How much to pay for land?

[User656789098]

I’ll try to be brief. We have exchanged on a house where half the garden is owned by the property and half leased from the LA. Garden is a long square. We have approached the LA to buy the leased garden, which they have agreed to. During house negotiations we were told by the EA the owner had been quoted £15k to buy the garden. We adjusted our offer accordingly, with a plan to be in process of buying the land as soon as possible after exchange so that we’d be in a position to complete on it with the house.

The LA have come back and quoted a value of £40k! They have also informed me that they have to open bidding on the land to any other interested party. There are several other properties bordering the garden, it would be quite awkward for any of them to incorporate the leased garden into theirs, but they could feasibly do so. Two have small gardens so it could be an attractive idea, I suppose.

The garden cannot be developed so there is no risk there. But I just cannot stomach paying £40k for a patch of garden that is probably not worth anything like that in real terms. If I bid too low and there is another party bidding higher, I’d lose out.

Anyone been in a situation like this before, or any surveyors who could advise here?

Thanks in advance!

40k sounds a bit steep for something that cant be used for development, however, did you make any formal enquiries as to the the possible cost of the land, rather than just take the EAs word for it? Surely this bidding process is something that should have been flagged up as a potential problem by your solicitor? What is their take on this?
If you have already exchanged I think you are a bit stuffed tbh.

Could you get an EA or surveyor to value it, not the EA you are going through. A bigger garden round here would add 40k to price. Or maybe just continue to lease. If you look at similar houses with bigger / smaller gardens you maybe able to work out price difference.

It was always going to be a tricky one, as the LA historically didn’t want to sell the land (hoping to develop it along with adjoining plots at a later date - now impossible). We could have let sleeping dogs lie and continued to lease it, but wanted to head off the theoretical risk of any other purchaser (ironic). The previous owner had enquired and received a written quote some time ago. It has taken an age for an updated survey by the LA - we assumed some uplift, but they’ve done a ‘marriage value’ estimating what the extra land would theoretically add to the house price.

What we had never been told was that the land would be offered to all bordering properties. Everyone including the solicitor had assumed we’d be doing a straight negotiation, sealed bids were a shock. It’s always been used by the house and looks seamlessly part of the garden so no one had considered we wouldn’t have first refusal.

Being where we are, I can’t decide strategy. Do we offer what we think is more reasonable (much less) and risk losing it? Or gritting the teeth and taking the asking price hit? The garden is still a good size without the leased part, but it almost halves what the house currently has at its disposal and would make it less desirable at resale, possibly...

penguins house prices around here dropped 10% this year and very little is shifting. It’s a difficult question to answer as to how much a piece of garden would realistically uplift a selling price right now. It could be £40k, it could be nothing but give the house the edge over a similar sized property.

Where are you? We are offering some of our garden to a neighbour and £40k is the price. It will double their garden. Sounds the same BUT I expect it will add at least that and make it far more saleable.

Problem you have is possible competition. Can't you continue to lease it?

Whilst you may have an opinion of what that piece of land is worth paying for, ultimately land is worth what the highest bidder/buyer is prepared to pay for it.

Our business sold a tiny patch of land (literally 3m by 1m sq piece of grass verge) for around £15k because the person who bought it was willing to pay that amount of money to own the access rights over that patch of land. That land had no value to anyone else whatsoever until that person decided they wanted to buy it.

All you can do is decide how much value having that piece of land would add to your property and what you can afford to pay for it if you decide you do want it more than you don't mind not having it.

We are in leafy South East. It seems we can’t stop the train now as the land has been offered for sale. If there are no other bids we could probably change our minds and ask to lease, but that’s a risk.

The issue for me is the house was a wreck when the previous owner bought it, not that long ago. It would have added a few thousand to the house value then. The house was renovated and quadrupled in value, garden unchanged. The leased part really isn’t inherently worth any more. £15k seemed steep enough, but fair.

scrowy I know you’re right, it is worth what someone is prepared to pay! I have no idea what the neighbours might want to do. Is there any point trying to sound them out?

It seems very unlikely another neighbor will offer. I’d make a low bid. If you are outbid you could always offer to buy from them?

You will find that the LA will have a duty to obtain the highest price. It’s not their money and they are accountable to the public and the auditor! I would get a valuation from a qualified surveyor who knows your area. Obviously you don’t want to pay too much, but if you want it, you must evaluate your best and final bid. What is it worth to you?

Surveyor here!

I've done heaps of these types of transactions, acting for landowners and being approached by neighbours wanting to extend their gardens, add parking spaces etc. Obviously every case is different, but from what you've told us £40k doesn't sound that steep in my opinion. As you know it's all about what it will add to the property.

I've done some work for institutional clients before - not local authorities but lots of charities- and the issue of making other parties aware is quite commonplace. It sounds like everyone has just assumed that because the patch of land looks like it is part of the garden of the property you're buying it will continue to be that way, owned or leased - if I was you I'd be asking your solicitor why they made that assumption too and why they didn't advise that you got this formalised with the LA first.

I guess it comes down to how much you want the extra land. You could tell the LA you're not willing to pay any more than £15k (or less) run the risk and hope none of your neighbours go for it, but only you know whether you'll be bothered by that or not.

If your local authority is anything like mine I would be surprised if they waited, knowing the house was up for sale/being sold and that they had a bit of a bargaining tool.

At the end of the day, it doesn't really matter that the land doesn't have any alternative uses - they own the land and you want it, so they can pretty much name their price.

Sorry if that wasn't what you wanted to hear, but really hope none of the other neighbours want it and you get it at a good price.

*wouldn't be surprised

@BubblesBuddy is right - they will have to be seen to be achieving best value and need to prove that there was no one who would have paid more for it.

Interesting. I have similar going on.
Unlike pp I think the suggestion of £15k increased to £40k is an absolute disgrace.

The garden cannot be developed so there is no risk there
Why do you come to this conclusion? Just wondering cos had a friend in similar scenario and recurring applications eventually ended in an application getting passed

Thanks househunt, that’s useful. I’m irritated by how this has developed. However, I took the risk as I wanted this house for specific reasons. I’m not sure why the solicitor didn’t forsee this, but I probably would still have offered the same on the house.

Judas there will be a covenant preventing development. Also access is impossible barring some very unlikely demolition!

oblomov are you buying from an LA too?

I’m considering risking it and making a lower offer. Most of the other properties would have very weird shaped, awkward gardens if they bought it. The house at the back already has a huge garden and elderly owners so I can’t imagine they’d go for it. It’ll be a cash transaction on the garden, and it’s cash I need for furniture etc. so the extra makes a big difference to my family.

I think I’ll offer what we’d budgeted. If someone else goes higher then I’ll live with the garden we have. At least no one can whack a house on it!

@EggCustardy no problem, hope it all works out for you.

Just also be wary about covenants, as they can be difficult to enforce and don't always mean there will definitely be no development. If you sell some land and attach a covenant you need to have a retained interest to be able to enforce it. For example, if the LA doesn't have any adjoining or associated property, they may find that they can't enforce it and if the buyer really wants to develop it they may still do so.

Also, covenants are often put in place so that the seller can have a second bite of the cherry if development does occur, ie they get the money for selling the land and then later on the purchaser comes back and says they want to discharge the covenant and are prepared to pay to do so, then the LA gets another payment which will be relative to the value of whatever is built there. Obviously I don't know what other factors come in to play in this particular situation, but just be aware that you can't completely rule out development based on a covenant.

I will always remember acting for a client who many years previously sold some scrubby wasteland in Polzeath, which if you don't know it is a very expensive and sought after area of North Cornwall, right on the coast. There was a covenant against development but it was terribly worded the Client had no remaining interest there. After taking some very expensive legal advice it was found that the covenant was unenforceable, so the new owner didn't have to pay anything to discharge the covenant. The new owner has gone on to build a 5 floor block of apartments overlooking the sea, each worth about £750k each!

I know this doesn't help the OP, but I'm not surprised that the LA have increased the value of land so much, most of them are under such budgetary pressure now that they are looking to maximise the profit on any land sales. My own district council is selling off parcels all over the place to fund their obligatory activities.

A friend in my village had a similar thing. However, every one of the neighbours expressed an interest and although they did get it in the end (not sealed bids) it was 30 grand more than they originally budgeted. If you really can live with what the house currently owns then it's no problem but I wouldn't assume just because their gardens would be a weird shape that others wouldn't think it's a great opportunity to get some more land.

househunt that’s very useful to know, thank you. Due to in-fill of houses other land I’m almost totally certain access is impossible.

bythepath where in the country was your friend? Looking at the plan the other houses (bar the one behind, who already have a huge gsrden) would have really bizarre gardens if they bought it (a small opening where their boundary meets, with the new garden going off at a sharp angle).

If someone is willing to pay 30k over the odds, good luck to them. In this climate I can’t stomach chucking in tens of thousands I might not get back. I’ve already bought at the top of a falling market.

would have really bizarre gardens if they bought it (a small opening where their boundary meets, with the new garden going off at a sharp angle
If someone wanted extra garden, I doubt that would bother them. However, on a positive note, if someone has bought a house with a small garden, I doubt they're interested in gardening.

I hope you’re right Quiteunfit!

On further digging with the EA today, at least two of the bordering properties are rentals owned by investors, so seem very unlikely to be interested as the houses are already permanently rented out. The EA knows a couple of the other owners who’ve expressed interest in downsizing, so again, unlikely they’d take on the expense if they are planning to sell. In fact I could approach one to privately but a bit of their garden if I lose out here. I feel the risk is now a bit lower.

However, is it worth knocking on the door of the remaining parties and sounding them out? If no one has any intention I could just put in a low bid. Or do I risk showing my hand? Argh!

*buy a bit