Can you use a Lisa ISA for land purchase?

sian_w

Hi, 
Rather than buy a home, I have dreams of buying some land and building a home. Is it possible to use a Lisa ISA to buy land that does not yet have planning permission to build a property. I want to maximise my savings to allow me to do this and I know that the Lisa's have a good return but are more restrictive. Any advice would be great fully received. 
Many thanks
Sian. 

verybigchris

Yes you can

You can use the Lifetime ISA to buy land for a self-build property as long as the purchase meets all the other criteria for property purchase through the scheme.

Thrugelmir

Only saving £4,000 a year it's going to take some years to have enough to buy a plot of suitable building land. 

bowlhead99

sian_w said:

Hi, 
Rather than buy a home, I have dreams of buying some land and building a home. Is it possible to use a Lisa ISA to buy land that does not yet have planning permission to build a property. I want to maximise my savings to allow me to do this and I know that the Lisa's have a good return but are more restrictive. Any advice would be great fully received. 
Many thanks
Sian. 

verybigchris said:

Yes you can

You can use the Lifetime ISA to buy land for a self-build property as long as the purchase meets all the other criteria for property purchase through the scheme.

Although it does say you can do that on the simple version of the guidance website, you may struggle to do it depending on your circumstances, and 'land that doesn't even have any planning permission' is likely to be one of the troublesome circumstances.

It's more correct to say, as it says in the ISA managers' or conveyancers' guides, that "the purchase of land for a self-build property would potentially satisfy the rules".  For example you can buy some land that has the shell of a 'dwelling' already started, or a building that's not a dwelling but is being converted into one.
 
A notice to you as the accountholder / investor when you try to do a withdrawal to buy a qualifying property states that 
You must:

- purchase a legal interest in land with a loan taken as a charge over the property i.e. a mortgage but not a ‘buy to let’ mortgage- on completion of the purchase immediately occupy the land as your only or main residence- on completion of a partially completed dwelling occupy it as your only or main residence.

The guidance from https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/691773/conveyancer__1___5_.pdf for example, says:

(8) The account investor must 
(a) on completion of the purchase occupy the land as their only or main residence; or
(b) in consequence of the land comprising a residential property in the process of being constructed or adapted for use as a dwelling, on completion of the purchase must intend it to be their only or main residence and must occupy it as such on its becoming suitable for such use
etc

When you withdraw the money from you LISA and want to be able to do it without a penalty charge (because you're going to use the funds for a qualifying reason), you need to be able to give a declaration / statement to your conveyancer that all the conditions for a charge-free withdrawal in respect of first time residential purchase are met, i.e. that you and the purchase meet all the criteria and you will be occupying the property as your main residence on completion or, in the case of a purchase of land with a dwelling which is not yet habitable, when that will take place.

The conveyancer, in taking the declaration from you and passing it on to the LISA manager, needs to be able to say that they have no reason to be believe it to be untrue or incomplete. If the property isn't yet habitable but is being constructed, they may believe your statement that what you're buying, "will be my only or main residence or will become so as soon as it is suitable for use". However, if you are buying the land speculatively in the hope of developing it but the land does not actually have any permission for a residential property to be constructed on it, it's quite possible that a solicitor would not want to put their name to the fact that they believe you will be able to occupy it once the residence is complete, because you may never get the permission to even be allowed to construct what you want at a price you can afford.

As mentioned above, the purchase has to be part funded with a mortgage (or other, non-buy-to-let, loan secured on the property you're purchasing) as well as part funded with the LISA proceeds and potentially other money you have too. But if there is no planning permission and you're just buying a field or scrap of land with the intention to later get permission and build something, you'll find mortgage lenders extremely wary of putting a mortgage on the land.

That's because the amount you're willing to pay for the land depends on your own personal faith that you could get permission to do what you want to do and be able to control costs as you develop it in line with the criteria that the planning permission people demand. If they lend against that dream using the land as security and you don't pay them back, they have to try and sell the land at auction to get their money back. They may find nobody willing to pay anything like as much as you were willing to pay for the piece of land (especially if it's known that you intended to get permission and didn't get it). As they know in advance that it's a big risk, you could imagine they would not want to offer you the mortgage in the first place if you only want to pay an interest rate in the single digit percentages.