Six Things to Consider When Entering into a Conditional Contract

A conditional contract is conditional on certain criteria being met and/or certain events taking place. Usually, this is obtaining a planning permission satisfactory to the purchaser developer.

So, What Should You Consider?

  • Have the conditions under the contract been adequately drafted? Ambiguous or vague conditions can lead to uncertainty in respect of ascertaining whether or not conditions have been satisfied.
     
  • Is the length of the contract sufficient to enable planning permission to be obtained and/or for the conditions to be satisfied and does it allow for planning appeal?
     
  • What happens if the conditions under the contract are not satisfied? What are the parties’ obligations? Should all or part of the deposit be forfeited, if any?
     
  • The land will often need to be sold with vacant possession. The parties should consider whether there are any existing tenancy agreements or licences affecting the land – these will need to be terminated in advance of the completion date.
     
  • The purchase price can be a fixed price, or can be a percentage of the market value of the land with the planning permission in place. Does the contract provide a means of agreeing or ascertaining the market value?
     
  • From a landowner’s perspective, tax advice should also be sought in respect of whether an option to tax in relation to VAT should be made in respect of the land being sold. From a developer’s perspective, the developer should ensure that a valid VAT option to tax has been made.

Of course, when entering into any form of conditional contract you need to seek legal advice and our team are on hand to assist and to guide you through the process. For further information, please contact us.