Option vs Promotion Agreement: Which Suits Your Land?

Key points

An option gives a developer the right, but not the obligation, to buy your land within a set period, usually once planning permission is granted.
A promotion agreement appoints a promoter to seek planning permission and then sell the land on the open market, with the proceeds shared.
On both routes the developer or promoter normally funds the planning work, and the price is linked to market value at the time of sale.
Key terms to check include the length of the agreement, any minimum price, permitted deductions and what happens if planning is refused.
In England and Wales, details of most of these agreements over registered land must be submitted to HM Land Registry from 6 April 2027.

What is the difference between an option and a promotion agreement?

An option agreement gives one developer the right to buy your land, usually at market value less an agreed discount, once planning permission is granted. A promotion agreement appoints a promoter to secure planning permission and then sell the land on the open market, with the net proceeds shared between you and the promoter.

Both are ways to unlock the planning value of land without the landowner paying for the planning work. They suit land with real development potential but no permission yet. The Competition and Markets Authority has noted that housebuilders often secure sites through option agreements, and that land promoters focus on taking land through the planning system on behalf of landowners.

How does an option agreement work?

Under an option, the landowner grants a developer the right, but not the obligation, to buy the land during an agreed period. The developer usually pays for the planning application and leads the planning strategy, often with the landowner's input.

Option fee: some developers pay a fee when the option is signed. It may or may not be deducted from the final price.
Price: commonly market value when the option is exercised, less an agreed discount and certain costs, sometimes with a minimum price.
Term: the option runs for a fixed period, which may be extended while planning is in progress.
Exclusivity: while the option runs, you cannot usually sell the land to anyone else.

When the developer is ready, it serves notice to exercise the option. The price is then fixed using the agreed valuation method, and the sale completes on the terms already set out in the agreement.

How does a promotion agreement work?

A promotion agreement is designed to line up the promoter's interests with yours. The promoter funds and manages the planning work. Once permission is granted, the land is marketed and sold, usually to a housebuilder, on the open market.

Sale price: set by the market at the time of sale, so competition between buyers can support the price.
Promoter's return: the promoter usually recovers its planning costs and takes an agreed share or fee from the proceeds.
Ownership: you normally keep the land until it is sold.
Control: the agreement sets out how the sale is run and what approval you have over the buyer and the price.

Many promotion agreements also include a minimum price, below which you are not obliged to sell, so you are not forced to accept a weak bid after permission is granted.

Which route usually gives the landowner more?

There is no universal answer. A promotion agreement exposes the land to the open market, while an option relies on a valuation formula. Much depends on the detail of each offer.

Question	Option agreement	Promotion agreement
Who buys the land?	The developer holding the option	Usually the highest suitable bidder on the open market
How is the price set?	Valuation at exercise, less the agreed discount and costs	Open-market sale, less the promoter's costs and share
Who funds planning?	Usually the developer	Usually the promoter
Main risk to the landowner	A low valuation or a long wait	No buyer at an acceptable price after permission

Some landowners prefer a joint venture, which shares in the outcome of building the homes rather than only the land sale.

What terms should you check before signing?

the length of the agreement and any rights to extend it;
whether there is a minimum price or minimum net payment;
what can be deducted, such as planning costs, Section 106 contributions or infrastructure;
how market value is assessed and how disputes are settled, often by an independent expert;
what happens if planning is refused or the agreement ends;
whether you can keep farming, letting or using the land in the meantime;
who pays your legal and professional fees, and how much;
whether any later uplift is shared through overage.

It is sensible to have a solicitor experienced in land deals, and ideally a land agent, review the terms before you commit.

How do you compare offers from different developers or promoters?

Headline figures can be hard to compare, because each offer is built differently. It helps to set the offers side by side and ask the same questions of each:

What is the likely net payment to you after every deduction, discount and fee?
Is there a minimum price, and is it realistic?
How long could the land be tied up, including extensions?
Who controls the planning strategy and the eventual sale?
What experience does the other party have of taking land through planning?
Which of your fees are covered, and is the amount agreed in writing?

A land agent can model the offers on the same assumptions, which makes the differences much clearer.

Who pays the costs?

On both routes, the developer or promoter normally funds the planning work, and landowners often negotiate a contribution to their legal fees. With Land to Homes:

we pay your reasonable legal fees on option and promotion agreements, with the amount agreed up front in the heads of terms;
on promotion, we fund the planning work, and costs are recovered from the sale proceeds only if the land sells with planning.

Our guide on who pays for land promotion explains common cost arrangements.

Do these agreements work the same way across the UK?

Options and promotion agreements are used in all four nations, but the drafting and the way they are protected differ.

England and Wales: agreements are usually protected by an entry on the title at HM Land Registry. Under the Provision of Information (Contractual Control) (Registered Land) Regulations 2026, details of most options, conditional contracts, pre-emption rights and promotion rights over registered land that relate to development must be submitted to HM Land Registry from 6 April 2027. Rights granted from 8 June 2026 are also caught.

Scotland: agreements are drafted under Scots law, the eventual sale is concluded through missives, and planning is often secured first as planning permission in principle.

Northern Ireland: agreements reflect Northern Ireland conveyancing and registration with Land & Property Services, and most planning decisions are made by the 11 district councils.

How are option fees and sale proceeds taxed?

HMRC treats the grant of an option as the disposal of a separate asset, so an option fee can be taxable when you receive it. The later sale is usually subject to Capital Gains Tax, although some land disposals are taxed as income. The rules are detailed, so speak to an accountant before you sign, and see our guide to tax when selling land.

To talk through which route might suit your land, start with a free site appraisal.

Frequently asked questions

Can I get out of an option agreement once it is signed?

Usually not without the developer's agreement. An option is a binding contract for its term, although many include termination rights, for example if no planning application is made within a set period or a long-stop date passes. Check these clauses carefully with your solicitor before signing, because they decide how long your land could be tied up.

What happens if planning permission is refused?

The agreement normally sets out what happens next. Within the agreed term, the developer or promoter may appeal, submit a revised application or wait for the local plan to change. If the term ends without permission, the agreement usually falls away. With Land to Homes promotion agreements, we fund the planning work, and costs are recovered from the sale proceeds only if the land sells with planning.

Is a promotion agreement better than an option?

Neither is better in every case. A promotion agreement tests the land on the open market, while an option gives one developer control and relies on a valuation formula. The right choice depends on the site, the planning strategy, the terms on offer and how involved you want to be. A land agent can compare offers on a like-for-like basis.

Can I keep using my land during an option or promotion agreement?

In most cases, yes. Agreements commonly let the landowner keep farming, grazing or letting the land until it is sold, provided nothing is done that harms the planning case or the eventual sale. Check the clauses on existing tenancies, access for surveys and any limits on granting new rights over the land.

Sources

This guide is general information about how land and housing processes usually work. It is not legal, tax or financial advice. Rules differ between England, Wales, Scotland and Northern Ireland and change over time, so take advice from a solicitor, accountant or land agent on your own situation.

Option agreement or promotion agreement: what is the difference?