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anonguest

A Way To Acquire A Building Plot On The Cheap?

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Got into a conversation with someone, who outlined an interesting and seemingly novel way to obtain a house that he would otherwise never be able to afford.

Single bloke aged 50. Never married (and also of view he is unlikely to marry), no kids, no dependents. No immediate family. Of very modest financial means, but has accumulated some savings. Currently long term renter. Recognises that time is rapidly running out for him to ever have a chance to buy a place of his own - and so must resort to 'creative' means. Wants to use his limited funds to ensure his longer term security.

Wants a home somewhere outside of major built up area/towns, and has a preference for Norfolk or Suffolk.

His idea.....

Approach someone selling a building plot with planning permission already granted BUT....offer a significantly reduced price to buy the land leasehold AND also ensure that the subsequent house also built will be part of that same lease.

In other words at the end of the lease the house that he builds, out of his own money, becomes the property of the land seller. Thus, although selling the land at a fraction of what they're hoping to get for it now, the land seller is compensated by getting a bigger return in the longer term.

Another, he assumes, appealing aspect and enticement to the would be land seller is that he further proposes a relatively short leasehold period of about 30 years (i.e until he is about 80 years of age). He bases this on the fact that longevity does not run in his family and he will be lucky to see 80!

He mentioned other various possible additional layers of detail and embellishment to the nature of the leasehold, but the main idea is as described above.

Thus, for example, he buys a building plot for £20K, rather than say £60K asking, builds said house for £80K. Immediate market value of completed home likely to be easily in excess of £100K at todays prices. ASSUMING houses prices will be higher in 30 years time the land seller makes a nice return, for foregoing the full asking price of his land today.

During his period of ownership the house and land will be his in the usual leasehold sense, and he could be free to rent the property out or even sell it on IF he found a buyer - but that buyer would be bound to the original sale contract terms and would lose the property when the 30 years are up.

Thinking about it there and then my immediate impressions were that I couldn't readily fault the idea and would be very tempted IF I Were the land seller, depending on my own circumstances of course. In return said low income bloke gets a nice home for the remainder of his life.

Curious to hear other peoples thoughts on this novel idea.

Edited by anonguest

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He would have the legal right to extend the lease. It's a right of long leaseholders.

Got into a conversation with someone, who outlined an interesting and seemingly novel way to obtain a house that he would otherwise never be able to afford.

Single bloke aged 50. Never married (and also of view he is unlikely to marry), no kids, no dependents. No immediate family. Of very modest financial means, but has accumulated some savings. Currently long term renter. Recognises that time is rapidly running out for him to ever have a chance to buy a place of his own - and so must resort to 'creative' means. Wants to use his limited funds to ensure his longer term security.

Wants a home somewhere outside of major built up area/towns, and has a preference for Norfolk or Suffolk.

His idea.....

Approach someone selling a building plot with planning permission already granted BUT....offer a significantly reduced price to buy the land leasehold AND also ensure that the subsequent house also built will be part of that same lease.

In other words at the end of the lease the house that he builds, out of his own money, becomes the property of the land seller. Thus, although selling the land at a fraction of what they're hoping to get for it now, the land seller is compensated by getting a bigger return in the longer term.

Another, he assumes, appealing aspect and enticement to the would be land seller is that he further proposes a relatively short leasehold period of about 30 years (i.e until he is about 80 years of age). He bases this on the fact that longevity does not run in his family and he will be lucky to see 80!

He mentioned other various possible additional layers of detail and embellishment to the nature of the leasehold, but the main idea is as described above.

Thus, for example, he buys a building plot for £20K, rather than say £60K asking, builds said house for £80K. Immediate market value of completed home likely to be easily in excess of £100K at todays prices. ASSUMING houses prices will be higher in 30 years time the land seller makes a nice return, for foregoing the full asking price of his land today.

During his period of ownership the house and land will be his in the usual leasehold sense, and he could be free to rent the property out or even sell it on IF he found a buyer - but that buyer would be bound to the original sale contract terms and would lose the property when the 30 years are up.

Thinking about it there and then my immediate impressions were that I couldn't readily fault the idea and would be very tempted IF I Were the land seller, depending on my own circumstances of course. In return said low income bloke gets a nice home for the remainder of his life.

Curious to hear other peoples thoughts on this novel idea.

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He would have the legal right to extend the lease. It's a right of long leaseholders.

I'm aware of that. I used the word 'leasehold' for want of better words. Presumably there must be some way, in law, to have a private contract drawn up as described such that the property ownership will revert to the land seller at the end of the agreed time period?

Edited by anonguest

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What happens if the guy with the land goes bankrupt in a couple of years time?

Good question. Part of the reason for posing this here and to perhaps some of the more legally qualified/knowledgeable.

I would have thought though, again assuming the law enables it, that an appropriately arranged sale/contract could protect against this?

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Got into a conversation with someone, who outlined an interesting and seemingly novel way to obtain a house that he would otherwise never be able to afford.

Single bloke aged 50. Never married (and also of view he is unlikely to marry), no kids, no dependents. No immediate family. Of very modest financial means, but has accumulated some savings. Currently long term renter. Recognises that time is rapidly running out for him to ever have a chance to buy a place of his own - and so must resort to 'creative' means. Wants to use his limited funds to ensure his longer term security.

Wants a home somewhere outside of major built up area/towns, and has a preference for Norfolk or Suffolk.

His idea.....

My idea.......

with him being single and a bit older, no kids and not likely to marry he'd be the ideal candidate to have a crack at buying some arable land or woodland and sticking a huge mobile home on it. He can live on it for at least 28 days a year (the arable land anyway,or perhaps he could be working the woodland ;) ), perhaps if he can find the right spot/area away from too many spying eyes he could live on it for most of the year ? even try dividing the land up and keep moving the mobile home/caravan around.

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The majority of small parcels of agricultural land with even a sniff of ever getting residential planning permission have clawback clauses in the contract, so the seller gets both their cash up front and the lion's share of any future gains. Otherwise, there are often no tents, caravans, buses, underground bunkers, shipping containers, sheds living in agricultural buildings etc. clauses, especially if the vendor has any local interests. The viability of trying to live on your own land is also normally affected by: a) whether anyone has a problem with it, and B) the enforcement policy of the local planning department, which can vary across the counties. With agricultural land prices inflating at least as fast as house prices, plus a premium on small acreages, it's getting a bit pricey for someone of limited means to chance it with this approach.

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I'm aware of that. I used the word 'leasehold' for want of better words. Presumably there must be some way, in law, to have a private contract drawn up as described such that the property ownership will revert to the land seller at the end of the agreed time period?

Thats exactly what land owners believed they were doing 50 plus years ago when they sold land leasehold, they believed they would get their land back as agreed between 2 parties at the start of the contact.. The law changed to protect the tenants. This applies to residential not business tenancies.

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Thats exactly what land owners believed they were doing 50 plus years ago when they sold land leasehold, they believed they would get their land back as agreed between 2 parties at the start of the contact.. The law changed to protect the tenants. This applies to residential not business tenancies.

Thanks for that. You learn something new everyday. I always thought the right of leaseholders to renew/extend when the time comes has always been a feature of the leasehold law arrangements.

IF I understand it correctly that is exactly what it is.....the leaseholder has the right to buy an extension but not the obligation.

Thus, using this hypothetical case here, when buying the land leasehold couldn't the buyer simply agree in advance to forgo his right to extend the lease at the end of the 30 years?

In any case even if there was no such way of 'protecting' the land seller so that he gets his land (and now extra house!) back at the end of the 30 years, the property will still have increased vastly in value precisely because there would now be a house on it. In other words IF the leaseholder wanted to exercise a right to renew/extend the lease he would then have to pay the new much market value for the land and house.

Either way the land seller has benefitted and gained financially? So the question remains could such a proposal, under the right circumstances for both land seller and buyer, be viable - as a way for a land buyer to get a reasonable price reduction in the original cost of the land?

Edited by anonguest

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It is possible to purchase a life interest in a property. My father did this for a relative for some reason. An aunt sold her house, and used some of that equity to purchase an interest in a house my Dad owned. He then used that money to buy an annuity (I think, this was some time ago when annuities actually paid something ). My Auntie then lived their rent free till she died. On death my father sold the house and there was nothing to return to my Aunties estate.

Not sure why I mention all that and it might not be relevant, but I am in a similar situation to the OP's example and have sometimes considered short leaseholds etc..

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Thats exactly what land owners believed they were doing 50 plus years ago when they sold land leasehold, they believed they would get their land back as agreed between 2 parties at the start of the contact.. The law changed to protect the tenants. This applies to residential not business tenancies.

The Duke of Westminster fought in the Courts and Lost on this point about wanting 'his' land back. The Leasehold Reform Act prevents this scheme. Too much to explain here - legal essays are out on Sunday night. Also he won't get any mortgage for such an arrangement even if the seller did not realise what he was doing and agreed, without using a Solicitor ( which won't happen because the Lease will need drafting!). No lender will enter into this sort of scheme which provides no security for the loan. Also...even if he could somehow have it happen (which he won't) then he couldn't sell it either because its not suitable as security for a loan - as the lease shortens the value diminishes in his scheme ( which as I say, is impossible to set up) .

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The Duke of Westminster fought in the Courts and Lost on this point about wanting 'his' land back. The Leasehold Reform Act prevents this scheme. Too much to explain here - legal essays are out on Sunday night. Also he won't get any mortgage for such an arrangement even if the seller did not realise what he was doing and agreed, without using a Solicitor ( which won't happen because the Lease will need drafting!). No lender will enter into this sort of scheme which provides no security for the loan. Also...even if he could somehow have it happen (which he won't) then he couldn't sell it either because its not suitable as security for a loan - as the lease shortens the value diminishes in his scheme ( which as I say, is impossible to set up) .

Thanks for the response, though I am not 100% sure I understand what you are saying or the relevance of it to the above mentioned proposed 'scheme'.

To clarify. Said 50 year old bloke is a cash buyer. Would buy the land for cash and build subsequent house on it for cash. No mortgages involved.

Given that a land seller he approaches would likely be selling the land freehold in the first place (i.e. never expecting to have interest in it ever again in any case), it would not be a big deal to the seller that, as others have said, the Leasehold Laws do not make the return of the land automatic.

I still need to hear why it is not possible for a land buyer to undertake to forgo the right to extend the lease in future, at the point of initial purchase?

From what has been said when property is sold leasehold the buyer has the right to extend that lease in the future - but that is not the same as obligation!

Presumably IF the owner of a leasehold property voluntarily and of sound mind declines to do so then, when the lease expires, the property ownership will revert back to the original owner?

I am curious because IF an appropriate contract could be drawn up it could be a creative way to reduce purchase costs for some people.

Edited by anonguest

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I am curious because IF an appropriate contract could be drawn up it could be a creative way to reduce purchase costs for some people.

Making a property unmortgageable (which this plan does) vastly increases the amount of cold hard cash needed

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Making a property unmortgageable (which this plan does) vastly increases the amount of cold hard cash needed

Sorry...but, again, I don't see how this is relevant to the question of whether the core idea is possible and would be supported by law.

Once again, to clarify, bloke is looking for a way to get a reduction in price of a plot of land - and does so by offering the land seller the incentive of the promise of a bigger financial return longer term. It's as simple as that.

Obviously if the land seller is short term in his outlook or, for one reason or another, wants/needs the full asking price now then it wont appeal to them.

Edited by anonguest

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I can't imagine this would be of any interest to a seller.

The return on the cash over 30 years would pay for a house to be built. Why take the risk of getting something back in 30 years, when you are quiet likely to be dead.

Give up all the opportunities for .. what ??

Obviously if the land seller is short term in his outlook or, for one reason or another, wants/needs the full asking price now then it wont appeal to them.

Short term? :o

Edited by Peter Hun

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"I can't imagine this would be of any interest to a seller.

The return on the cash over 30 years would pay for a house to be built."

Maybe? Maybe not?

Assuming of course the land seller can take the proceeds of his full asking price money and invest it/grow it fast enough, relatively risk free, to an amount that will build a house PLUS the cost of the new land he will need to build it on 30 years hence......

Would he be able to grow his pot of money at a rate faster than likely rises in land costs and build costs?

"Why take the risk of getting something back in 30 years, when you are quiet likely to be dead. "

Sounds like an argument against signing up for a pension!?

Again, as said, it depends on the circumstances/outlook of the seller. The land seller may be much younger, or the seller may want to bequeath the eventually returned land and added house to his beneficiaries.....the possibilities are endless.

As also said the exact details (e.g length of proposed 'lease') would be subject to negotiation. A land seller might think 25 years more appealing than 30 years, or only a 50% reduction in price rather than 65% reduction, etc, etc

The core question remains.....is this 'scheme' legally feasible?

Edited by anonguest

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The best dodge I heard of recently was to make use of the Town and Country Planning (General Permitted Development) Order 1995, parts 4 and 5 of Schedule 2.

This law includes "any purpose" occupation i.e. allows temporary residential use.

1. Buy a field

2. Divide into 13 pieces. Register everything with land registry

3. You can temporarily occupy you own land for 28 days

4. Move between your 13 pieces of land over the course of a year (364 days). Stay somewhere else for one night.

So you just need a moveable structure. Post caravan or motorhome would be nice.

The other one was to create a site suitable for use by the caravan club (exempted organisation), then just live in one of the caravans yourself.

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Could be a goer if he finds a plot with PP owned by a grandparent, as they are likely to see 30 years as short term. (Planning for the grandchildren.)

Instead of buying leasehold, what about renting for 30 years and paying it all up front? Does a renter of land have an automatic right to extend the rental period?

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The best dodge I heard of recently was to make use of the Town and Country Planning (General Permitted Development) Order 1995, parts 4 and 5 of Schedule 2.

This law includes "any purpose" occupation i.e. allows temporary residential use.

1. Buy a field

2. Divide into 13 pieces. Register everything with land registry

3. You can temporarily occupy you own land for 28 days

4. Move between your 13 pieces of land over the course of a year (364 days). Stay somewhere else for one night.

So you just need a moveable structure. Post caravan or motorhome would be nice.

The other one was to create a site suitable for use by the caravan club (exempted organisation), then just live in one of the caravans yourself.

Sort of what I said before. from what I gather though you need approx 5 hectares of land to make this water tight ? and you can put a mobile home on it (or just a simple caravan) as long as it's no bigger than a set amount, something huge like 65foot by 20 foot!

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Could be a goer if he finds a plot with PP owned by a grandparent, as they are likely to see 30 years as short term. (Planning for the grandchildren.)

Instead of buying leasehold, what about renting for 30 years and paying it all up front? Does a renter of land have an automatic right to extend the rental period?

On a 30 year lease, yes.

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