Acquiring land from a neighbour involves a series of steps and considerations to ensure a smooth and legally sound transaction. The process begins with verifying the land’s ownership through the HM Land Registry and, if necessary, obtaining documentation from your neighbour.
This article outlines the steps involved in purchasing land from a neighbour, covering key aspects such as negotiating the price to completing the purchase.
Stephen Clark, from land bridging finance company Finbri, comments, “Acquiring land from a neighbour is a meticulous process, navigating through steps like verifying ownership, negotiating prices, and addressing legal intricacies. Understanding financing options, from traditional mortgages to specialised land loans, allows buyers to make informed decisions based on their financial preferences.”
What is the process of buying land from a neighbour?
The procedure to buy land from a neighbour involves seven key steps:
Determine the land’s ownership:
- Before beginning negotiations, confirm if the neighbour has the legal authority to sell the property – whether this means approaching a neighbour to buy land or sending a letter.
- Clearly define the area you wish to purchase.
Negotiate the price:
- Discuss the purchase price with your neighbour, considering factors like the land’s value, existing structures, and potential future developments.
- If necessary, consult an estate agent or land valuer for a professional assessment.
Review legal and planning requirements:
- Verify if the land has any legal restrictions or covenants that could limit its use.
- Check for any existing planning permissions or if you need to obtain permission for your intended use.
- Consider factors like access rights, drainage, utilities, and easements.
Engage a conveyancing solicitor:
- Appoint a conveyancing solicitor to handle the legal aspects of the transaction.
- The solicitor will conduct Land Registry searches, verify ownership, and draft the necessary contracts.
Agree on boundary and maintenance:
- Determine the new boundary line and how it will be marked and maintained.
- Address any potential disputes or concerns your neighbour may have regarding the boundary changes.
Prepare and exchange contracts:
- Your solicitor will draft the contract outlining the agreed terms and conditions.
- Both parties must sign the contract and exchange copies to signify their commitment to the sale.
Complete the purchase:
- Once all conditions are met, the final steps of the purchase can take place.
- You will need to pay any outstanding fees and sign the transfer deed to transfer ownership.
- The Land Registry will update its records to reflect the change in ownership.
How to check who owns the land:
The first step is to contact the HM Land Registry. For a small fee, they will check if the land is registered; for another, they will identify the registered owner.
If the land is registered with the Land Registry, and your neighbour is the registered owner, then you can proceed with buying the plot.
Buying land with a mortgage on it
When buying land with a mortgage on it, the lender will need to consent to the sale and agree to remove their interest in the land. If they do not, the lender could repossess the land if your neighbour defaults on their mortgage repayments.
When considering whether to relinquish their interest in the land, a lender will take into account factors such as:
- The value of the land
- The outstanding balance on your neighbour’s mortgage
It’s important to note that if the lender does not consent to the sale, you cannot purchase the land.
Buying land with a restrictive covenant
A restrictive covenant is a legal restriction in the property’s title that will prevent, or perhaps limit, what you can do with it. For example, a restrictive covenant may prevent you from building additional buildings on the land.
When buying land from a neighbour, it’s important to be aware of any restrictive covenants that may be in place. If you are not aware of any restrictive covenants, your neighbour may try to have one put in place after the sale is finalised.
This could prevent you from making alterations to the property, such as building an extension or garage. It’s always best to have a solicitor review the property title before you purchase the land to ensure that no restrictive covenants are in place.
Planning permission for the land
If you are buying land to build on, you need to check whether planning permission will be required and, if so, how likely it is to be granted.
- Your neighbour may already have planning permission in place. This will simplify the process but often results in them demanding a higher price for the land.
- You will also need to consider whether the land has access rights, sewerage and drainage, and utilities such as water and gas.
Planning permission may be required for the use of the land you buy, even if it already has planning permission.
You must still go through the planning process, which includes submitting plans and addressing any objections from neighbours. If the land is in a conservation area, additional consent may be needed from the council before building can begin. Consider access rights, drainage issues, water supply, and other easements such as gas, electricity, and sewers.
What are the costs associated with buying a neighbour’s land?
There are a few different costs associated with buying a neighbour’s land:
- The purchase price of the land.
- The cost of any legal fees associated with the purchase.
- The cost of any surveys or other inspections that may be required.
- The cost of any planning permission that may be required.
- The cost of any improvements or renovations that you may want to make to the land.
It’s important to be aware of all of these costs before you move forward with the purchase so that you can make an informed decision about whether or not it is a good investment.
How can you finance the purchase?
Here are some common types of financing that can be used to buy land:
Cash payment: The most straightforward way to buy land is through a cash transaction. If the buyer has sufficient funds, paying in cash eliminates the need for financing and expedites the purchase process.
Traditional mortgage: Buyers can opt for a traditional mortgage to finance the land purchase. This involves borrowing money from a bank or financial institution and repaying the loan in monthly instalments over a predetermined period.
Bridging loans for land: Some financial institutions specialise in land loans specifically designed for purchasing undeveloped land. These loans may have different terms compared to traditional mortgages, and the interest rates could be higher. Buyers should explore various lenders to find the most favourable land loan terms.
Owner financing: In some cases, the seller (neighbour) may offer owner financing. This arrangement involves the seller acting as the lender and allowing the buyer to pay them directly over an agreed-upon period. This option can be flexible, especially if the buyer has challenges securing a traditional mortgage.
Final thoughts
Buying land from a neighbour is a multifaceted process that requires careful consideration and adherence to legal procedures. From verifying ownership through the HM Land Registry to finalising the purchase, each step ensures a smooth transaction.
