Whether they chose to develop a plot themselves, or take the simpler route of selling it on as a building plot, people’s motivations for looking into this vary. Tim Atkins, partner in our commercial property team in St Austell explains:
“Some people spot the investment potential and specifically buy a house because it has enough garden space to build a second property. Others, perhaps motivated by increasing uncertainty over pensions, have lived in a home for years and want to build up their nest egg and secure a better financial future this way.
“The difficulty of first time buyers getting onto the property ladder motivates others, who chose to transfer ownership of part of their garden to their children, so that they can build a house.”
Whatever the motivation there are many factors that should be considered before embarking on such a project. The first is tax liability. In many cases it may be possible to do this without incurring capital gains tax, if the prime residence allowance applies. You need to be careful about the timing of sales to ensure you are eligible for the allowance.
To be sure of your tax liability and because of the complexities involved in these transactions it is important to seek professional advice. Tim explains: “It is crucial to check the legal title to the land, develop an accurate plan, consider of rights of way and rights to services and obtain agreement over who will build and maintain the boundary features of the new property.”
One issue which concerns many people who choose to sell a building plot is what the new house will look like. Tim explains that there are ways you can influence this:
“It is possible to impose restrictions on any new development on land you sell. This could include issues like the height of the new house and where windows are placed, so that they do not overlook your property.”
Selling or developing a building plot in your garden can definitely bring financial rewards, but the complexities involved should not be underestimated. It is always worth speaking to a solicitor specialised in this kind of work before embarking on a project to ensure that you avoid the pitfalls and make maximum financial gains.