Ask our resident Conveyancing Expert, John Robson
I am looking to buy a plot of land which forms the major portion of the garden of a house situate within the village I currently live. I approached the owner and agreed a price subject to planning permission being granted to build a 3 bedroomed bungalow.
The owner does not wish to be involved in the planning application process and is only concerned with the sale of the plot as it is. The price we have agreed reflects the fact planning permission will be granted as without it the land is not worth the agreed price and I would not wish to buy it.
How can I protect my position? For example if I successfully apply for planning permission the owner may then sell to a third party for a higher price.
I have not approached a conveyancer or obtained any legal advice as matters are at initial stages.
This does seem an attractive proposition as the seller is only interested in selling the land allowing you to proceed with the planning application to build a property of your choice and to your own specification.
Essentially there are two ways to proceed:
Firstly a Lock Out Agreement. This type of legal contract “locks” you both into the agreed deal, locking out all other prospective buyers, subject to :
- satisfactory title investigation
- satisfactory search results
- satisfactory replies to enquires
- satisfactory planning approval.
A non refundable deposit will be payable by you for the benefit of this type of agreement. A timescale will need to be inserted within the agreement. The agreement would be immediately rescinded if the planning application is refused or if the title and search checks are adverse. The deposit paid would either be retained by the seller or refunded. The former is the more common scenario.
Secondly a conventional conditional Sale Contract. The contract would be entered into after title check and searches but would be subject to satisfactory planning approval.
A ten per cent deposit is payable on exchange of the contract and it is a matter for both parties to agree if the deposit, or part of it, is to be refunded if planning is refused.
However before you proceed with either of the options it would be prudent to make your own investigations of the following issues:
- arrange a meeting with the planning officer of the local authority covering the area to discuss your proposals and to ascertain an initial reaction
- submit a pre planning proposal
- investigate if the utility services are available and the costs to lay the services
- obtain a copy of the title to the land to consider any restrictive covenants that may prevent any development – usually these covenants are set out in a Schedule and can be easily identified
- discuss with an National House Building Council (NHBC) or Premier Guarantee registered builder, the approximate cost of constructing the property and the cost of the building warranty
- discuss with a local estate agent the typical resale value of the property.
You may find that after making these elementary investigations the project is either not possible, if restrictive covenants affecting the land prevent development, or it is not financially viable.
Furthermore you must be sure you have the available finances to support the project. You may have the cash to buy the land. However if you need to mortgage out the project to finance the build it is most important you have the advice of a conveyancer before proceeding.
Lending institutions have strict guidelines on property they will finance. The Council of Mortgage Lenders – www.cml.org.uk – website contains useful information.