This is the first formal step in the process and as such is particularly significant.
Finding a plot
There are several online databases that can provide details of local plots for sale. In addition it is recommended to spend some time in each area under consideration speaking to estate agents, land agents and researching any land sale advertisements in the local press.
Other people to contact include developers, the local council and the utility organisations for the area, all of whom may have an individual plot of land that is surplus to their requirements and available for sale. A further suggestion might be to get together with a group of other potential self-builders and buy a bigger piece of land to develop.
Buying the land
Many development plots are sold via auction, where typically a 10 percent deposit will be required on the day of purchase, with the balance due within 28 days. Therefore the finance required must be securely in place before the auction takes place in order to avoid any possibility of entering into a commitment that cannot subsequently be met.
Alternatively plots can be purchased via land agents, who perform a similar role to residential estate agents. They will source suitable local land that is available for sale that meets a buyer’s criteria and convey offers to a seller. Again, it is normal for land agents on behalf of their client to insist that a potential buyer can prove their ability to meet the purchase price. If this is to be partly funded by a mortgage, an approval from the lender will usually be required at an early stage.
Planning permission and access
Obtaining permission to build your house on your plot is paramount in ensuring your project goes ahead. Without planning permission, your lender will not release the funds for your project.
The most important consideration when selecting a plot of land to buy is the likelihood of obtaining planning permission for the build. Many plots are sold with planning permission already in place although these are usually considerably more expensive. If buying land with full planning permission already in place, detailed development plans will have been submitted to the local planning authority and it is therefore important to ensure that the actual permissions granted are entirely suitable. Local planning authorities are required by law to keep a public register of all planning applications, which applicants should be able to access easily.
Planning permission expires after three years and so purchasers should be satisfied that there are not any significant time restrictions attached to existing permissions. Plots are also sold with outline planning permission. Although offering the purchaser less security, this is often cheaper to obtain and it will also offer an indication of the type of full planning permission that should be achievable in the future.
The cheapest way to buy land is to select a plot without any planning permission. This can be a risky option and a purchaser could then expect to see the value increase substantially once planning permission has been granted. However, to apply for lending to build a property, plans and planning permission must already be in place and lenders will want to be satisfied that development of the site can commence prior to the expiry date of the planning permission.
To make a planning application you first need to work out who makes planning decisions in the relevant area. There is normally a two or three-tier local authority system, consisting of a county and district council, in most cases a parish council may also be involved in this process. The majority of decisions are taken by the local district or borough council, however, where a unitary authority is in place, it will act as the local planning authority.
Access to the land is another key consideration when selecting a plot to buy. The build costs will be substantially higher for a plot of land that is difficult to reach or requires specialist machinery. Plots that are on a hill or a steep slope may also create additional building difficulty and therefore increase cost. While every self build mortgage lender will have its own specific set of criteria to be satisfied, most will require copies of the build plans and planning permission to be provided to their valuer on or prior to inspection of the land and throughout the property build stages.
Land surveys and Stamp Duty
Having a survey done on the land helps ensure a site is suitable for building on. Customers are strongly advised to obtain a survey of the land that they are proposing to buy. In addition a solicitor should be able to report on a number of issues concerning the suitability of the land for purchase, including:
- Checking what is likely to happen to land that is in the vicinity of the house
- Finding out if utilities (gas, water, electricity and phone) are connected or in existence nearby. If they are not connected, how easy would it be to do so, and what would it cost?
- Ensuring that the plot is not on a flood plain and be wary of any nearby streams
- Ensuring that brownfield sites do not present unforeseen problems that are connected to its previous use e.g. chemical contamination arising from a historic industrial use
- Checking that the land is not legally subject to any restrictive land covenants or ransom strips (where somebody retains ownership of a section of the plot) that materially affects its use or access.
If the cost of the building plot does not exceed the current threshold set by the government, Stamp Duty is not applicable. Where the threshold is exceeded, Stamp Duty will be levied on the amount by which the cost of the building plot exceeds that threshold.
Customers are advised to check the HMRC website www.gov.uk/stamp-duty-land-tax-rates to confirm the current threshold applicable.
Your home may be repossessed if you do not keep up repayments on your mortgage.
