Building on land at the rear of my mortgaged property?

by Readers Question

9:50 AM, 29th July 2016
About 2 years ago

Building on land at the rear of my mortgaged property?

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Building on land at the rear of my mortgaged property?

I have recently purchased a 4 bed property for £250,000 (total plot around 300 sq/m). I have a residential mortgage on the property of £150,000 (60% LTV). To the rear of the property is a large plot of land suited for a new build – I’m 99% sure I will be granted planning to build a 3/4 bed detached dwelling. This would mean taking around 100 sq/m of land off the rear of the existing property.plot

When finished (currently in need of renovation) the existing property will be worth £350,000; £250,000 after I have taken off the land at the rear.

Ideally – when granted PP – I would like to simply separate the plot with a fence and build a house at the rear. How would I go about selling the property as technically the land the new build sits on is part of the initial lending agreement with the mortgage provider.

I presumed the most logical way to do this would be for a surveyor to come out to the property once the new build has been built and the plot has been separated (by a fence, not legally) and confirm the revised existing plot is still worth at least £250,000. However everyone I asked doesn’t seem to be able to confirm what would happen.

If anyone could help me I would be more than grateful – I can’t be the first man ever to sell a part of his back garden!

Darius



Comments

Neil Patterson

9:55 AM, 29th July 2016
About 2 years ago

Hi Darius,

Please do not do anything without speaking to your residential mortgage lender first.

The security of the residential mortgage is taken against the whole property and at the very least they will want to have another valuation done on it without the plot and re-assess the loan based on the new security and LTV.

You will also need a solicitor to help setting up the legal titles and the mortgage security changes. Please see our partners at Hawkins Ryan >> https://www.property118.com/conveyancing-3/

Rippedoff Investor

11:19 AM, 29th July 2016
About 2 years ago

You should NOT fence off the land but rather get whoever purchases it ultimately to put up a fence to your satisfaction ( and be responsible for maintaining it). Crucially , if you fence it off physically now or before disposal, that counts as a reduction in your main residence and tax is payable of the sale ( of part garden) proceeds..

John Pettman

13:53 PM, 29th July 2016
About 2 years ago

No Your not the first person to sell off part of their garden. Firstly if you build on your rear garden how is access obtained??? where will all the services run???? will you be connecting up to drains that are on the retained land or will any of your services run across that part of the land sold off These are all matters that will have to be dealt with in the eventual hiving off of that part, You need to contact you mortgagee to firstly get their consent , they will wish to ascertain how it may effect the value of the retained land. They will also need to agree to release their charge over the bit you wish to sell off . They will be making a charge for doing this and may indeed require that part of any eventual sale is used to reduce your existing mortgage. It is essential that you examine your title . The last thing you wish to happen is after doing all this and constructing another property the buyers Solicitors point out that their is a restrictive covenant prohibiting the construction of more than one property per plot . Yes it happens
John Pettman

Kate Mellor

17:23 PM, 29th July 2016
About 2 years ago

If you were to simply build on the back of the existing plot, you would be in breach of your current mortgage conditions, but additionally your current mortgage provider would have the two properties as security for their lending rather than the one and would be able at any point to recall your borrowing at the most inconvenient time - mid build! Never put yourself at the mercy of your lender in this way.

My approach to this if I were in your position would be:

1) First check that there is no covenant on your existing title against further development as mentioned by John.
2) Pay for a pre-planning application consultation with your local council planning officer to come out and give you advice as to whether your proposed development would be likely to be recommended for approval and whether it would be within local planning guidelines. There is a modest fee for this advice, but it is worth it.
3) Have formal plans drawn up and submit your application. It may well be worth using an experienced architect as you are bound to get objections from neighbours.
4) If your permission is granted, your best option would be (rather than try and rejig your existing mortgage) to remortgage the existing house with the new boundaries and incorporate a Title Split to be carried out by your solicitor at the time of completion of the remortgage using a TP1 form (Transfer of Part).

Doing this first will allow you to add new easements to benefit the new build property, such as access for services installation, maintenance & repair etc and result in you having a new mortgage with a new lender on the newly defined boundaries of the existing property, along with a completely separate plot with its own title on which to build which is then completely free for you to remortgage should you require additional funding.


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