Partner Katja Wigham, in our Commercial Property team, explains the things that anyone looking to sell part of their garden land for development needs to keep in mind.
There are many issues to consider when selling part of your land in the context of development. A lot of people come to us having negotiated a price but having failed to consider other points which can make things more difficult further down the line. This article addresses some matters which should be considered at an early stage.
The first point to consider is the structure of the deal. Developers may well come to you and suggest a conditional contract, an option agreement or an outright purchase of land and which of these is most appropriate will depend on all of the circumstances. A full discussion of these is beyond the scope of this article but often a developer will not want to take the risk that planning permission will not be granted and in this situation it is sometimes appropriate to have a conditional contract (which will require the developer to buy the land if certain conditions are met) or an option agreement (which gives the developer the right to buy the property at a later date). In other situations a developer will be prepared to acquire the land outright.
If it is not to be an outright sale you will want to consider for how long you are prepared to limit or restrict what you can do with your land. In some situations where an immediate sale is agreed the developer will want to impose some form of “overage” which would require an additional payment to be made in the future if there is an uplift in value (for example if the land is developed). These are all points to agree with your buyer when the initial discussions are taking place.
At the same time as discussing and agreeing the deal structure it is also important to have other considerations in the background such as the following:-
- Title – it is worth being clear on any issues that currently affect the land. There could be restrictive covenants which prohibit or limit development which could prevent a developer building what they want to on your land. If you are aware of exactly what affects the title then you will be in a good position to anticipate and deal with any problems.
- Other constraints on development – in the same way as there can be title issues there can be other matters affecting the land, for example tree preservation orders, planning restrictions or service media which could affect development potential on the land transferred. These would be apparent from searches and while these will usually be carried out by the buyer it is worth looking back at any information you were given when you purchased your land to give an indication of any issues, although this would not show the up-to-date position.
- Mortgages – depending on what you are proposing to do with the land you are selling off if you have a mortgage over your property then the lender may need to consent to the proposed sale (although consent will not be required if the lender is being paid off in full immediately). However if consent is required the lender may well require a formal valuation to be carried out and they will expect their fees to be paid. Obtaining lender consent to the transaction can take some time so the sooner their consent in principle can be obtained, the better. They may also want some or all of the money from the transaction and again this is something to factor in when agreeing a deal.
- Planning permission to be granted – something else to bear in mind is what is actually going to be built on the land you are selling and how much control you require over what is built. If you are intending to continue to live in your existing property you might want to place restrictions on the height, size and type of building that can be constructed on the land that is sold off and its proximity to your own house. This can all be dealt with in the transfer deed to the developer but it makes things simpler if these points have been considered at the outset.
- Other practical points – how will the new dwelling be accessed? Will access be shared with the new dwelling? Are there current services running through or over the land that is being sold? Will the boundary be fenced? If so, it is often advisable to stipulate the height and type of fencing. These points are all worth considering as early as possible in the process.
There can also be tax issues on the disposal of part of your land and so again it is worth taking advice on this early on in the process.
Blandy & Blandy has extensive experience acting for both landowners and developers in relation to land being bought and sold for development. If you are thinking of selling off part of your land we would be happy to talk through the process to make things as straightforward as possible.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
