Neighbour wants to buy half of my garden to create building plot

martindow

Have you got a mortgage? If so you cannot sell off part of your garden without their agreement. Reducing the size of your garden and being overlooked will probably affect the value of your house, so they are very likely to say no.

eddddy

martindow wrote: »

Have you got a mortgage? If so you cannot sell off part of your garden without their agreement. Reducing the size of your garden and being overlooked will probably affect the value of your house, so they are very likely to say no.

What most lenders would do is as follows:

- Have the property re-valued to see if selling the land would take the property outside the LTV limit for the OP's mortgage product.

- If it loan/valuation is still within the LTV limit - no problem

- if the loan/valuation is outside the LTV limit - they would ask the OP to use some of the sale proceeds to pay off part of the mortgage.


But some of the smaller/sub-prime lenders may be trying to reduce their risk/exposure, so might use this as an excuse to make the OP pay off more of their mortgage.

Owain_Moneysaver

eddddy wrote: »

- Fences... you can sell the land with a covenant that the buyer must construct and maintain a fence of a certain type and height.

I'm not a lawyer, but you can probably also sell with a covenant, or a condition in the deed of sale, about the size and style of property to be built; this can help with privacy and overlooking eg if you specify a chalet bungalow with the bungalow's roof towards you and the roof windows sideways on.

Depending on where you are, the value of the land may be much more than 1/3rd of the final house value.

You also do need to consider the long term depreciation in your own house value (there will be some) through loss of the garden and the closer neighbour. You'll get money now, but your house may lose a lot more in value in the decades ahead. You might in fact be better off holding on to the land for several years.

rebelheart15

Thank you all for your replies, all have been incredibly helpful. As it stands my neighbour is looking to sell our gardens as a buliding plot of around 0.07Ha, I presume to a developer to take it from there.

Certainly for my own reasons it would be nice to have a more manageable garden, it would still be around 100 foot. I do worry about having a neighbour effectively in the back garden but looking at the plans it would seem that the proposed dwelling would be mostly in my neighbours' back garden and my existing garden would back onto the new neighbour's garden.

Realistically I am approaching retirement and although my house may lose some value from having a closer neighbour and losing garden in the long-term, it would be nice to have a garden I can manage and not one I can't cope with, and to have the money to make life a little easier.

My house is approx valued at around £150000. I do still have a nominal mortgage of around £10000. I also have a loan (standing around £19000) secured against the house. I would be happy to use any proceeds I get from the garden sale to pay directly towards those loans. Would this realistically pose any problem and would I need to let my loan-provider know of any plans?

eddddy

rebelheart15 wrote: »

My house is approx valued at around £150000. I do still have a nominal mortgage of around £10000. I also have a loan (standing around £19000) secured against the house. I would be happy to use any proceeds I get from the garden sale to pay directly towards those loans. Would this realistically pose any problem and would I need to let my loan-provider know of any plans?

Hmmm... that could be quite complicated.

If you pay off both loans with the proceeds of the sale, you don't need the lenders' consent to sell the land.

If you don't pay off the loans, you will need the lenders'consent - and you should deal with that first. (If they say "no", there's no point in applying for planning consent.)


But... assuming you do intend to pay off the loans, you may hit another problem...

In order to get planning consent, everyone with an interest in the land may have to sign a section 106 agreement.
See: http://www.pas.gov.uk/3-community-infrastructure-levy-cil/-/journal_content/56/332612/4090701/ARTICLE

That means you, both your lenders, your neighbour and his lenders.

A 'proper' bank/building society will probably be familiar with section 106 agreements, and will probably agree to sign. A 'secured loan' company may not be familiar with them. If they refuse to sign, you may not be able to get planning consent.

So, you need to:
1. Ask the planning authority if they would require a section 106 agreement
2. If so, ask your 'secured loan company' (and your mortgage company) if they would be happy to sign one.

martinsurrey

eddddy wrote: »

Hmmm... that could be quite complicated.

If you pay off both loans with the proceeds of the sale, you don't need the lenders' consent to sell the land.

If you don't pay off the loans, you will need the lenders'consent - and you should deal with that first. (If they say "no", there's no point in applying for planning consent.)


But... assuming you do intend to pay off the loans, you may hit another problem...

In order to get planning consent, everyone with an interest in the land may have to sign a section 106 agreement.
See: http://www.pas.gov.uk/3-community-infrastructure-levy-cil/-/journal_content/56/332612/4090701/ARTICLE

That means you, both your lenders, your neighbour and his lenders.

A 'proper' bank/building society will probably be familiar with section 106 agreements, and will probably agree to sign. A 'secured loan' company may not be familiar with them. If they refuse to sign, you may not be able to get planning consent.

So, you need to:
1. Ask the planning authority if they would require a section 106 agreement
2. If so, ask your 'secured loan company' (and your mortgage company) if they would be happy to sign one.

I think your jumping the gun a bit here.

point 1 is valid, but only just.

from the link you posted

"are a mechanism which make a development proposal acceptable in planning terms, that would not otherwise be acceptable."


s106 agreements are only really applicable for large developments (the very wording of the legislation refers to developments that would otherwise by unsuitable in planning terms), they are there to ensure that new development doesn't overwhelm the existing areas infrastructure, and thats not really the case for a single house.

the OP's development is going to have to pay a CIS (Community Infrastructure Levy charge), but CIS charges are due on commencement of a development, so the OP wont have to pay, they buyer of the plot will.

Stevie_Palimo

I'd perhaps see if permission was granted here to maybe also consider doing the build to with a view for a further profit. Worth mowing over if it increases money in both your pockets.

eddddy

martinsurrey wrote: »

...
s106 agreements are only really applicable for large developments (the very wording of the legislation refers to developments that would otherwise by unsuitable in planning terms), they are there to ensure that new development doesn't overwhelm the existing areas infrastructure, and thats not really the case for a single house.

Some LPAs require an s106 unilateral undertaking just for one house, and it must be submitted as part of the planning application.

Your username suggests that you are in Surrey.

Here's an example of a refused planning application in Surrey - for a single bungalow in a back garden.

Reason 2 for refusal states:

In the absence of a completed legal agreement, under Section 106 of the Town and Country Planning Act 1990, the proposal fails to provide an infrastructure contribution in accordance with the Council's adopted Code of Practice for Planning Obligations and Infrastructure Provision February 2008 and is therefore contrary to Mole Valley Core Strategy Policy CS17

http://www.molevalley.gov.uk/CausewayDocList/DocServlet?ref=MO/2014/0869&docid=520618

martinsurrey wrote: »

...the OP's development is going to have to pay a CIS (Community Infrastructure Levy charge), but CIS charges are due on commencement of a development, so the OP wont have to pay, they buyer of the plot will.

It's not as simple as that.

The people that signed the s106 unilateral undertaking will be legally liable to pay at commencement of development. (i.e. the owners of the land and their lenders when planning was applied for.) That's why 'unsophisticated' lenders might get scared.

When the plot is sold to the developer, the seller's solicitor should ensure that the buyer indemnifies the seller for anything payable under the s106 unilateral undertaking.

(If the seller's solicitor doesn't do this correctly, the lpa could claim the money from the original lender.)

RAS

OP

I would strongly advise that you do NOT sell your land to your neighbour.

You agree to the planning permission (subject to the discussions above) and to jointly market the site.

The cost of obtaining the PP, EA and legal fees comes out of the sale price and then you split the remainder 50:50.

You must get that agreed in writing before you allow this to go any further. My parent was in your neighbour's position and wanted more than 50%. Nothing happened. Then next door decided they wanted to sell and we agreed the 50:50 split and it happened.

pimento

I've no idea where you live but where I am (Essex) a building plot goes for £1m an acre.