Rosemary, can you tell us first please the difference between a sale and purchase agreement on the one hand and a development agreement on the other?
Rosemary: As a starting point I would stress that there is no magic about the terminology. It doesn’t matter legally what you call any of the agreements. It is their legal effect that matters.
In our residential development team, we focus on land (or “real estate” as it is sometimes called). A sale and purchase contract would be one that covers the sale and purchase of a development site, often on a conditional contract. A development agreement would tend to deal with development by one party of land belonging to another.
Sometimes a contract will deal with both the sale of the land and its subsequent development.
What is the difference then between a development agreement and a building contract?
Phil: Again, as Rosemary says, there is nothing special about the terms used.
A building contract is normally one between a land owner and a contractor, under which the land owner employs the contractor to do works. If you own a piece of land and employ a builder to build you a house on it, that would be a building contract.
A development agreement might be appropriate where not all of the land is owned by the person who is carrying out the works. A typical example might be where a local authority is selling off land and has a wider interest than just receiving the best price. Authorities often want to make sure also that a particular type of development takes place. They will impose development obligations as part of the land sale contract.
Where do JCT contracts fit in with all of this?
Phil: JCT contracts are a particular type of building contract that are in general use. It is often helpful to use them, because they contain tried and tested wording, cutting down on a lot of detailed negotiation. Our specialist construction team use them a great deal. We can readily adapt them to different types of case.
Rosemary: Development agreements often contain terms that are quite similar to JCT contracts. We need to be careful however not just to repeat them on the assumption that they will be suitable, because the relationship of the parties is often subtly different in different circumstances. A Development Agreement will also typically provide a mechanism for the sale of the houses when constructed.
Phil: It is really important, therefore, to be clear at the outset just what the parties are trying to achieve. It is very easy to make certain assumptions at the outset and spend a lot of time negotiating and drafting terms that are not actually suitable, racking up big legal fees in the process. We would always advocate early discussions on the principles and structure of any transaction.