Selling land? Don’t eat into your profit with unnecessary legal fees!
With the drop in the housing market, rises in mortgage rates for several months, and high inflation, you might be looking at selling land you own, e.g. part of a garden or field, to release capital.
Whether you are selling part of a garden or a piece of rural or agricultural land, don’t fall into the trap of doing the legal work BEFORE you have found a buyer. If you do, you could be paying more in legal fees than you need to – perhaps at least twice as much, if not more!
“As head of Temple Heelis’s Rural Land and Property department, I often work with clients who own land of one kind or another and have decided to sell off a piece. It’s a seller’s natural reaction to parcel up the land with a new title before offering it for sale,” says Peter Dodd. “However, this is more often than not the wrong way to do things.” Peter explains further: “When I first meet with a client selling land, my initial questions include ‘does the sale plan correspond with the title deeds?’ ‘Are the actual boundaries shown by fences, walls, ditches, streams or other markers?’ and ‘Are there any rights or restrictive covenants on all or part of the land which need to be factored into the sale, for example rights of way, easements for drainage, private water supply, septic tanks or access to neighbouring properties?’
Peter continues “Even if you are selling just a part of your garden, there may be easements or other rights which neighbours have. Even the smallest sale of land isn’t always straightforward.”
Peter advises any seller to work with the buyer, establishing what the buyer intends to do with the land before starting any legal work. If there is any change of use, for example from agricultural to residential, this needs to be taken into account when preparing the legal agreements and registering the land to be sold.”
“Only when establishing the answers to these and other questions will I suggest a plan of action to begin the legal preparations. Too often clients have come to me after they have already separated the piece of land they are selling from the main title deed and, although this seems like the logical thing to do, it’s often the worst thing to do. This is because the new title may not include all the rights and agreements which the purchaser requires, and further legal documentation may need to be drafted to vary the title that has only recently been created.”
The key to selling land and keeping as much of the sale proceeds as possible is to do the legal work in the right order. Working with the buyer before separating the land from the original title deed and registering a new title is the best approach. This is equally true if land is being divided up among family members, for example if one generation is parcelling up residential or ‘working land’ for the next generations. In this situation, there may also be tax considerations such as inheritance tax planning and agricultural relief.
A buyer – or a member of the next generation in family situations – may have certain expectations or requirements before taking on the land. They may want to do something in particular with the land, so it is important to find that out. There may be restrictive covenants, rights and protections which the buyer will need to know about and include in the new title. Without factoring these in, a seller could be caught in the trap of varying a new title which has just been registered and paying not only their own costs but also the buyer’s!”
“Having made the decision to sell a piece of land, I don’t like to see clients lose some of the money they could have kept,” says Peter. “Don’t second guess your buyer, work with them. It will ultimately ensure you receive the best outcome from the sale and ensure the process runs smoothly and quickly.”