How to sell part of your land?

Posted on Thursday, April 9, 2020

With local authorities being more flexible with planning and 'infill' sites commonly approved, we are regularly contacted by clients asking what the value of their garden could potentially be.

Typically, garden land has a marriage value; if the land has no access, it will have a very limited number of potential buyers as it is dependent on a neighbouring property owner wishing to purchase it. Garden land is purely subjective with no hard and fast rule; it is simply down to how keen the buyer or seller is, after all, who would else would want a garden that is potentially landlocked with no way of getting to it? However, if your garden could give access to a new dwelling built in the garden of a neighbouring property, then the value is far greater.

If your land has a means of access and building potential, there are a few options available:

1) Obtain planning permission yourself

The advantage of this option is that you can achieve the maximum value for your plot. However, there are many hoops to jump through and exposure for expenditure such as application fees, architect drawings, planning consultants, land surveyors and tree, ecology, archaeology, environment, drainage and highways specialists too. You face the risk of not obtaining planning permission or under developing your site, meaning you could sell it with planning approval for one dwelling, only to find out later that the developer has amended the plans after completion and now has approval for two!

2) A joint venture

A joint venture or a "JV" as known in the industry, is where the associated costs for the planning application and construction of the new property are shared between the landowner and developer, the profits are then split once the new development has been sold and completed. The advantage of the joint venture is that you can benefit from the developer's experience and contacts to maximise the land value. A deal is agreed at the beginning where the developer will pay the landowner an uplift for every unit they can achieve planning for, and the price of the land is deducted from the overall sale price of the development and given to the landowner, the profits after build costs by the developer are apportioned between the two parties.

3) An option agreement

An option agreement is an arrangement entered into by a landowner and a developer, where the parties agree to an initial payment from the developer in exchange for a binding first option to purchase the land when planning consent is achieved. The purchase must take place within a period agreed at the beginning, which can last several years depending on the size of the development. The agreement prevents the landowner from selling the property while the developer deals with the planning applications. The land is not purchased until it is exercised by the purchaser, which is normally triggered once planning permission has been granted.

3) Hope value

Hope value is something worth considering with land without planning permission, when there is a likely possibility of achieving it, without the seller being exposed to any costs at all.

We have an example where a developer purchased a garage in garden land for £35,000 without planning permission. The developer paid substantially over the market price for the garage on the basis that he believed he could get planning permission for a detached house, which he did. As the vendor wanted a quick sale, this arrangement suited him, and the developer took the risk of considerably overpaying for a garage in the hope that he could achieve planning and exchanged contracts in 28 days,

4) Conditional exchange of contacts

Recently we agreed a sale on 1.5 acres of garden land that had no planning permission but based on neighbouring properties setting a precedent, believed that consent was likely. We found a buyer who offered £600,000, with a conditional exchange of contracts, where they could withdraw after an exchange of contracts should planning permission be refused. An offer of £300,000 was also received from a buyer for a non-conditional sale, meaning they would complete the sale without any planning consent and potentially end up with a costly bit of garden land if planning was refused.

If you are considering selling land, then please do get in touch to see if any of these options could work for you, for more case studies see our new homes page.

Photograph © Copyright Texas Radio and The Big Beat and licensed for reuse under this Creative Commons Licence