Option Agreements, Overage and Promotion Agreements: Common Drafting Traps and Critical Timelines Explained

If you own land (or you’re buying land) and you’re thinking about development value, you’ll almost certainly come across option agreements, overage (clawback) and promotion agreements. On paper, they can look straightforward: someone promotes or buys your land if planning comes through, and you share the upside. In reality, these agreements are full of moving parts, and small drafting gaps can cost you a lot of money — or leave you stuck for years with no clear route out.

This guide explains how these deals work in practice, where people get caught out, and the timelines you need to watch like a hawk. It’s written for the UK (particularly England and Wales), and it’s focused on what you should look for before you sign.

If you want support on the property side generally, start with Commercial Conveyancing, as these agreements often sit alongside wider title, funding, and sale documentation.

Why these agreements exist (and why they go wrong)

Land with development potential is valuable — but planning risk is the big unknown. Many landowners don’t want to spend years and tens of thousands of pounds paying consultants, architects, highways input, surveys, and planning fees with no guarantee of success. Equally, many developers don’t want to buy land upfront at full hope value if planning might fail.

So these agreements try to balance that risk:

• An option agreement gives a developer the right (but not the obligation) to buy your land later, usually if certain conditions are met.

• Overage is a mechanism to pay you extra later if the land’s value increases after sale, usually because of planning.

• A promotion agreement appoints a promoter to pursue planning and sell the land on the open market, taking a fee from the proceeds.

They go wrong when:

• key terms are vague,

• deadlines are missing,

• the “trigger” for payments is unclear,

• there’s no proper dispute process,

• the agreement accidentally blocks your ability to sell, refinance, or deal with the land.

The planning timeline problem you can’t ignore

A lot of these agreements assume planning will be quick. Often it isn’t.

As a guide, most planning applications are meant to be decided within 8 weeks, or 13 weeks for larger/complex proposals. And the government’s “planning guarantee” policy says major applications should be decided within 26 weeks, non-major applications within 16 weeks (separate from the statutory time limits).

In the real world, extensions of time and backlogs are common. That’s why your agreement must not just say “use reasonable endeavours” — it should set out hard dates, a longstop, and what happens if planning drifts.

Option agreements: what they are and what you must lock down

An option agreement gives the developer a period of time to:

1. pursue planning (sometimes), and/or

2. decide whether to exercise the option and buy.

The drafting traps landowners fall into

1) The option period is too long (or rolling)

A 5–10 year option can feel normal in strategic land, but it must match your land and planning reality. Watch for:

• automatic extensions (especially for “appeals” with no end date),

• extension on vague events (“planning progress”),

• the developer controls extensions unilaterally.

What you want: clear start and end dates, with tightly defined extension events and a final longstop.

2) “Planning” is defined too loosely

“Planning permission” can mean different things:

• outline vs full,

• reserved matters,

• permissions with conditions that make the scheme unviable,

• permissions vulnerable to challenge.

What you want: a definition of acceptable planning that matches the development you’re actually agreeing to.

3) The purchase price formula is unclear

Option prices are often:

• fixed,

• % of market value,

• based on a residual valuation,

• “market value with planning” less abnormal costs,

• based on a valuation mechanism.

If the valuation method is vague, you can end up arguing for months — or worse, accepting a figure that doesn’t reflect the true uplift.

What you want: a clear valuation process, assumptions, deductions allowed, and a timetable for appointing valuers and resolving disputes.

4) The developer’s “cost deductions” eat your uplift

Options commonly allow deductions for:

• planning costs,

• abnormal costs (remediation, utilities),

• infrastructure (highways, drainage),

• finance costs (sometimes),

• CIL and s106 (sometimes).

If you don’t control deductions, your land value can be squeezed even when the permission is strong.

What you want: a defined list of allowable deductions, caps where appropriate, and evidence requirements.

5) Title and third-party rights are ignored

Options can be derailed by:

• restrictive covenants,

• rights of way,

• easements for services,

• wayleaves and utility apparatus,

• access issues.

Before you even argue about price, you need to know what the land can legally support. 

Critical option timelines you should demand (and why)

An option without a timeline is basically a waiting room you can’t leave.

Here are the dates you should expect to see:

• Deadline to submit the planning application (not “as soon as practicable”)

• Deadline to pursue an appeal (if refused)

• Longstop date for planning (after which the option ends)

• Option exercise deadline after permission is secured

• Completion deadline after exercise

If the agreement already exists and you’re trying to understand typical mechanisms, Buying commercial property in England and Wales: heads of terms to completion explained clearly helps you sense-check how deadlines and conditions are normally handled.

Overage: where people lose money without realising

Overage is meant to protect you when you sell land now but the value increases later. The idea is fair. The execution is where it often collapses.

The biggest overage drafting traps

1) The trigger event is ambiguous

Common triggers include:

• grant of planning permission,

• implementation of planning,

• sale of the land,

• sale of plots/units,

• practical completion,

• disposal of an interest (including a lease).

If the trigger is poorly drafted, a buyer can structure around it and avoid paying.

What you want: triggers that are clear, comprehensive, and hard to sidestep.

2) The overage calculation is unclear

Is overage based on:

• a % of uplift above base value?

• a % of sale proceeds?

• a residual valuation?

• a “net developable value” formula?

Also: what costs can be deducted? And how is evidence provided?

What you want: a precise formula, defined inputs, audit rights, and a defined valuation/dispute route.

3) The overage term is too short (or too long)

If it’s too short, the uplift happens after expiry and you get nothing. If it’s too long, it can blight future sales and funding.

What you want: a term that matches the likely planning/development horizon, with sensible release provisions.

4) Security is missing

Overage is only valuable if you can enforce it. If the land is sold on, mortgaged, or transferred into a vehicle, you can lose leverage.

What you want: practical security such as a restriction on title and/or a legal charge (and a mechanism for mortgagee consent where appropriate).

A proper due diligence process is critical here — Commercial property due diligence: title review, searches, enquiries and CPSEs explained gives a good overview of what should be checked before you rely on any post-sale payment promise.

Promotion agreements: powerful, but only if the incentives align

A promotion agreement appoints a promoter to:

• pursue planning at their cost (usually),

• market the land for sale once planning is achieved,

• sell to a third-party buyer on the open market,

• take an agreed promotion fee (often a % of sale price) plus cost recovery.

This can work well because the promoter is incentivised to maximise sale price — but only if the agreement is drafted properly.

Promotion agreement traps you should watch for

1) The “best price” duty is too soft

If the promoter is not bound to a clear sales strategy and competitive process, you can end up with a quiet off-market deal that suits the promoter’s network rather than your outcome.

What you want: defined marketing obligations, bidder process, and your approval rights on key steps.

2) Planning strategy is not controlled

Who decides:

• whether the application is outline or full,

• the scale of development,

• whether to amend the scheme,

• whether to appeal?

What you want: a planning strategy framework, consultation obligations, and decision-making rules (including what happens if you disagree).

3) Costs are not capped or evidenced

Promoters usually recover costs. That’s reasonable — but you need:

• a defined “recoverable costs” list,

• a cap or approval threshold,

• regular reporting.

4) The promotion period is too open-ended

A promoter might want 10+ years. You might not.

What you want: a realistic promotion period with milestones and a longstop (and termination rights if progress is not made).

The “hidden” property issues that derail development deals

Even if the agreement is perfect, land issues can break the deal:

• Access and visibility of legal rights

• Utility constraints (apparatus, easements, wayleaves)

• Unknown covenants

• Ransom strips

• Boundary disputes

• Title defects

If utilities run through your land or telecoms kit is being installed, read Wayleave agreements: what every UK landowner must know and Telecoms and utilities on your land. Those issues often sit right in the middle of development viability.

And if you’re still in the early stages, A guide to understanding property searches helps you understand what’s flagged before you commit.

Funding and lender timelines: the pressure you feel at the worst time

Even where you’re not borrowing, your buyer often is. And lender requirements can force aggressive deadlines, extra documentation, and last-minute conditions.

If your agreement relies on funding (or you’re selling to a funded buyer), you should understand what lenders typically want and when. Financing a commercial purchase: lender requirements, securities and timelines explained clearly gives a practical overview.

A simple “before you sign” checklist

Before you sign any option, overage, or promotion agreement, you should be able to answer these questions clearly:

1. What’s the objective? (planning uplift, sale, phased development, long-term hold)

2. What are the hard dates? (application, appeal, longstop, completion)

3. What counts as acceptable planning? (and who decides)

4. How is price or uplift calculated? (and what can be deducted)

5. What are the trigger events? (and can they be avoided by structuring)

6. What security do you have? (title restriction, charge, notice)

7. What happens if things stall? (termination rights and consequences)

8. Who pays costs and when? (caps, reporting, audit)

9. What’s the dispute process? (valuer appointment, expert determination, timescales)

10. What title issues exist today? (and who fixes them)

FAQs

Do you need planning permission in place before signing an option or promotion agreement?

Not usually. Many of these agreements exist specifically because planning is uncertain. What matters is that the agreement clearly sets out who applies, what they apply for, and by when, with a longstop if planning doesn’t land.

What’s the difference between an option agreement and a promotion agreement?

With an option, the developer usually has the right to buy the land themselves at a price defined by the agreement. With a promotion agreement, the promoter usually pushes the planning process and then sells the land on the open market, taking a fee from the sale proceeds.

Why do overage clauses cause so many disputes?

Because the triggers and calculations are often drafted too loosely. If the clause doesn’t clearly define what “uplift” is, what costs can be deducted, and when payment is due, it becomes a dispute waiting to happen — especially years later when people’s memories and documents are not as tidy.

How long should these agreements last?

There’s no universal number. It depends on the site, planning complexity, and whether you’re dealing with strategic land. What matters is that you have a realistic term, clear milestones, and a firm longstop so you’re not locked in indefinitely.

What’s the biggest mistake landowners make?

Signing a deal that looks attractive on the headline numbers, without locking down the mechanics: timelines, acceptable planning, deductions, triggers, and security. A strong-looking percentage is meaningless if the contract lets the other side delay, reshape the scheme, or structure around payment.

Speak to a solicitor before you commit

If you’re about to sign an option, overage, or promotion agreement — or you’re already in one and it’s starting to drift — getting advice early can protect your position and often saves you far more than it costs.

To discuss your land deal and the best route for your situation, start with Commercial Solicitors or Commercial Lease if your development plans involve occupational leasing. When you’re ready, contact the team via Contact Us and you’ll get clear, practical guidance based on your goals and your timelines.