In our latest self-build blog, we talk about land purchase contracts with Simon England, a Partner at Harrison Drury Solicitors.
Our first blog of the series covered finding and choosing land for a self-build project but what happens once the perfect plot is in your sights?
The first thing to remember is that purchasing a site can be complex and time-consuming. The time it takes to exchange contracts will vary depending on the route you take to purchase, the due diligence you are required to undertake if someone else is funding the purchase or you would like to carry out if you are using your own funds and it will also depend upon the land that you acquire. It can range from being as fast as a couple of weeks to taking as long as a few months or even years.
Options might include:
- purchasing directly from a landowner
- purchasing through a contractor
- working in partnership with a developer
Or you may be a builder who is using the self-build scheme to become a developer too.
Depending on which route you take, there will be several contract elements to consider. Unless you’re purchasing on a speculative basis, you don’t want to purchase land that cannot be developed as you intended so even the smallest of self-build projects should require the same level of scrutiny as larger-scale developments.
If the site already has the benefit of planning, the contract should be relatively simple. You will usually enter into an unconditional purchase of land alongside a funding agreement if that is required.
This means you are agreeing to complete the purchase of the land as it is, with no additional permissions required or those that you need to be dealt with after completion.
If the site does not have planning permission, there is no guarantee that you will secure it for your proposed development. To protect you from purchasing land for which you cannot develop as you would like, you may want to enter into a conditional contract. A conditional contract means that you agree to buy the land, subject to certain conditions being satisfied. This gives you time to apply for and hopefully secure planning permission and deal with any other requirements that will enable you to build your project. Once the conditions have been achieved and after an agreed date, the contract will become unconditional and proceed to completion. If you are unable to obtain planning permission within the agreed timescale, either party can usually withdraw from the contract and walk away without penalty. This reduces the risk to the land purchaser.
Securing planning permission can often take some time, particularly if the land is not identified for housing in the Local Plan which sets out planning policy in each local authority area. As part of a longer-term plan, you may just wish to agree on an option to acquire the land at a time you choose during an agreed option period which means you can exercise your right to buy years down the line when perhaps the site has been added to the Local Plan. Usually, a vendor will want a fee for agreeing to give you this flexibility which would likely be non-refundable in the event you did not exercise the option.
Before entering into a contract or choosing to spend money on securing planning permission, you should perform due diligence on-site. The purpose of this is to identify anything which needs to be included in the contract such as dealing with ground conditions and boundaries. You may be able to get some information from the vendor in their replies to enquiries but additional searches and surveys are usually required.
It is also essential that any rights and restrictions are identified from the title to the property and which land may be subject to them or benefit from them.
These could include
- rights of access/services which your scheme may need
- restrictions that prevent or affect your scheme such as a neighbours right to light or restrictive covenants
- reservations, such as mines and minerals which could restrict or prevent development
These can be difficult to identify and may not be registered on the title at the Land Registry and further consideration of historic deeds may be required. Where they are, they may still not be clear, particularly on older deeds on which rights and restrictions were set out in descriptions and not plans. We recommend an inspection of the site and surrounding areas to understand the existing use of the site. A litigator can help to clarify any rights or restrictions and can also help you clean up the title including apply to the lands tribunal under certain conditions to have adverse entries removed.
Many buyers are also unaware that rights can be acquired that are not on the title. For instance, a group of locals can apply for an area to be designated as a town or village green where they have been walking their dogs or enjoying other pastimes for 20+ years and could be successful in preventing any development of the land. Checks should be made for apparent rights being exercised such as ‘informal’ footpaths as this could be raised as late as the build stage causing major delays and changes to your scheme which would be very costly.
Land purchase contracts can be incredibly complex and risks must be identified and mitigated early on by the right transactional and litigation specialists.
The same complexity exists for build contracts too, which we will cover in our next blog post.
For advice on land purchase contracts, email Simon.England@harrison-drury.com