part disposal of garden

part disposal of garden

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Good morning

Fred and Jean want to sell some of their garden to build a house. It is their own dwelling house and they do not own any other property.

The total area is way under 1/2 a hectare and it is a reasonable area as a lawned garden.

The garden has not been fenced off.

No building work has been started. Planning permission has not been applied for yet.

Ok. Pretty clear PPR should apply.

But, although it has not physically been fenced off, the mortgage company on the house said they required it to be registered seperately at the land registry.

Here's my hesitation; hs283 says "land which at the date of disposal has been fenced or divided off from your garden for development, or has been developed or is in the course of development (for example, excavations under way for foundations, roads, services, and so on) will not qualify" 

Does the fact that the area has been shown on the Land Registry, although not physically divided by a fence, does this constitute "divided off"? Or is it talking physically?

Would it make a difference if planning permission had been granted, but no development had started?

Many thanks in advance.

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By Paul Soper
08th Aug 2014 17:37

Clarification please -

I quote "Fred and Jean want to sell some of their garden to build a house" - this suggests that they already have a house on this land but wish to sell part of it to build a second house on the land that remains after the sale?  Or do they want to rebuild their existing house.

If they are simply selling the land as part of the financing then it will be exempt.  However if you mean that they want to build a house on the existing garden land and then sell that house and the land on which it now stands then I can understand why the Building Society is cautious.  You could build the house on the land using the borrowed money but then convey such a small amount of the land that the property would be unsaleable.  Of course you wouldn't, that would be crazy, but it is why the building society would want to see the land separately registered.  Is this a problem?

Look at it the other way round, your client could have a house with a very small garden and then buy an adjacent field to provide better garden facilities.  It would be separately registered as a plot but would clearly become part of the garden, provided it was within the permitted area - there was a case many years ago of a taxpayer buying a field which was not even sharing a boundary, it was further down the road, but still qualified - although I'm not sure I'd want to rely on that case today...

So registering the plot separately but in your clients name would not IMHO, in itself, separate it as no physical separation would have occurred, and it is physical separation that prevents the relief being given.  If the property is built as a separate unit by your client and then sold you would also have to think through the consequences of that, both from the point of view of trading and the apportionments necessary to calculate the gain on the bit which is being sold.  It may be advisable, for example, to form a special purpose vehicle to which the land is sold whilst incontrovertibly exempt and then develop inside that legal structure.  Expenditure which is intended to give rise to a gain is not exempt under s224(3).

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