Splitting land with uplift clause

Jazz11

I jointly own 4 acres of agricultural land with one of my parents. The land has a 20% uplift clause (we purchased the land at half it’s value so agreed the uplift clause). The land has a large barn. We are looking to either scenario one - build one property for one of us with small garden or scenario two - two properties (one each) with small garden. 

What is the best way to handle this so we pay the least amount of uplift clause and the land is still in equal shares so that it is fare. 

Would we have to consider any other charges.

if we built two houses we would share a private water supply installed on the land.

thanks 

princeofpounds

I don't quite understand what you are asking - by uplift clause, do you mean an overage where any planning permission awarded creates a liability to pay a portion of the value uplift created to the person who sold you the plot?

If it has been properly constructed, it won't matter whether you split the plot or not - it's still going to apply. Two properties will almost certainly create more value, so you will pay out more, but be better-off yourselves than in the case of one property.

But it all depends on the exact wording of the overage.

user1977

As above, nobody can advise you without seeing the current agreement. 

GoogleMeNow

Have you got planning permission to build on agricultural land?

Jazz11

princeofpounds said:

I don't quite understand what you are asking - by uplift clause, do you mean an overage where any planning permission awarded creates a liability to pay a portion of the value uplift created to the person who sold you the plot?

If it has been properly constructed, it won't matter whether you split the plot or not - it's still going to apply. Two properties will almost certainly create more value, so you will pay out more, but be better-off yourselves than in the case of one property.

But it all depends on the exact wording of the overage.

Yes it’s an overage to be paid on grant of planning permission.  Out of the 4 acres. The simplest land split is If we had two 1/2 acre plots (one building on each). One to be owned by one of the joint land owners and the second plot to be owned by the second joint land owner. This would leave 3 acres of land to be jointly owned so we have equal split. 

I assume we then only have to pay overage on the two half acre plots and avoid having to include the value of the remaining 3 acres of land. I don’t know if there is a financial benefit to not including the 3 acres?

lincroft1710

Jazz11 said:

I jointly own 4 acres of agricultural land with one of my parents. The land has a 20% uplift clause (we purchased the land at half it’s value so agreed the uplift clause). 

If you bought the land at 50% of its agricultural land value and would be expected to pay 20% overage, that seems a bargain to me!

user1977

Didn't you get advice when you bought about how the uplift clause would work? If so then revisit that.

princeofpounds

Jazz11 said:

princeofpounds said:

I don't quite understand what you are asking - by uplift clause, do you mean an overage where any planning permission awarded creates a liability to pay a portion of the value uplift created to the person who sold you the plot?

If it has been properly constructed, it won't matter whether you split the plot or not - it's still going to apply. Two properties will almost certainly create more value, so you will pay out more, but be better-off yourselves than in the case of one property.

But it all depends on the exact wording of the overage.

Yes it’s an overage to be paid on grant of planning permission.  Out of the 4 acres. The simplest land split is If we had two 1/2 acre plots (one building on each). One to be owned by one of the joint land owners and the second plot to be owned by the second joint land owner. This would leave 3 acres of land to be jointly owned so we have equal split. 

I assume we then only have to pay overage on the two half acre plots and avoid having to include the value of the remaining 3 acres of land. I don’t know if there is a financial benefit to not including the 3 acres?

The way these things are normally constructed is that you only pay a proportion of the uplift. So in your example, you will pay based on the planning uplift achieved by getting permission for those two properties. The remaining 3 acres is utterly irrelevant if it was plain agricultural land before and will remain plain agricultural land afterwards - there is no uplift to include in the calculation.

If you, for example, created two houses with 2 acre gardens, then there would be some uplift as the agricultural land becomes garden land. But it would be rather modest on a per square metre basis compared to, for example, getting more housing ground area. Gardens are worth more than agricultural land but not that much (and the value large gardens do have is, frankly, largely based on the possibility of future more intense development)

Jazz11

princeofpounds said:

Jazz11 said:

princeofpounds said:

I don't quite understand what you are asking - by uplift clause, do you mean an overage where any planning permission awarded creates a liability to pay a portion of the value uplift created to the person who sold you the plot?

If it has been properly constructed, it won't matter whether you split the plot or not - it's still going to apply. Two properties will almost certainly create more value, so you will pay out more, but be better-off yourselves than in the case of one property.

But it all depends on the exact wording of the overage.

Yes it’s an overage to be paid on grant of planning permission.  Out of the 4 acres. The simplest land split is If we had two 1/2 acre plots (one building on each). One to be owned by one of the joint land owners and the second plot to be owned by the second joint land owner. This would leave 3 acres of land to be jointly owned so we have equal split. 

I assume we then only have to pay overage on the two half acre plots and avoid having to include the value of the remaining 3 acres of land. I don’t know if there is a financial benefit to not including the 3 acres?

The way these things are normally constructed is that you only pay a proportion of the uplift. So in your example, you will pay based on the planning uplift achieved by getting permission for those two properties. The remaining 3 acres is utterly irrelevant if it was plain agricultural land before and will remain plain agricultural land afterwards - there is no uplift to include in the calculation.

If you, for example, created two houses with 2 acre gardens, then there would be some uplift as the agricultural land becomes garden land. But it would be rather modest on a per square metre basis compared to, for example, getting more housing ground area. Gardens are worth more than agricultural land but not that much (and the value large gardens do have is, frankly, largely based on the possibility of future more intense development)

 Perfect. Thank you. That is what I was thinking. Yes the 3 acres would remain plain agricultural land but it would contain the new water bore hole which will service both properties. I guess that would become a problem if we ever need to sell the 3 acres, one of the properties or my parent passes and their half ownership passes to me and my siblings. So many things to consider.

Would you know if it’s easy/costly to split the land into the three parcels and at what point would you do that? I assume at point that planning permission is granted.

many thanks

Jazz11

lincroft1710 said:

Jazz11 said:

I jointly own 4 acres of agricultural land with one of my parents. The land has a 20% uplift clause (we purchased the land at half it’s value so agreed the uplift clause). 

If you bought the land at 50% of its agricultural land value and would be expected to pay 20% overage, that seems a bargain to me!

Yes it pays to have looked after it for 40 plus years. 

princeofpounds

Jazz11 said:

princeofpounds said:

Jazz11 said:

princeofpounds said:

I don't quite understand what you are asking - by uplift clause, do you mean an overage where any planning permission awarded creates a liability to pay a portion of the value uplift created to the person who sold you the plot?

If it has been properly constructed, it won't matter whether you split the plot or not - it's still going to apply. Two properties will almost certainly create more value, so you will pay out more, but be better-off yourselves than in the case of one property.

But it all depends on the exact wording of the overage.

Yes it’s an overage to be paid on grant of planning permission.  Out of the 4 acres. The simplest land split is If we had two 1/2 acre plots (one building on each). One to be owned by one of the joint land owners and the second plot to be owned by the second joint land owner. This would leave 3 acres of land to be jointly owned so we have equal split. 

I assume we then only have to pay overage on the two half acre plots and avoid having to include the value of the remaining 3 acres of land. I don’t know if there is a financial benefit to not including the 3 acres?

The way these things are normally constructed is that you only pay a proportion of the uplift. So in your example, you will pay based on the planning uplift achieved by getting permission for those two properties. The remaining 3 acres is utterly irrelevant if it was plain agricultural land before and will remain plain agricultural land afterwards - there is no uplift to include in the calculation.

If you, for example, created two houses with 2 acre gardens, then there would be some uplift as the agricultural land becomes garden land. But it would be rather modest on a per square metre basis compared to, for example, getting more housing ground area. Gardens are worth more than agricultural land but not that much (and the value large gardens do have is, frankly, largely based on the possibility of future more intense development)

 Perfect. Thank you. That is what I was thinking. Yes the 3 acres would remain plain agricultural land but it would contain the new water bore hole which will service both properties. I guess that would become a problem if we ever need to sell the 3 acres, one of the properties or my parent passes and their half ownership passes to me and my siblings. So many things to consider.

Would you know if it’s easy/costly to split the land into the three parcels and at what point would you do that? I assume at point that planning permission is granted.

many thanks

The legal procedures to split the titles aren't hard in themselves. It would involve drawing up new plans and titles and submitting them to the land registry.

But there can often be complications that can cost you time or money. For example, this overage clause may have something to say about how the title is handled while it still applies. 

How much? Low to mid 4 figures perhaps, at a guess?

Planning permission is independent of things like boundaries and titles, so you can do either process first. In reality you probably want to go part-way on each process to ensure it is likely to be possible. Little point completing either process without ensuring you can complete both.