For roughly the past year and a half I've been recording snippets of progress on this roller coaster of a build, so I though it would be a good idea to edit the footage to create this timeline. Even though we still have quite a way to go before I am happy to call it 'finished', it's great to look back on to see how far we've come...
self build in London
Last time on the build blog I wrote about the negotiating process and how we agreed an asking price with our vendors. This time I’ll summarise the actual legal process of buying land, which like everything else in this game – takes a long time!
You can either purchase land with planning permission already in place, or without. In some cases, plots for sale have had planning permission refused once, or many times before – so it is important to do your homework and look up the planning history on your local council’s website.
Our plot of land did not already have planning permission in place, but we didn’t want to purchase it without planning permission, and the vendor didn’t want to sell it without planning permission either – we both wanted to be certain that a house could be built there before the deal went through. So, if you are in the same position, there is a way to do this, it’s called a Legal Option To Buy. It is a legal agreement that protects both parties whilst the planning process happens, and if the outcome is positive, the purchase process is then kicked off.
What Is An Option Agreement?*
An option agreement is an agreement made between a landowner and a potential purchaser of their property. In simple terms, both parties enter into an agreement, in return for a non-refundable sum of money, the potential purchaser of the land has a legally binding option to buy at a certain date or within an agreed time-frame, or after completion of a certain event (for example after obtaining planning permission).
It is a point for negotiation when drawing up the option agreement whether the non-refundable deposit will be taken off the final purchase price of the property.
The Advantages of an Option Agreement.
For the Purchaser
- Securing an option agreement minimises your risk. If obtaining planning permission takes longer than expected, you can be confident that you have a legally binding agreement that prevents the seller from getting frustrated and selling the land to another buyer.
- You may be able to secure the final purchase price of the property in the option agreement. This can be a major advantage for agreements that span years rather than months because if land value increases, you are only bound to pay the contracted price.
- An option can be registered, securing your potential investment.
For the Seller
- If the property market is experiencing a downturn, you are assured of an interested buyer at some point in the future.
- You will normally receive a non-refundable deposit in exchange for the option.
- In certain circumstances the option agreement can include an overage clause, enabling you to claw-back additional money after the sale has completed.
The Importance of A Good Agreement
- The following conditions should be covered in a good agreement:
- The duration of the term of the option
- The amount of land included in the option
- The condition or conditions which must be met for the option right to be executed
- The amount of the deposit and payment terms
- Any extension on the duration of the option if applicable
- The final purchase price of the property if applicable
- A disputes resolution procedure
- Details of how each party may terminate the agreement under certain conditions
For security you need to register a call option agreement with HM Land Registry. A notice of the option agreement will be put on the title stating the potential buyer has a right over the land if the event needed to execute the option takes place. In the case of a pull option, the execution of the agreement is driven by the seller, therefore the buyer has no exercisable rights over the land so there is no reason to register this type of option agreement. *saracenssolicitors.co.uk
As with everything else on this rollercoaster of trying to build your own home, the Option Agreement process had many hurdles, and we were going through the planning permission process at the same time – let’s just say it was an extremely challenging time!
Luckily, our vendors were patient and understanding and they had our Option Agreement extended two or three times to allow us to deal with the issues and delays that came up in the Planning Permission process – but of course, before you can apply for planning permission, you need to find an architect to help you design your dream home – which I will write about next time on the Build Blog.
See you then!
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Post Cover Photo Credit: Jason Hawkes