Splitting title on property

Mrs_pbradley936

I don't know if I am in the right area of the forum but I would like some information on splitting the title on a property. My friend has a detached house with a huge garden and lots of road frontage. She also has outline planning permission to build a house on part of the garden.

Who would you go to to find out the best way of doing all of the formalities?  Someone told her she would be better off moving into the new house and then selling the existing one. Where can you find accurate information on this sort of thing?

propertyrental

To split a title, you submit form TP1 (Transfer of Part) to the Land registry. You'll need a clear Plan showing where the new boundaries are, probably drawn up by a surveyor.

You'll also need to specify any rights/obligations/ covenants applying to one or both properties, eg if utilities have to cross one property's land to get to the other, plus any restrictions you might want to impose eg restricting what a new owner can add/construct on the land sold. A solicitor will assist with this.

The best time to submit TP1 would be when one of the properties is sold.

user1977

Or rather simpler, the buyer splits the title when they register the part they’ve bought (as happens in almost every new build purchase).

propertyrental

Yes but the OP/seller is still going to have to specify in advance what is included/excluded in the sale, where the boundaries etc are, so is likely to need surveyor/solicitor help with this.
But yes, submitting the TP1 can be done by the buyer.

lika_86

Does she have an outstanding mortgage?

Emmia

lika_86 said:

Does she have an outstanding mortgage?

That's a crucial question, as if she does her current lender will need to be involved as the property value would change... 

RAS

We made sure that the boundary of the building plot was clearly delineated before it was put up for sale. Just installed a fence. That also meant that when the house went up for sale, potential buyers knew exactly what they were getting.

Do check the CGT rules. It used to be that selling the plot whilst still owning the house allowed you to avoid the CGT that would have been payable if you sold the house first.

Mrs_pbradley936

lika_86 said:

Does she have an outstanding mortgage?

Yes 120K so not a huge one. How would this complicate it all?

Emmia

Mrs_pbradley936 said:

lika_86 said:

Does she have an outstanding mortgage?

Yes 120K so not a huge one. How would this complicate it all?

Chopping off part of the plot will presumably reduce the overall value of the property that would remain in the possession of your friend.

When mortgages are taken out, the lender has a valuation to ensure that if the borrower stops paying the property could be sold so that the lender can recoup the amount borrowed.

As the division of the plot will affect it's value, your friend needs to inform her lender that she's planning to do this, and they will then (I would expect) wish to value the smaller property - this would affect her LTV for example and might mean that she has to remortgage.

Lets say the property now is worth £200k, the outstanding mortgage is £100k so 50% LTV. 

The sale of the plot reduces the value by £50k (to £150k) - the mortgage is still £100k but the LTV would be around 67% - which may not be compatible with the mortgage she's on. 

Mrs_pbradley936

Emmia said:

Mrs_pbradley936 said:

lika_86 said:

Does she have an outstanding mortgage?

Yes 120K so not a huge one. How would this complicate it all?

Chopping off part of the plot will presumably reduce the overall value of the property that would remain in the possession of your friend.

When mortgages are taken out, the lender has a valuation to ensure that if the borrower stops paying the property could be sold so that the lender can recoup the amount borrowed.

As the division of the plot will affect it's value, your friend needs to inform her lender that she's planning to do this, and they will then (I would expect) wish to value the smaller property - this would affect her LTV for example and might mean that she has to remortgage.

Lets say the property now is worth £200k, the outstanding mortgage is £100k so 50% LTV. 

The sale of the plot reduces the value by £50k (to £150k) - the mortgage is still £100k but the LTV would be around 67% - which may not be compatible with the mortgage she's on. 

Thank you - that makes sense. I think the plan is to pay off the mortgage with the proceeds of the sale so how would that work? 

Also while it might make sense financially to sell the original house and move into a newly built one it will cost a lot of money to do get a house up to being mortgage worthy and I am not sure that she wants to go down that route. Someone said she could but a caravan in the garden and live there while the place was being built. There is a lot to ponder in all of this. 

She needs help the the legal aspects as well as the practical aspects not to mention the Capital Gains Tax. 

RAS

It was a different market but we halved the length of the garden and there was no loss in value. We probably attracted a different market; those who were happy to mow a smaller lawn.

Has your friend talked to the planners, looked at the PP for similar sites, as outline permission is relatively cheap makes a huge difference to sale value? Our wasn't exactly back of a fag packet but was DIY, paid a few quid for the plans of a similar site, reversed it and redrew on scaled paper.