Things to consider when making a sale of part
Joanna Stepien, a solicitor in the Real Estate team, writes about some of the things a seller should consider when selling part (as opposed to whole) of the land they own.
It is not uncommon for landowners to sell only part of the land they own. There are different reasons why this may be necessary: sometimes the parcel of land sold is acquired by the neighbouring property owners who want to use it for a particular purpose in connection with the main use of their property, for example as an extension of their back garden. In other cases, the land is sold by a developer who is disposing of plots comprising completed units or houses. Whatever the scenario is, the seller should consider carefully what rights over the land that is being sold need to be reserved for the benefit of the “parent” land and what restrictions need to be placed on the land that will no longer be within their control following the sale. Such rights and restrictions can seriously adversely affect the retained land and the land that is being sold.
There are lots of different rights that are capable of being reserved over someone else’s land but the most common include:
- A right of way – the seller needs to ask itself the question: do I need to cross over the land I intend to sell in order to gain access to any of my retained land? If the answer is yes, this right needs to be specifically reserved. However, this gives rise to further questions which need to be considered. Is pedestrian access sufficient or is access with vehicles necessary? Can the right be exercised only at certain times or at all times? Who should be responsible for maintenance of the shared access road or track?
- A right to connect to and install services – if any of the pipes, cables, sewers and other conduits serving the retained land run through the land that is being sold, the seller would usually need a right to use them. Otherwise, the new owner could cut off the supply of utilities to the retained land. As with the access way, the parties also need to agree who should maintain the common services.
- A right of access for maintenance – it is probable that at some point the seller will need to enter the land it has sold, even if only for a short time. For example, if any buildings on the retained land are close to the boundary, it may be necessary to erect scaffolding on the neighbouring land in order to repair such buildings. Unless such rights are specifically reserved, the seller will be trespassing if they enter the land they sold without the owner’s permission, notwithstanding the fact that in practice they may struggle to maintain their own property without such access.
- A right for eaves and other parts of the building to overhang the land subject to the sale – this is particularly important if there are (or likely to be in future) any buildings close to the boundary between the retained land and the sold part. If there are any gutters, eaves or windows that will cross the virtual boundary line and overhang the land that is being sold (or retained), this right needs to be specifically reserved. If not, the seller will be trespassing and can be asked for the offending part of the building to be removed (which may be impossible).
It is, of course, the case that a seller may need to accept that the buyer is granted similar rights over the seller’s retained land and these also need to be considered and framed carefully.
It may also be desirable to prevent new owners from doing something on their newly acquired land.
- A restriction on use – depending on the type of the property that is being sold, it may be desirable for the seller for the sold land not to be used for certain purposes. For example, a cottage owner would not want an industrial estate on the neighbouring land so it may limit the permitted use of the land to residential purposes only.
- A restriction on building on the land – this is a slightly different to a restriction on use. The seller may want to keep open space next to their retained land and prohibit the buyer from building anything on the land. Alternatively, they may limit the height and number of buildings that can be erected by the buyer or their successors in title.
- Other common restrictions include preventing the buyer from causing nuisance, an obligation to keep noise levels to a minimum or allowing for the land to be used at certain times only for particular activities.
As mentioned briefly above in the “Rights” section, if certain rights are granted, the parties should also consider who should do what to enable the seller to exercise these rights freely. For example:
- If the seller and the buyer share an accessway, they need to decide who should be responsible for maintaining or even constructing it. It is common for the party on whose property the accessway is to have an obligation to keep it in repair but at the same time, the other party should be obliged to contribute to the maintenance costs.
- In a similar way, if one party reserved a right to use conduits on the other party’s land, it should be clear who should construct them in the first place, who should maintain them in future and who should contribute to the maintenance.
- One obligation that can be crucial for both or one party to the transaction, is an obligation to erect and maintain fences separating the two pieces of land. Quite often the exact materials, height and other fencing details are specified in the transfer itself so that either the seller or the buyer must build the fences in accordance with the agreed specifications and also repair them in future when needed. When the land is used for agricultural purposes, it is vital that the fences are stockproof for example but depending on the use of the land, other factors like height can also be important for the seller.
It is important to note that unlike restrictions, positive obligations do not run with the land and are personal. In other words, such positive obligations are binding on the original seller or the buyer but not on successors in title, unless they also reaffirm them in subsequent transactions. The person with the benefit (for example the person who is using the shared accessway and is expecting for it to be kept in repair by the owner) needs to ensure that these obligations are binding on all future owners. The most common ways to do that include:
- Putting a restriction on title so that any person that buys the land with the burden of the positive obligation needs to enter into a deed of covenant with the person with the benefit. In a deed of covenant the new owner effectively makes the same “promise” to do something as the original party. Without confirmation that the terms of the restriction have been satisfied, the new owner will not be able register its ownership as the Land Registry will not amend the register.
- Making the right conditional on the other party complying with their positive obligation – for example using the accessway only if contribution towards maintenance is paid. While this can work in certain cases where it is within the grantor’s control to exclude the person benefiting from the right from exercising the right, it may not always be physically possible. For example, if there are no codes or gates on the accessway which remains open at all times, it may be impossible to bar other users until payment is received.
- A slightly more unusual solution to ensure that future owners are bound by the positive obligations would be to grant a long lease to the buyers rather than to sell the land to them. Lease terms can be as long as the parties want so if we are talking about a long term interest, anything from 99 years to 999 years should mean that it is unlikely that the original parties will have to re-negotiate the terms and enter into a further lease in their lifetime. Depending on the circumstances granting a lease may not be appropriate and many buyers will subconsciously resist that as they will expect to own the land absolutely, but it is a good way to ensure that future owners abide by the positive obligations. This is because whoever buys the leasehold land will automatically be bound by the lease covenants. There is no need to have them repeated and there are remedies available to the landlord to enforce the lease covenants. This should
It is also worth remembering that the original buyer remains bound by positive obligations, even after they sell the land in question, unless the new owners agree to take over. In theory, the original buyer (or the last buyer who made the promises) can be asked many years later to fulfil their obligations, even if they have no interest in the land. Once again, practical difficulties can mean that such person cannot be easily traced so the seller will have no one they can turn to in order to insist that the positive obligations are complied with. Therefore, it is in everyone’s interest that such positive actions are affirmed by new owners each time.
Any rights, restrictions or obligations should be negotiated between the parties prior to the sale to avoid future difficulties or disputes. Both the seller and the buyer need to consider not only what is currently required for their use and enjoyment of the property but also what may be needed in future, either for themselves or when they want to sell the property. However, the seller should also bear in mind that imposing too many conditions is not very attractive for potential buyers so the need for rights and restrictions needs to be balanced against what is required in order to facilitate the sale.
If you need further information or would like to talk to someone about any aspect of land disposal, please contact the Real Estate team.