Golf Course Development
In these uncertain times all businesses are looking at ways to maximise their income streams, and golf clubs are no different. Where golf clubs differ from many businesses is that often they own swathes of land, but the capital is locked into this. It is therefore worth investigating whether there are any avenues open to you to unlock this capital and to make use of any land that is not serving the club in its commercial pursuits.
This guidance note is designed to give an overview of the development of land owned by the club and to offer some insight of what to look out for if you decide to take further steps.
Firstly, how is your club set up? If the club is owned by an individual, or individuals, then ultimately any decision to develop the land will be their choice. If the club is a company then the directors will make the decision and, dependent on the articles of association, may require the consent of the members prior to entering into any development arrangements. The situation is similar where the club is an unincorporated association where the trustees will make the decision, but will almost certainly need to liaise with the members before making such a major decision.
This leads to another issue to be managed – the members. If the club is owned by an individual then this is not a problem, but for the other forms of ownership this can be a potential sticking point. Some members will have a long history with the club and may be reluctant to change and it is therefore important that any proposals are carefully analysed and researched so that the best possible case is put to the members to avoid any potential disputes or upset.
Once a decision has been made to look at developing land, what legal areas should you ensure are investigated before proceeding?
It is worth digging out the title deeds for the land owned by the club. Ideally the title will have been registered with the Land Registry. This means that the deeds to the land are held in a central register and are easily accessible. Registered deeds have plans attached to them and list all matters affecting the land. Where the title is registered there is no risk of deeds ever going missing and you can easily track the extent of the land owned by the club. Even if the title is in several pieces each will be registered in the club’s name, showing a tapestry of ownership.
Conversely, if the title to the land is unregistered the extent of the land owned will be proven through historic deeds and documents which will need to be kept in a safe and secure place. If such deeds go missing or become damaged you will need to go through a lengthy and expensive process to ‘reconstitute the title’ with the Land Registry before a buyer or developer would look to proceed. As an aside, it is also worth noting that if the trustees of the club have changed then the deeds should be updated every time a trustee is appointed or retires as evidence of ownership of the land. We do strongly suggest registering the title to the club’s land if this has not already been done as this can remove potential headaches in the future and will make dealing with the land much easier in all circumstances.
If you are uncertain as to whether the club’s land is registered or not please get in touch and we can find this out for you and also provide plans showing the extent of the land, if registered, owned by the club.
Once the registered title, or deeds, of the club have been looked at there is another question, although it may sound odd – Does the club own the land it is looking to develop? With such large parcels of land involved in golf courses there is a risk that land thought to be owned by the club may actually fall outside its legal boundaries; having been absorbed by the club over many years without ever actually changing hands. As such, it is worth checking the deeds for the club to make certain that what is planned to be developed is actually owned by the club.
Once ownership and extent of land is dealt with the nature of the club’s title needs considering. Does the club own the freehold of the land or is the land leased? If the land is leased then this will dissuade many developers from looking to purchase as leases have finite terms and they will be looking to obtain the freehold so that they can sell it on again once development has occurred.
Next you need to consider the legal matters that affect the land. These can range from historic rights of way over certain sections of the course, public rights of way or rights of drainage for neighbouring land. There are many items that may affect the golf course that can only be ascertained from carefully checking the deeds and which may have been forgotten over time. Likewise, there may also be restrictive covenants, or promises, that limit what the land can be used for or restricting what, or even if, development can take place.
Once the title has been checked over and cleared as suitable for development then the exact areas to be developed need careful consideration. Whilst a club may have an idea as to the land it wishes to develop, has it thought about the practicalities? Some points to consider are access to the public highway, the location of utilities and how these will affect the club itself. There is no benefit in deciding to develop a section of the course if it means that access to the highway will be a detriment the club to the point where it is no longer practical to play golf.
If the above points have been checked and cleared then it comes down to practical considerations on how best to proceed. Does the club expose itself to potentially expensive environmental reports, planning consultations and site visits with no guarantee of a return? Potentially, it may only be possible to attract a developer with evidence the site can be used, but we would suggest another way.
An option agreement is a legal right for a third party to purchase land once certain ‘trigger events’ are met within a specific timeframe. Trigger events are when actions undertaken by the third party during this timeframe, such as obtaining suitable planning permission for development, are met. A price for the land will be agreed and once the trigger event occurs the sale will take place.
As an example: The club agrees to an option for a period two years over a designated area of land; in that two years the developer will seek planning permission for ten houses. If the developer can only get permission for eight houses then the option will not be triggered and the purchase will not proceed. If permission is given for ten houses then the option will be triggered and the sale of the land take place.
With reference to the example given above, what would happen if permission is given for more than ten houses, as the land will have been valued and the option price agreed based on the land having ten houses? This is where an overage can be agreed. An overage is a right reserved over land for a specified period of time. If any additional works, in this instance additional housing, are undertaken the original owner of the land gets a percentage of the increase in value. This means that the club can profit even after the land is sold should its value increase due to additional development.
Golf club mergers and the mutual benefits
You may be aware of the plans Widnes Golf Club have to develop 26.5 acres of land and to convert their existing 18-hole course to a 9-hole course, taking advantage of England Golf’s ‘Golf Express 9’ campaign.
As part of this development Widnes will be investing in nearby Blundells Hill Golf Club with a view to upgrading their existing facilities. The benefit of this arrangement is that members of each club will have access to both as part of their membership.
The benefits for both clubs are clear. Members will have access to new state of the art facilities and a choice of either the long or shortened form of the game. The clubs will be able to pool their resources and rely upon each other’s expertise and skillsets. With the proposed plans it will also bolster member numbers for both clubs, and allow them to promote their clubs with a view to expanding membership.
Clearly this will not be an option available to all clubs and will be affected by issues such as location, membership, club structure and ease of development. We do however feel that if an opportunity such as this arises for your club then it is worth seriously considering.
Other than the legal considerations there are also other factors that are worth bearing in mind.
If you are looking at selling land with the benefit of planning you ought to consider approaching a planning consultant as they will be able to give you an idea as to the validity of your proposals. If planning is unlikely to be granted then there is no merit in entering into protracted and expensive negotiations with the council’s planning department.
Land agents should also be approached. This will enable you to get an indication as to the value of the land and what potential value it will have post development. Agents will also have helpful contacts and should be able to introduce you to buyers for the land, whether developed or not.
It is also worth bearing in mind that development will most likely result in a large lump sum payment and you must consider your tax position carefully.
As you will note from the above there are many factors to consider when looking at developing land, in particular relating to golf courses. If you have any queries about the contents of this article or are looking into any of the matters highlighted then please contact us and we shall be happy to assist you.