How the Price for Your Land Is Worked Out in an Option Agreement

Every field has three values at the same time, and most confusion about what land is worth comes from mixing them up. Surveyors call them existing use value, hope value and value with planning permission. Only the first can be read from published figures.

Existing use value is what the land is worth for what it does now: growing wheat, grazing sheep, keeping horses, storing machinery. For farmland it is set by what similar land nearby has sold for and by what the land can earn. Knight Frank's index of bare farmland across England and Wales recorded an average of £8,497 an acre for the second quarter of 2026, down 1.5% on the quarter and 4.1% on the year. Strutt and Parker's database, reported by Farmers Weekly on 12 October 2026, put England alone higher over the first nine months of 2026, with arable land averaging £10,600 an acre and pasture £8,700. The two measure slightly different things, and both are national averages that a particular field can sit well above or below, but together they give the honest starting point for ordinary farmland in 2026: somewhere around £8,500 to £10,600 an acre.

Hope value is the extra a buyer may pay above existing use value because planning permission might one day be granted. It is a real part of what land is worth, and the next two sections explain how it is judged and where it turns up.

Value with planning permission is what land is worth once permission for homes exists. It is worth far more than farmland. But it belongs to a scheme rather than to a field: it depends on how many homes the permission allows and on everything that has to be paid to build them. Until a scheme has been drawn and permitted, nobody can honestly put a figure on it for a field that has not been looked at.

The price we agree sits above the first of these and is fixed before any planning work starts. The rest of this page explains the second value, then turns to the question that decides most of a field's potential: how many homes it could take.

Hope value is the price of a possibility. The Royal Institution of Chartered Surveyors, whose professional standards apply to its members, defines it in its professional standard on development property as an element of market value in excess of the existing use value, reflecting the prospect of some more valuable future use. The same standard describes it as the value that comes from the prospect of development where there is no current permission for it.

A valuer judging hope value looks at the consented future from a distance and takes off what stands in the way. The RICS standard says that where permission has not been obtained, the costs of obtaining it should be allowed for, and that the uncertainties of the planning process should be factored into any valuation of the site. In plain terms there are three discounts:

• The chance it never happens. A field with no planning status may never get permission at all. Whoever pays hope value carries that loss.
• The cost of getting there. Surveys, drawings, consultants, application fees, a legal agreement with the council and sometimes an appeal, all paid before the answer is known.
• The wait. Money paid for land today earns nothing until the land can be built on, and a field that needs to go through a local plan first may wait a long time.

These discounts multiply rather than add, so a buyer facing uncertain odds, a long wait and a large planning bill ends up paying for a fraction of a fraction, in cash, on the day. That is why hope value on a field with no planning status is usually a modest premium on farmland value.

What Makes Hope Value Rise

Hope value moves as the odds move. Each step below lowers the chance of failure, the cost still to be spent or the wait, and so narrows the distance between hope and permission:

1. No planning status. The field has never been put forward and does not appear in any council document.
2. Put forward in a call for sites. The council has been told the land is available. This costs little but puts the land on the council's list.
3. Assessed as suitable. The council's land availability assessment, often called a HELAA or SHELAA, records the land as having potential for homes, with an estimate of how many it could take.
4. Allocated in a draft plan. The council proposes the land for homes in the plan it is preparing, subject to examination by a planning inspector.
5. Allocated in an adopted plan. The plan has been examined and adopted, and the principle of homes on the land is settled.
6. Permission granted. At this point it is no longer hope. The land has a value with planning permission for the scheme that was approved.

Our guide to the call for sites and local plans explains how the first four steps work and how long each stage of a plan usually takes.

In a Probate Valuation

When land passes on a death, it is valued for inheritance tax at its open market value. HMRC's own manual is clear that hope value is a component part of the open market value in appropriate cases, whether or not planning permission has been sought or granted, and that it expects the valuer to consider whether there is any potential for development. Executors cannot leave it out simply because nobody has applied.

Land values in an estate are usually referred to the District Valuer, who considers them on HMRC's behalf. HMRC's manual on the District Valuer's role explains that for farmland, the valuer agrees the agricultural value and, where there is development value, may also agree the open market value. The gap between the two matters because agricultural property relief, the inheritance tax relief on farmland, covers only the agricultural value. The excess, such as hope value, will not attract agricultural relief, although it may qualify for business relief where the land was part of a qualifying business.

How far apart the valuations can be is shown by the estate of Susan Foster, summarised by the law firm Clarke Willmott. The estate held 6.39 acres of pasture at Shifnal in Shropshire. HMRC's value was far higher than the executor's, and the dispute reached a tribunal. The tribunal reached its own figure between the two by starting from what the land might fetch with permission and taking a heavy discount for the risks, including the lack of an access and the uncertainty of planning. Hope value is a matter of judgement, and one practical problem, such as access, can decide most of it.

Our guide to probate and selling land covers the executor's side of this in full, including what the date of death value means for tax when the land is later sold.

In a Compulsory Purchase

When a council or other public body buys land compulsorily, compensation is normally based on what the land would fetch if sold on the open market by a willing seller. The government's guidance on compulsory purchase compensation explains that this can include values attributable to the prospect of planning permission being granted on the land in the future, which is hope value, assessed under a set of planning assumptions. It also explains the no-scheme principle: compensation ignores any increase or decrease in value caused by the scheme the land is being bought for.

The Levelling-up and Regeneration Act 2023 changed this for some schemes. Section 190 inserted a new section 14A into the Land Compensation Act 1961, headed "Cases where prospect of planning permission to be ignored", and it came into force in England on 30 April 2024. An acquiring authority can now include a direction in its order for schemes with public sector led affordable or social housing, health or education uses. If the Secretary of State confirms it, being satisfied that it is justified in the public interest, the land is valued on the assumption that no planning permission would be granted. A permission that has already been granted still counts.

One idea runs down the right-hand column. The law will often recognise a prospect of planning, but it treats a prospect and a permission as different things, and it is the permission that settles value. An agreement in which we carry the planning, and you are paid a fixed figure once permission is secured, takes that guesswork off your side of the table.

By a method called a residual valuation. A housebuilder or valuer starts from what the finished homes would sell for, known as the gross development value or GDV, takes off every cost of producing them including the builder's profit, and treats what is left, the residue, as the value of the land. The RICS standard sets this out as a single line: gross development value less total development costs, including profit, equals residual land value.

The government's planning practice guidance on viability lists the costs that go into the sum: build costs, abnormal costs such as contaminated ground, site-specific infrastructure that might include access roads, sustainable drainage systems and green infrastructure, the total cost of the council's policy requirements including affordable housing, finance, and professional, sales and legal costs. Our guide to where the money goes when a field becomes homes takes each of those costs in turn and shows what share of the sales value it takes; this page does not repeat them.

Small variations in these inputs can cause relatively high variations in the residual output.

That warning is why a residual sum cannot be run from a distance. And the input every other line is multiplied from is the number of homes: build cost, affordable housing, contributions and sales value all scale with it. So the rest of this page sets money aside and works through the question at the heart of every desktop review: how many homes could this field take?

Because a good part of every field is never built on. The whole field, inside its boundary, is the gross site area. The part that homes and their gardens can actually occupy is the net developable area. Density, the number of homes per hectare (dph), is measured on the net area, so mixing the two up makes the home count far too high.

The land that is not built on goes to the things a scheme needs before it can have a single house:

• The access. A junction onto the public road with clear sight lines either way, called visibility splays, and often a footpath link to the village.
• Estate roads and footpaths. The streets inside the scheme, turning heads for refuse lorries and trees along the new streets.
• Sustainable drainage. Rainwater from roofs and roads has to be held back and released slowly, usually through a basin, pond or swales at the low point of the site. The viability guidance names sustainable drainage systems, often shortened to SuDS, as a site-specific infrastructure cost.
• Public open space and play. Green space and a play area on site, where the council's open space policy asks for them.
• Habitat for biodiversity net gain. New or improved habitat so that the site ends up measurably better for nature than it was before. Our biodiversity net gain guide explains how it is measured.
• Buffers. Strips kept back from hedgerows, mature trees, watercourses, neighbours' gardens and any pipeline or overhead line crossing the land.

Councils publish the ratios they use when estimating how many homes a site could take. West Oxfordshire District Council's land availability assessment of October 2025 uses three bands of gross to net ratio, and then applies a density of 35 homes per hectare to the net area. It explains that because the vast majority of sites it assesses are greenfield, edge of settlement sites, that density was applied across the board.

Not everyone thinks those ratios go far enough. The Home Builders Federation, which represents housebuilders, told Newcastle and Gateshead councils in December 2025 that their draft gross to net assumptions were overly optimistic. It listed the on-site requirements a council should allow for, including open space, which it said often cannot be doubled up with biodiversity net gain, and tree-lined streets. It also cautioned against using the density of existing housing nearby as a guide, because older estates did not have to meet today's requirements.

So a council ratio is a reasonable first estimate across a whole district, and a sketch layout on the actual field is what decides. The two worked examples below use the West Oxfordshire figures because they are published, recent and simple, so every line can be checked.

Look at where one acre sits in the council's table. At 0.4047 hectares it is only just over the 0.4 hectare line. A field of exactly 0.4 hectares, just 47 square metres smaller, would be counted at 100% developable and would give 0.4 × 35 = 14 homes. Four homes appear or disappear on a rounding line, which shows why a band in a district-wide assessment is a starting point and a layout drawn on the real field is the answer.

On a small site like this, much of the land that is not built on goes to getting in and out. A single access road with a turning head for a refuse lorry takes a surprising share of an acre, and a long, narrow field loses more to its road than a square one. Drainage can often be handled with a swale, a shallow grassed channel, rather than a full basin. And whether the scheme needs habitat on site depends on the land: the biodiversity net gain exemption that came into effect on 6 August 2026 is for the smallest developments, under 0.2 hectares, so a one-acre field is still within the rules.

The mix of homes matters too. Thirty-five homes per hectare is an average: smaller homes and short terraces fit more on the same net area, large detached houses fewer, and the council's housing mix policy decides which way a layout goes.

Ten times the land does not give ten times the homes. The larger field gives up a bigger share of itself to the things a larger scheme needs: a proper estate road network, a drainage basin sized for a four-hectare site, open space and play, and more habitat. That is why acreage on its own is a weak guide to a field's potential.

Now apply the Home Builders Federation's caution. If the layout on the real field shows that only 55% can be developed, perhaps because the open space and the habitat cannot share land, the sum becomes 4.047 × 0.55 = 2.2259 hectares, and 2.2259 × 35 = 77.9, or about 78 homes. Seven homes have gone from the same ten acres without the field changing at all.

1. The title. The HM Land Registry register and title plan: who owns the land, where the boundaries run, any rights of way, easements or restrictive covenants, and whether the land reaches a public road directly or only over someone else's strip.
2. The hard constraints. Flood zones, Green Belt, National Landscape, Sites of Special Scientific Interest, ancient woodland, listed buildings and conservation areas nearby, tree preservation orders, and pylons or pipelines crossing the land. Some of these rule a site out; most change the layout.
3. The access. Whether a safe junction can be made onto the road, with the visibility splays the highway authority will expect, and whether people could walk to the village shop, school and bus stop.
4. The council's position. How old its local plan is, whether it can show a five-year supply of housing land, its Housing Delivery Test result, whether the land is in its land availability assessment, what its emerging plan proposes, and how it has decided similar applications nearby.
5. A sketch layout and the home count. The net developable area and a realistic density, worked out as in the examples above, with the open space, drainage and habitat placed where the land needs them.
6. The costs a scheme would carry. The council's affordable housing requirement, whether it charges the Community Infrastructure Levy or relies on Section 106 agreements, the habitat the land holds now for biodiversity net gain, the drainage the site needs, and any abnormal costs such as difficult ground.
7. The route through planning. Whether the land is best taken forward by an application now or put forward for allocation in the local plan first, and which surveys and reports that route will need. We pay for and run all of that work.
8. A price in writing. One figure, agreed at the start, set above what the land is worth today, with a short summary of how the agreement works so that you and your family can talk it over.

We will usually ask to walk the land with you before the figure is confirmed, because the fall of the ground, wet corners and the exact line of a hedge are things that only show on the ground. A free desktop review of your land is confidential and carries no obligation, and our page on how it works sets out each stage from the first conversation to completion.

From everything that can change between the day an agreement is signed and the day permission is granted. Planning work takes time, and the costs and rules around a scheme do not stand still while it is done. Our price is agreed at the start, written into the option agreement as a figure, and not reduced if costs rise during planning. These are the changes that fall on us, not on you:

• Costs rising during planning. Surveys, consultants, drawings, application fees and, if it comes to it, an appeal. We pay for and run all of it, at our own cost and risk; on a larger site the planning work can reach £300,000. If those costs rise, or the build costs a scheme will face go up, your price stays where it was agreed.
• A council adopting a higher affordable housing target. Councils set their affordable housing requirement in the local plan, and the government's guidance asks for it as a single figure, so that it can be accounted for in the price paid for land. Plans are replaced over time, and a new plan can ask for more. The same guidance says that what was paid for the land cannot be used to excuse a scheme from the plan's policies. So if a new plan asks for more, the scheme has to provide it, whatever was agreed for the land. Under our agreement, that cost is ours.
• Changes to biodiversity net gain. The rules have already been changed since the requirement began. Defra's post of 14 July 2026 set out changes that took effect on 6 August 2026, and said that changes to the statutory biodiversity metric would follow. Whatever the rules are when we apply, meeting them is our cost.
• What the surveys find. A drainage study that needs a larger basin, an ecologist who asks for a wider buffer, a highway authority that wants more at the junction. Each takes land or money, and sometimes both, and none of it comes off your figure.

This is the difference between a price agreed at the start and a price worked out at the end. Where the amount a landowner receives is calculated only once the land is sold with permission, from what it sells for less the costs incurred along the way, each change above either lowers what the land sells for or is deducted from it before the landowner is paid. Our guide to promotion agreements and their deductions explains how that model works.

Under our agreement the figure is settled first, in writing, and the planning work happens afterwards at our risk. That makes it the simple route: no valuation at the end, nothing to recalculate, and one clear number that a family, an executor or a trustee can agree to.

The agreed price is paid on completion, once planning permission has been secured. The milestones are set out in the agreement itself, and in outline they run like this:

1. Signing. The option agreement is signed, with the price written in as a figure. You keep owning and using the land, and any income from it.
2. The planning work. We commission the surveys and reports, prepare the scheme and make the application, or put the land forward to the council's local plan first where that is the better route. All of it is at our cost and risk.
3. The decision. The council decides the application. If it is refused, we may appeal, at our cost. The agreement continues while any application or appeal is being decided.
4. Completion. Once permission has been secured, we complete the purchase and you receive the agreed price through your solicitor.

If planning permission is not secured, you keep your land and owe us nothing, however much was spent on the work. Our guide to option agreements explains the rest of the document in plain English, including how it is protected by an entry on your title while it runs.