
I have now moved to Abu Dhabi and I wanted any disputes between RPR and myself arising from the Option to be resolved in the UAE. They should be resolved using three arbitrators, sitting at the Dubai International Arbitration Centre, applying the law of the UAE. Can you please draft a clause that gives effect to this? Also, which clauses should be deleted from the existing Option if this new clause is accepted by PRP?
