The title split of your property and creating new leases
by Raminder Uberoi — Posted on 24 October, 2018
Factors to consider for a Land Registry title split of your land or converting your property into separate flats
Update – Following a number of stamp duty related questions received in relation to title splits, we invited Suzanne O’Hara, author of the forthcoming publication A Practical Guide to Stamp Duty Land Tax in England and Northern Ireland to contribute to our most recent blog, Flat conversion, Stamp Duty Land Tax (SDLT) and claiming Multiple Dwellings Relief. This blog offers a good understanding on stamp duty liability and your entitlement to stamp duty reduction when title splitting and converting your property into self-contained flats with new leases.
Building new property on your land, or selling a part of your land to developers via a Land Registry title split can be a highly profitable venture. Due to the increasing demand for new homes, more and more people with large gardens and plots of land are seeking to divide their freehold land and build new property. However, to do so requires a property title split. There are several factors to consider before you commence with splitting the title of your land or converting your property into lease flats.
Mortgage Lender’s Consent for splitting the title
If you have taken out a mortgage on your property it is essential that you contact the lender and obtain their consent for the title split. This is because they have a financial stake in the land, so their willingness to approve the title split will ultimately depend on how much equity there is in the part of the land they retain a mortgage over. Your lender will therefore want to ensure that they will retain a valuable and marketable title to the remaining property following the title split.
Consent is normally granted by way of a document known as a deed of release i.e. the lender releasing the borrower from the lender’s charge over the part of the property being sold. Your solicitor will need to draw up the Deed of Release if the application for the title split is approved by the lender and this will be sealed by the lender. Consent of any second or subsequent mortgagee must also be obtained.
Your lender is likely to reject the title split if they believe it will significantly reduce the value of the part of the property being retained. Resultantly, you should seek the consent of your lender prior to making plans for converting your property into flats or selling part of your land to a developer or another third party.
If you intend to convert your property into flats, your lender will require you to grant individual leases which comply with their requirements.
Freehold Transfer of Part
Where a house and a garden are registered under one title, a Transfer of Part (TP1) deed will be signed by both seller and buyer. Alongside this, your conveyancing solicitor will be required to send scaled plan drawings of the land being sold to ensure it is compliant with Land Registry requirements.
Converting property into multiple flats and granting leases
If you wish to divide your property you must create brand new leases for each flat, with Land Registry compliant drawings in place
Regarding leases, Landlord and Tenant common law stipulates that the landlord and Lessee must be separate entities. This is often seen when, for example, the owner of property may want to retain his freehold and leasehold titles in his same name, but this will not be possible and seen as void by the land registry. A solution is often to keep the freehold title in his personal name and grant a lease into the name of a limited company (wholly owned by the freeholder to retain control) or vice versa.
Legal & Conveyancing Issues
Whether you are splitting the title of your freehold property or creating new leases, you will need to consider factors such as repairing obligations and rights of way and private access areas on your land. Parking and communal arrangements must be correct and will need documenting in the title and/or leases.
It is also important to ensure that any new-build property or conversion to flats complies, amongst other factors, with local authority Building Regulation and Planning rules. If the property has been built or converted to flats most lenders will require a new-build structural warranty or professional consultants’ certificate.
Your local authority will consider any objections from neighbours. For example, if your property is in a conservation area the council may need to provide further consent before you can build. Therefore, it is best to obtain planning permission before commencing any work.
Complying with Restrictive Covenants
There may be restrictive covenants in place which prohibit or limit development on your freehold property, and could prevent a developer building what they want to on your land. If you are aware of exactly what the covenants say, then you will be in a good position to anticipate and deal with any problems.
How Starck Uberoi can help
Starck Uberoi have a dedicated team of solicitors that specialise in creating new leases for flat conversions following a property title split. We offer an end-to-end service by also advising on stamp duty reductions and specialist mortgage advice where multiple leases are granted. You can contact us on 020 8840 6640 or email firstname.lastname@example.org. We have offices in Ealing, Brentford, Canterbury and London Belgravia. For advice on getting the best mortgage deal for your new leases visit our mortgage page or email email@example.com