Development land uplift clause and divorce?

by Readers Question

9:58 AM, 11th April 2017
About 2 years ago

Development land uplift clause and divorce?

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Development land uplift clause and divorce?

My husband and I have been married for 25 years, separated for 8 years. I have now decided to divorce him because of his unreasonable behaviour.

We have several buy to let properties and also land with planning permission to build houses.

Would it be possible for me to put an uplift clause or similar on the land before we divorce so that the children and I will benefit from?

Many thanks

Jackie



Comments

Mark Alexander

10:46 AM, 11th April 2017
About 2 years ago

Hi Jackie

What has your solicitor advised?
.

Ian Narbeth

10:13 AM, 13th April 2017
About 2 years ago

I am a solicitor and have had to work with these clauses. They are a pain in the backside. People, including judges,think of including them because if land without planning permission obtains it then it goes up in value substantially. True, but not really the point. Other assets might increase as well such as art works, jewellery, books, furniture etc but nobody asks for a clawback if they go up in value later. If you are splitting assets then they can be valued now. A professional valuer will value land and take account of its potential for obtaining planning permission and the possible amount of any uplift.

To deal properly with an uplift clause is expensive in legal time. The person not keeping the land wants to ensure that the one with it does not "find a way round" the legal drafting or that there is a sale at what they "think" is an undervalue that defeats the uplift or provides a smaller uplift than they are sure they are entitled to. Or they think that a sale should be delayed so that the market price can rise. The person with the land does not want to find that he/she cannot do anything with it without the agreement of the ex-spouse. Uplift clauses are therefore complex to draft - expect to spend £5000 of legal fees if the job is done properly. They also mean that the spouses have to deal with each other on potentially acrimonious terms for many years until the land is sold.

In a case I know of the ex-husband got so fed up with the ex-wife's unreasonable approach after the divorce - not allowing him to grant a lease and generally being obstructive which increased costs for him - that he obtained a court order for sale and bought it back himself at auction free of the restriction

In your case you say the land already has planning permission. In that case the valuation now reflects the full value of the land. If your ex spends £200,000 developing houses and sells for £300,000 more than the current valuation I am afraid to say there is no reason you should get a percentage of the "uplift". It is simply developer's profit. If you were to impose such a condition on the sale so that a third party was bound by it, you would depress the value of the land and make it difficult to sell. If you want to get in the development business, take your share of the money and buy some other land with planning permission. Spend £200K on it and try to make a profit.

Colin Dartnell

17:39 PM, 13th April 2017
About 2 years ago

Can you sell the land now, and split the proceeds, or won't husband agree?

Puzzler

16:11 PM, 14th April 2017
About 2 years ago

Odd question, it will be decided in your financial settlement. Have you agreed that your husband should retain the land?

Jackie Ruddell

12:36 PM, 21st May 2017
About 2 years ago

Sorry it took me so long to reply but I wasn't able to log in.
No we haven't agreed that my husband will retain the land, my husband just assumes that he will
and I will get whatever he cash he can raise.

Jackie Ruddell

12:52 PM, 21st May 2017
About 2 years ago

Reply to the comment left by "Colin Dartnell" at "13/04/2017 - 17:39":

My husband won't agree to sell the land and split the proceeds.

Mark Alexander

17:29 PM, 21st May 2017
About 2 years ago

Reply to the comment left by "Jackie " at "21/05/2017 - 12:52":

That decision may well be taken out of your husbands hands by the Judge hearing your divorce case. The job of your solicitor is to persuade the Judge to make that ruling, e.g. for the land to be sold and how the net sale proceeds should be divided. Same goes for his portfolio.

If I was advising him I would suggest to him that he makes you a 50/50 partner in the business. If you have no involvement in the running of the business then I would suggest to him that he should persuade the judge to agree a fixed (possibly indexed) 'partners salary' for him to be paid out of profits before other profits are split.

I would then advise both of you to consider incorporation of the partnership after three years (once the partnership is entitled to claim a Stamp Duty exemption) and in order to 'wash out' all capital gains to that point. I would also advise you both to consider BICT in order to negate the requirement to refinance at the point of incorporation. See https://www.property118.com/landlord-incorporation-explained-video-interview-ranjan-bhattacharya/98856/

From what you have explained to me offline, your husband not only has a problem in relation to divorce finances but he also faces potential bankruptcy due to being caught in a CGT trap if he sells and a finance cost relief trap if he doesn't. You could both end up with 100% of nothing if you continue to fight. The strategy I have proposed above might be the only route to salvation for you both.
.

Puzzler

18:55 PM, 21st May 2017
About 2 years ago

Mark is right, it will be decided as part of the financial settlement, helpful if you both can agree. I doubt you'll get uplift any more than a purchaser would expect to give you an uplift, this is factored in to the price/value.

Sounds like you haven't discussed this with your solicitor yet or you would know this. You will most likely get 50% of the total, how that is divided will be up for discussion.

You don't say how old he children are but what happens to either of your property afterwards is up to each of you individually.

A non-property related question: why do you feel it necessary to (a) divorce your husband on the grounds of unreasonable behaviour when you can divorce him just for being separated which would be more straightforward and (b) to post that on a property site? It's not relevant.

That said, if you and your husband can't agree it will be taken out of your hands and decided by the court. The longer you take to come to an agreement the more it will cost you so take care it doesn't all go on lawyers' fees and there is nothing left to be uplifted....

and how are the B2L properties to be split?

Jackie Ruddell

22:36 PM, 21st May 2017
About 2 years ago

Reply to the comment left by "Mark Alexander" at "21/05/2017 - 17:29":

Hello Mark,

I suggested to my husband that we create a partnership but he said no, he thinks all the properties
are his to do with as he pleases, we don't agree on the valuations either, things are much the same
as when we spoke except I would really like to know which Court Order I should ask the Judge for.

Jackie

Jay James

0:39 AM, 22nd May 2017
About 2 years ago

"..I would really like to know which Court Order I should ask the Judge for."

That is a question for the solicitor representing you in the divorce.

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