Building bungalow on parents land

JessWebster78

Hi everyone, 

Currently looking at options for my mum. Her house is on the market and she is looking for a bungalow to purchase. Unfortunately it looks like her House will probably not go for the amount she needs to buy a bungalow (taking into account fees) The process so far (viewings and 1 sale fallen through) is causing her a considerable amount for stress and really affecting her already deteriorating health. 

She has a large side garden which could probably house a 1 bed bungalow - myself and my brother are in a position to be able to possibly fund this. 

The plan would be to take her house off the market for now and her continue to live in it whilst we build a bungalow for her on the side garden - she will then move into the bungalow and we then sell her house. We would be looking to make some cash back on top of what we’ve paid to fund the build. 

Planning permission etc aside - My main concern is protecting our investment - would we have to buy the land from her to then build on it? If not we would basically be building on her land which would then form part of her estate….also any tax implications… 

Has anyone done this before? I know people who have built bungalows, but on their own land which they have self funded so a different scenario to what we are proposing to do 

ProDave

It gets complicated if you are not building to live in yourself.  You become a developer and are liable for tax and VAT on the profit of the build.

If there was a way for your mum to finance it, then she would be a self builder, and would be able to claim back all the VAT spent and it would be her main residence so exempt from CGT.

Could she achieve that by selling the existing house and keeping the building land, and renting for the duration of the build?

lincroft1710

You say "planning permission aside", but this should be your first port of call. Until you get pp everything else is irrelevant.

JessWebster78

ProDave said:

It gets complicated if you are not building to live in yourself.  You become a developer and are liable for tax and VAT on the profit of the build.

If there was a way for your mum to finance it, then she would be a self builder, and would be able to claim back all the VAT spent and it would be her main residence so exempt from CGT.

Could she achieve that by selling the existing house and keeping the building land, and renting for the duration of the build?

This is exactly what I need to know and very helpful  - thank you. Renting could be a possibility and not something we’ve thought of 

JessWebster78

lincroft1710 said:

You say "planning permission aside", but this should be your first port of call. Until you get pp everything else is irrelevant.

I don’t plan on seeking planning permission until I know that the figures stack up tbh. If it’s not worth doing financially and is too complicated then there’s no point in going any further. 

Keep_pedalling

You could lend her the money to have a bungalow built and secure the loan with a charge against her house.

lincroft1710

Have you had an estimate for building the bungalow and associated works?

markin

She can just split the land, and as said above its better for her to build with a loan. Her selling the land to you for £1 would be pointless and more complex.

A static caravan could be the easy and fast way, Or a pre-fab SIP house.

A stab in the dark for price £100-250K

Top google result https://www.ecosipshomes.co.uk/

ManuelG

Have to say, if she's stressed about selling the house, is putting her in a caravan, pre-fab, or rented before moving her again going to be particularly stress free for her?

JessWebster78

Keep_pedalling said:

You could lend her the money to have a bungalow built and secure the loan with a charge against her house.

This is one option we’ve discussed - we were originally going to possibly buy a bungalow for her or (or lend her the money) 

JessWebster78

lincroft1710 said:

Have you had an estimate for building the bungalow and associated works?

Builder is due to go round over the next few days. We’ve done an online calculation which comes in at around £100k. House at the moment is worth circa £200k but would have to get revalued without this bit of land