Insights

Early in discussions, landowners are typically presented with two key commercial terms: an upfront payment (the “premium”) and a promoter’s fee expressed as a percentage of the eventual sale price — often 15%, 20% or more. These figures are introduced early, often with limited explanation of the underlying economics. 

 

This note explains why fees are structured this way and implications for landowners.  

  

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What the “percentage fee” represents 

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A promoter’s fee is not simply a margin — it is also the mechanism by which multiple uncertainties are priced: 

• Planning risk (often binary) 

• Time risk (typically 3–10 years) 

• Capital at risk (professional fees, application costs, appeals and the premium paid) 

• Management input over a prolonged and uncertain programme 

 

In essence, the percentage reflects the probability-weighted return required to justify committing capital and time without certainty of outcome. 

 

It is not comparable to professional fees (e.g. agents, lawyers) or even to development profit, where risk is different and timing more controllable. 

 

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What the “premium” represents

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The premium is a non-refundable payment made on exchange. It provides early value to the landowner but is not the primary driver of overall outcome. 

 

Importantly, there is a trade-off: higher premiums increase the promoter’s capital at risk, which can in turn suppress the percentage fee or influence how that capital is deployed over the life of the project. 

 

It should be viewed as an element of overall deal structure rather than a substitute for achieving a strong planning outcome. 

 

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The asymmetry of risk 

 

The key dynamic — often under-appreciated — is that: 

• The promoter funds the process regardless of outcome 

• The landowner only participates financially once value is created 

 

If planning is not achieved: 

• The promoter absorbs the loss (which can be substantial) 

• The landowner retains the asset 

 

If planning is achieved: 

• Both parties share in the uplift 

 

This asymmetry is fundamental. The fee percentage must, over a portfolio of sites, compensate for: 

• Failed projects 

• Delayed projects 

• Capital tied up without return 

 

In other words, successful sites cross-subsidise the unsuccessful ones. 

 

This portfolio-based risk dynamic is the primary reason promoter fees are typically expressed at levels that may initially appear high. 

 

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Why “lower percentage” is not necessarily better 

 

There is a natural instinct to focus on headline fee percentage. However, this can be misleading if considered in isolation. 

 

A lower percentage can sometimes reflect: 

• A weaker commitment to funding or pursuing difficult planning outcomes 

• Shorter-term behaviour (e.g. pursuing quick, lower-value consents) 

• Reduced willingness to carry risk through appeals or complex negotiations 

 

Conversely, a higher percentage may be justified where the promoter: 

• Is prepared to fully fund the project through to a robust outcome 

• Has a track record of delivering in challenging planning environments 

• Takes a long-term, value-maximising approach rather than a quick exit 

 

The correct question is not “what is the percentage?”, but “What level of commitment, capability and risk assumption sits behind it?” 

 

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The impact on net land value 

 

From a landowner’s perspective, the relevant measure is not the gross value achieved (how much the land sells for), but the net receipt after all costs and fees. 

A simplistic comparison would be: 

• Option A: 15% fee, £3.0m gross value 

• Option B: 20% fee, £3.6m gross value 

 

Despite the higher fee percentage, Option B produces a materially better outcome for the landowner (£2.7m for Option B vs £2.3m for Option A assuming £250,000 of costs are recovered by the promoter in both cases). 

 

This reflects a central principle: 

Execution quality and planning outcome typically outweigh small differences in percentage terms. 

  

 

Costs and fee structures are not always directly comparable 

 

Promoters differ in how they structure and recover project costs. Some outsource project management, with those costs recovered on sale. Others deliver this in-house and absorb part of that cost within the fee structure. 

 

As a result, headline percentage fees are not always directly comparable without understanding how costs are incurred and recovered. 

 

 

Alignment of interests 

 

Well-structured promotion agreements align interests by design: 

• Both parties benefit from maximising value 

• Both benefit from achieving planning permission 

• The promoter is incentivised to invest time and capital where it believes value can genuinely be created 

 

However, alignment only works where: 

• The promoter has sufficient conviction to invest properly 

• The landowner understands the economic logic of the arrangement 

 

A focus solely on minimising percentage can inadvertently undermine that alignment. 

 

 

A more useful way to evaluate proposals 

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Rather than focusing on percentage alone, landowners are better served by assessing: 

• Track record in similar planning contexts 

• Approach to funding and risk (depth of commitment) 

• Strategy for maximising value (not just achieving consent) 

• Willingness to pursue difficult routes where appropriate 

• How costs are recovered and what caps are in place 

• Clarity of reporting and decision-making process 

 

In this context, the fee percentage becomes one component of a wider commercial judgement, rather than the defining variable. 

 

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A practical point 

 

If you are considering multiple promotion agreements, the differences in headline terms can be difficult to compare on a like-for-like basis. We regularly help landowners interpret how different structures — premiums, percentages and cost recovery — translate into likely financial outcomes in practice. This typically involves building a simple model to compare proposals on a consistent basis, highlighting where value is genuinely being created (or eroded).

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