Splitting Freehold Land

Do you own a freehold title that you want to split into multiple plots but intend on keeping them rather than selling them?

Is it possible to split a freehold title and own both titles under the same ownership?

We have come across various situations where our clients have been able to do this, but we have also had situations when it hasn’t been possible, and it is important to understand the reasons why, which is explained below.

Why would you want to split the land on a Freehold title?

Typically, most people would want to split a piece of land onto multiple new freehold titles when they intend on using that land for a specific reason, for example:

• To build a new property on, to then keep.
• To build a new property on, to then sell.
• The land is not being used and a developer has approached to buy the land for their own development project. This could be a quick way of raising some money on something you already own but don’t use.

What are the benefits of splitting land into individual freehold titles?

• Splitting a freehold title makes it easier to get separate finance if you intend on using the land for something specific.
• It could be a way of raising some money by selling the separated land to a developer.

Why do you face issues splitting land if you intend to keep both plots?

When you intend to sell the new plot of land, you should ultimately be able to split that title without too many issues. However, due to the law of easements – this isn’t always the case if you intend on keeping both plots.

See below two different examples:

1. In Example A, it would most likely be possible to split the freehold title onto a separate plot of land and keep it in the same ownership as the existing property. This is because there shouldn’t be any issues with easements (rights of way or access to utilities etc.) as the new plot of land can be accessed directly by the adopted highway easily without impacting the existing house.
2. It would most likely be very difficult in Example B to split the title onto a separate plot and keep it in the same ownership as the existing property. The common ownership would cause issues with easements, and the plot at the back wouldn’t have any right of way from the current home, and as there is no direct access to the proposed development from the adopted highway, you could face issues. Property law prevents the granting of easements between the same legal entity.

To overcome the issues faced with example B, rather than keeping the new plot under the same ownership as the current title, you would need to transfer the new plot to a different entity (but one that is still ultimately owned by yourself). For example, if you own the current freehold in your sole personal name, you could transfer the land to a limited company that you are the only director and shareholder of. As there is no longer a common ownership, the seller can grant the vendor the easements required for the titles to be split.

There is a negative to this solution however, as although you should now be able to split the freehold title, the sale to a different entity will potentially cause a stamp duty charge and capital gains tax will potentially be payable (or corporation tax if the existing title is owned by a limited company).

So what needs to be considered when splitting land into new freehold titles?

• Easements – An easement is a right to cross or use someone else’s land for a specified purpose. The most common type of easement that most people will have come across is rights of way. It may not be feasible to split land due to there being issues with easements such as: access, splitting utilities, etc.
• Planning permission – You may need to obtain planning permission from your local authority to split your freehold title and build a new dwelling on this land, for example. This will depend on the size, shape, location and use of the land, as well as the impact on the surrounding area.
• Unity of Possession principle – As per the above, if two plots of land have common ownership, easements become void, and you won’t legally be able to split the title.
• Stamp Duty Land Tax – may be payable as per the above example.
• Capital Gains Tax / Corporation Tax – may be payable as per the above example.

A solicitor will be able to assist in working out if it is going to be feasible to split land onto it’s own freehold title, and they will take the above into account when confirming if it is feasible or not.

How can Advocate Finance help?

You will need to speak to a solicitor to complete the process of splitting land onto a new freehold title.
However, if you have been able to successfully split the land and you’re now looking to raise some finance on the new freehold title or on the existing title,  we can certainly assist with this and can provide a tailored mortgage illustration to meet your individual circumstances.

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