Research

The first stage in the process is research, both formal and informal. Whatever the circumstances surrounding your and your neighbours’ properties, it is unlikely that they have advertised their garden land for sale. Unless they are selling such a large plot as to be of interest to a professional developer, there are only a few parties who would be interested in the land: immediate neighbours with adjoining gardens. However, they may have mentioned that they would consider selling their garden (or portion of it) in conversation.

Some informal research will allow you to gauge their interest in selling the land or retaining it, and any timeframes they have in mind. Would they consider it now? Is it something they’d only consider in the distant future, when their current garden became unmanageable, or their priorities changed? Is that something they might bring forward if a good offer was on the table? An informal conversation will give you an idea of their intentions, what they might consider, and when. If you do not know who owns the land you can pay £3 to get a copy of the Title Register from HM Land Registry, then make an informal approach about the subject.

More formal research involves getting an idea of what the land may be worth. Determining the value of adjoining garden land is highly subjective. It has no real market value, as (in most cases) the only interested parties will be the neighbouring homeowners; the market in this case is extremely limited. However, the motivation to buy that plot of land could be considerable, as there is not likely to be a comparable plot elsewhere, and the chance to buy it might never arise again.

As a starting point, estate agents can value your property with and without the land. A valuation surveyor can provide an assessment too. The potential impact on each property’s value can then be considered. Depending on the size of each property’s existing curtilage, the decrease in value faced by the seller may be negligible, but the increase in the buyer’s property value could be substantial; this would no doubt be factored into the sale price. These figures will serve as a good starting point for negotiations, but remember how subjective the value is and be prepared for this figure to move as you find out just how motivated the seller is to sell, and how much the buyer is prepared to pay.

What does the process involve?

Legally, an area of land is plotted out and this plot is transferred from one Title to another. A Land Surveyor will draw up detailed, scaled plans of the plot to be separated from the original Title.

The plans will establish accurate boundaries of the land to be sold. Access to the land and any easement required will also be included where appropriate; for example, the new owner might need to pass over the neighbours’ land to access the new plot, or vice versa. Access or connection to utilities can also be included; for example, if the land had an outbuilding connected to a gas or water supply, or the new owner intends to build over a drain or sewer under the land.

Ultimately, the solicitors involved will check the plans and ensure they meet both their clients’ and HM Land Registry’s requirements. The plans would then be submitted to HM Land Registry with a TP1 (Transfer of Part) form, alongside either an AP1 (Change the Register) or FR1 (First Registration application- if the land is not currently registered).

Key Considerations

Use of land

As a seller, it is important to understand why your neighbour wants the land. If it’s for garden use, you need to be prepared for the reality that you will be seeing and hearing more of your neighbour than before as they begin to make use of the new space. A once-secluded spot at the end of your garden, quite removed from your home, could become far noisier. Think: dogs, hot tub, trampoline, children playing. Even if your current neighbours are unlikely to bring any of these to their new garden space, future owners could.

If the neighbour wants to build a garden room, annexe or similar on the land, consider the impact this will have on your enjoyment your garden, too. Again, with greater use there will be greater disturbance. An outbuilding like this will also increase the neighbours’ property value, and it can be important to factor in the uplift in the sale price or include an Overage Clause (see below).

Overage

Overage clauses are legal directions which allow the seller to receive a proportion of any uplift in the value of the land after development, sometimes long after the sale. So, the buyer pays for the land as is, but would need to pay the seller an additional amount if/when the land is developed and its value increases. An overage payment will be triggered by a specific event, written into the clause. For example, the building of a new house on the land.

Used in another way, an overage clause can be a kind of ‘honesty insurance.’ A seller may be happy to sell their garden to a neighbour on the grounds that the land is only ever used as a garden and not built upon in any way. The neighbour might say this is in line with their intentions, but an overage clause in the contract can help ensure they stay true to their word. Buyers who genuinely have no intention of building on the land should, in theory, have no issue with an overage clause being include, and it would actively dissuade or even prevent those buyers who have ‘hidden agendas’ to build on the land further down the line. In reality, an overage clause used in this way is not always appealing; buyers may worry that land with an overage clause can be more difficult to mortgage or sell in future. If these are concerns, legal and financial advice should be sought so that both parties can make informed decisions.

Restrictive Covenants

The seller can include Restrictive covenants in the Title of the new plot of land, which may grant some security as to how the land will be used going forward. As examples, covenants can prohibit: keeping livestock; parking caravans and boats; installing hot tubs; using the land for trade; erecting flagpoles, outbuildings or other structures; access. Conveyancers will be able to advise on these, and what is appropriate and proportionate. Buyers will need to ensure any restrictive covenants in place will not prevent them using the land as they want to, and sellers will need to ensure that the sale does not impede their enjoyment of their garden and home.

Rights and Responsibilities

The responsibility of installing and maintaining a boundary fence, wall or hedge, and any underground pipes, can be included in the Title for the plot to be sold. This ensures the seller is not obliged to pay for the new fence once the current boundaries move (following the sale).

Legal fees

Both parties will likely instruct solicitors to see the transaction through and ensure the transfer meets their needs. For an unmotivated seller, wary of the hassle and expense ahead, the contract is sometimes arranged such that their legal fees are paid by the buyer, regardless of whether the sale reaches its conclusion or not.

Mortgage

If the seller has a mortgage on their property, they will need to ask permission from the lender to sell a portion of the land. The lender will then carry out a valuation and decide whether they can release that plot of land from the mortgage; if they do discharge the land from the mortgage, a DS3 form will be required. In some cases, the lender might insist on a condition of the sale being that some or all proceeds are used to reduce the existing mortgage.

Tax Implications

The tax requirements of the sale will depend on the circumstances and type of land involved, so it is advisable to speak to a tax specialist where necessary.

For example, the sale of garden land is usually exempt from Capital Gains Tax (CGT), as long as it qualifies for Private Residence Relief (PRR). PRR applies to areas up to 0.5 hectares (including the area covered by the house), that has been used solely as a garden attached to the main residence. HMRC can consider PRR applications on properties where the land exceeds this, however.

When considering whether PRR is applicable, intentions when buying the land are important. For example, if a plot of land is purchased and later sold, with Planning Permission granted either just before or just after the purchase, HMRC could argue that you had the intention of selling the land on once you had developed it, which would incur Income Tax. Similarly, if you are selling your garden with an Overage clause in place, it is likely that money from any overage payment will be taxable as a trading income relating to developing land.

In other cases, if the land in question is not currently used as a garden (e.g., agricultural land or woodland) there may be other tax implications to consider. Agricultural land is subject to VAT, for example, and there are some complex tax implications for woodland, depending on how it is managed. Furthermore, buying agricultural land adjoining your garden will require Change of Use Planning Permission.

All in all, the advice of a specialist will ensure the transaction meets all tax requirements.

Alternatives

If the above brings you to the conclusion that you have no wish to sell your garden land, but you have neighbours eager to make use of it, you could consider a ‘license to occupy.’ This is a private agreement can grant non-exclusive permission to use the land for a period. It is a more flexible alternative to leasing the land, which would come with statutory rights and requirements such as tenure, notice periods, review periods, and exclusive use amongst others.

For the landowner, the benefits of a license to occupy are numerous. They retain ownership and therefore don’t have to go through the process of dividing up their land, deciding on its value, changing the Title Deeds and conveyancing. There is no negative impact on their property value from losing the land or renting it out, and they can control how it is used. The landowner also retains the right to occupy the land, as the license is for non-exclusive use. What is more, the license can be revoked without having to evict or fulfil the terms of a lease agreement.

The main drawbacks are from the point of view of the licensee, wanting to buy but being stuck as a licensee with non-exclusive use of the land, no statutory rights and the knowledge that permission to (non-exclusively) use the land could be withdrawn.

It is important to note that licenses are typically used for short-term arrangements, so are not best suited as an alternative to buying/selling garden land. Furthermore, a licence to occupy could, legally, be deemed a lease if the language or terms used in the agreement, or the reality of the arrangement, showed this to be the case. This is particularly pertinent if a dispute arose, and the matter was taken to court. Consult a solicitor to determine whether a license to occupy is appropriate and will meet the needs of each party, and ensure any arrangement is fit for purpose.

Summary

Buying a plot of adjoining garden land can add to your property value and enjoyment of your home. Compared to the hassle and expense of moving, it can be an ideal way to increase your outdoor space or give you scope to extend your home. However, it can be difficult to negotiate a sale price, as the land’s value will ultimately be personal to the parties involved and their own motivations. The stresses and strains of what is often a protracted process can also test neighbourly relations.

As a prospective buyer, sound legal advice throughout the process will ensure the terms of the sale allow you to use the land as you intended, whether that is purely as amenity space or to develop upon.

If you have been approached by a neighbour wanting to buy a portion of your garden, consider how this will affect how you use your garden and home, as well as the value of your property. Also think carefully and take legal advice about what clauses or covenants might be appropriate to protect your interests. If your existing garden is fairly large then you might not miss a sliver taken off the plot, and the proceeds of the sale may make it well worth your while in parting with it.

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