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Plot purchase and new construction: Why it shouldn’t be as expensive or complicated as you think

12:53 19 October 2016

Archant

The summer holidays are but a distant memory and autumn is upon us. Are you still thinking about that ramshackle house just up from the beach that you saw on holiday? The one with the most amazing views? Or perhaps you are dreaming about the plot of land down the road that is in just the right location for your perfect house

You may be dreaming of building your own house on the perfect plot of land but may discard that thought as fantasy on the basis that it will be much too expensive, an inordinate amount of hassle and extremely complicated.

Well, a plot purchase and a new construction needn’t be as expensive or complicated as you may think, and indeed there are many upsides to taking this route rather than holding out trying to find the perfect house, in the perfect location, which has already been built by somebody else.

There are a number of ways to go about this:

(a) find an empty plot, buy it and apply for planning permission and if obtained, build

(b) find a plot, enter into an option agreement to purchase it, whilst you obtain the planning you need. If you get planning build it and if not walk away

(c) find a plot with existing planning permission, buy it, and build the house; or find a plot with a partially built house and then purchase the land and building (as built) and work with the developer/builder to finish off the house to your specification

There can be a number of possible advantages to proceeding in any of these ways:

Stamp Duty Land Tax (SDLT)

• The SDLT may be payable in relation to the value of the land you buy (assuming the plot is vacant) and is therefore likely to represent a significant saving

• Assuming a house is partially built on the plot, then there is likely to be a reduced value being the total of the value of the plot and the value of the house as constructed

• There should not be additional SDLT (the additional 3% that came into force on 1 April 2016 in respect of second homes) on land that does not have a dwelling built on it

VAT

• You may be able to apply for a VAT refund on building materi-als and services if you are building a new home or converting a property into a home (subject to the materials qualifying and an application being made to HMRC within three months of completing the work).

Perhaps the most important and practical point is that you get to build your own house, to your own design, specification, layout and orientation, to suit your needs and which will last many generations.

Recently we acted for clients in relation to the purchase of a property which had been partially constructed by the devel-oper. The developer was keen to extract their value from the site as early as possible, and was prepared to work with our clients to finish the home to their specification and layout.

Our clients had the benefit of being able to purchase the land and property as constructed at the date of completion and paying SDLT on the value at that stage (rather than the value of the property once completed). They also had the opportunity to choose certain aspects of the build to their own requirements. We provided extensive construction law advice in relation to the contract with the developer and our private property team dealt with the land transaction. We were able to use our network of contacts which encompass buying and selling agents, land agents, lenders and brokers. They worked hand in hand with our own teams of experienced construction lawyers who advised on appointing architects and other construction professionals as well as negotiating building contracts, plus our residential property experts to provide the range of services required for the purchase of land for development.

Of course, finding a plot can be very difficult but with the right advice and preparation you can ensure you are in pole position to snap up a suitable plot when one becomes available. Whilst it may be tempting to rely on your architect or surveyor to advise you on selecting and completing a suitable form of building contract, we would strongly recommend always seeking advice from specialist construction lawyers when undertaking significant works to your property, or a new build project. There are many legal considerations to be aware of, and the often used JCT family of so called “standard” contracts are not to be recommended without some amendment to better protect your position.


Top tips

• Take specialist advice - Take specialist advice early on - you may save time, trouble and money

• Widen your search - Widen your search to consider not just empty plots of land but also partially constructed sites

• Be realistic - Be realistic about your budget and time scales but don’t give up on the dream too easily


David Savage and William Marriott are property lawyers with Charles Russell Speechlys in our Guildford office. If you would like to speak to either of them about any aspect of building or purchasing a site or property to build on, please email them at david.savage@crsblaw.com, or william.marriott@crsblaw.com

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