Buying low value land – Commercial Property transactions

• Posted onJuly 11, 2022

Low-value land is currently in high demand due to the UK’s housing crisis, and councils and developers are actively looking for potential development areas. In a commercial property transaction, the onus is on the buyer to find out as much information as they can before exchange of contract. The principle “Caveat Emptor” or “buyers beware” applies. There is also a responsibility on sellers to know how to get the best price for their land and the ways that this can be done. It is therefore important to be informed about what to look for when buying or selling low-value land and to consider the following before committing:

Does the land have planning permission?

There are three main ways that land can be sold:

1. Without planning permission

This is most likely the quickest way to sell your land, however, it will result in the lowest value. Any buyer would be investing their money in the hope that they would be able to secure planning permission in the future. No matter how likely it is that planning permission will be granted, there is always the risk involved in the timeline and extent to what you are able to build on the land.

2. “Subject to planning” basis

One way around selling the land without planning permission is to indemnify that planning permission will be secured before completion, usually known as a “conditional contract”. This timescale is usually much longer than selling the land without planning permission, however, will most likely attract a higher price.

3. With planning permission

This is the most appealing way to sell low-value land and will attract the highest price as it removes the planning risk for buyers. Sellers are also able to secure outline planning permission, which would approve the principle of housing on a site but allows some detailed matters to be decided in the future.

If a site is packaged up with the right technical reports regarding ground conditions and drainage, you can make a site “shovel-ready” which allows the buyer to start work very quickly after completion. This is especially attractive to housing developers with shorter timescales and will attract a higher premium for this benefit.

Applying for planning permission can be a very expensive and complicated process, it typically costs between £30,000-300,000 depending on the size, what planning permission you are applying for and the complexity of the site. As a rough guide, a plot of land for sale with planning permission would be worth on average around 8-10 times the value of the land for sale without approved planning.

How do I apply for planning permission?

If you make the decision that you would like to sell your land with planning permission or you have purchased land without planning permission and want to make an application, you will need to submit an application to your local authority. Once you have been granted planning permission, you will need to value your land before putting it up for sale, there are a number of factors that may influence the value, such as:

1. What are the physical qualities of the land? If your land has good access to necessary systems like water or sewer lines, then it will be more attractive to buyers who want to develop properties on it.
2. Where is the land located? Buyers will be willing to pay more for land that is located in particularly desired areas for property development.
3. Are there any transport connections? If a buyer is looking to build houses or flats on the land, then they will consider proximity to transport connections such as bus routes and train stations.
4. What are the local services and amenities? With the same principle as transport connections, developers will be looking for local schools, supermarkets and possibly shopping centres.
5. What can be built on the land? This will depend on the size, shape, slope and location of the land.

How do I know the value of my land?

Knowing the value of your land is very difficult and consulting a professional is crucial at this stage. Some suggested tips are to:

1. Secure planning permission on your land. Already having planning in place can increase your sale price and clears a major legal hurdle.
2. Price your land within a reasonable range. Asking estate agents and auctioneers for quotes and comparing your land to similar plots listed on property sales websites are good tools to know that you are buying or selling for the right price.
3. Ensure the listing makes the land enticing. You must ensure that the listing promotes the plot in the best possible way, it is always wise to invest in good photography to clearly show what you are selling.
4. Work with an experienced professional agent. You should find knowledgeable land agents that you trust to represent your interest and navigate the complex sales process.
5. Maximise the value of your land. The land is only worth as much as the developer is willing to pay.
6. Get your title sorted. A title refers to a document that lists the legal owner of the land and it is an important part of the land selling process. Failing to sort your title out can lead to issues that scare buyers away and delay the sale of the land. You may have to register the land for the first time with the Land Registry, this can take several months. This will ensure that there are no nasty surprises or obstacles further down the line such as restrictions on the title or rights for the adjoining land owners that may restrict future developments.
7. Consider access to both the land you are proposing to sell but think carefully if you are retaining any land.
8. Occupational interests. Is the property subject to any occupational interests such as grazing licences or agricultural tenancies that would prohibit or slow down timescales for redevelopment. If you are considering granting any new interests in the land, you should seek advice from a solicitor to ensure you are taking into account a developer’s requirement for the land to be vacant at completion.

For help with buying or selling in a low-value commercial property transaction, you can find all the information about our services here.  You can get in touch by filling in the form in the sidebar of this page, alternatively, you can call us on 01453 847200 and someone will be happy to help.