What to think about: Is it worth selling a portion of your garden?

In search of unused garden plots, side land, or garages, thousands of homeowners may be sitting on property valued at thousands of pounds to specialized developers

Homeowners interested in selling portions of their gardens for development have made up the majority of the 50% increase in inquiries that developer Caswell and Dainow has received over the past 12 months.

Adam Dainow, co-founding director, states: "People are looking for ways to release large sums of cash to help out during the cost-of-living crisis."

However, not everyone believes that selling off a portion of your property will have little to no effect on the value of your house when it comes time to sell.

BFIA looks into the benefits and drawbacks of selling a portion of your garden.

Go here to watch the entire video.

Does your property have potential for development?

Your plot needs to be large enough to accommodate at least one property that meets the size requirements of comparable nearby properties.

For example, a property and a garden might not be expected on your plot in inner city areas where space is limited. It might be enough to have a small balcony or terrace. A desirable plot is probably larger in suburban areas where privacy and expansive gardens are expected.

Could you sell a portion of your garden for a certain amount of money?

Whether you live in an area with a higher or lower value housing market will determine this. A plot of land where a typical three- or four-bedroom house sells for 500,000 to 600,000 could be worth up to 100,000 before planning permission is obtained, or between 150,000 and 200,000 after it is. This is according to Caswell & Dainow.

Homeowners can anticipate paying between 150,000 and 175,000 for their garden pre-planning permission and between 200,000 and 275,000 after planning permission in housing markets where a property of the same size sells for between 750,000 and 1 million. Before and after planning, these values increase to 300,000 and 400,000, respectively, with neighboring homes selling for as much as £1.5 million.

"We worked with a homeowner in North London who received 150,000 for land to the rear of his property where planning was secured for a three-bedroom family home, and a family in South London who received 140,000 for overgrown side land that had become a regular site for fly tipping," says Dainow."

However, residents of more modest neighborhoods don't have to lose out.

According to him, "landowners may still net between 30,000 and 60,000 for a slice of their garden for a single home in areas of lower value."

How does it function?

Your lender must first approve the sale if the property is secured by a mortgage.

When you sell a portion of your property, the value of their security decreases because the bank's lending is based on the property's initial value.

According to Nicholas Mendes, mortgage technical manager at brokerage John Charcol, the lender will also consider your home's potential for sale.

"Practical details matter," he says. "Access, parking, drainage, services, boundaries, or rights of way may all be impacted by the sale, which could quickly become a problem.

"These plans are frequently derailed by the knock-on effect rather than the idea of selling land itself.

"If valuable development potential is being taken away, the remaining property becomes less marketable, or the title becomes more complex due to covenants, restrictions, or ambiguous boundaries, a lender may become anxious."

Before making a choice, your mortgage lender may ask for a valuation at your expense. Depending on the amount of your debt and the value of your property after selling a portion of your garden, lenders may request that a portion of the sale proceeds be used to pay back the mortgage.

There are three options available to you if you have been granted permission.

Before obtaining planning permission, sell your garden to a developer. This is the quickest way to get the best price. Decide on a subject-to-planning offer with the developer, whereby they agree to purchase your garden at a higher price provided they can obtain planning permission. You will need to give a lawyer instructions to draft a contract. Make your own application for planning permission. If you are successful, you will receive the highest price for your land, even though this is the most expensive option.

Will your house lose value if you sell your land?

The size of your initial plot, the amount of land you still own, and the kind of neighborhood you reside in will all determine this.

The managing director of Legal & General Surveying Services, Richard Sexton, stated: "In certain situations, selling off a portion of your property won't affect its value, especially if the remaining plot is still generous for the type and location of the property."

Particularly in rural or semi-rural areas, a home with an acre of land can still feel substantial and appealing with half an acre. Even if the house is objectively sizable, removing development land can still lower desirability because buyers will pay more for space, exclusivity, and outlook."

Only when land enhances a home's setting, privacy, future potential, or general enjoyment does it add significant value. Value and market appeal are typically significantly impacted if the sale alters the house's character or lessens its distance from the neighbors.

In a suburban setting, those who started with a smaller plot are more likely to cause their property's value to decline.

"Privacy, parking, outlook, and future extension potential can all be significantly impacted by carving off land," continues Sexton.

In terms of valuation, buyers are more likely to react negatively when the remaining plot starts to feel compromised or inconsistent with nearby residences."

As the creator of Survey Shack, an app-based property assessment tool, and a registered valuer, Brett Ray has personally witnessed the impact on salability.

He stated, "A portion of the garden to a house on my street had previously been separated from the original plot."

It has been more than a year since that property was put up for sale. This demonstrates how shrinking the garden and changing the original plot can "affect future saleability," according to Ray.

According to Ray, homeowners should carefully consider the risks and benefits because outdoor space has become much more valuable since the pandemic, especially in and around large towns and cities.

Things to think about before selling your land.

According to Trudy Woolfe, director of lender services at e Dot Surv Chartered Surveyors, sellers must take into account a number of factors, including the stigma of having the smallest garden on the street, additional traffic down your drive or side access to your property, loss of privacy, and your garden or windows being overlooked.

"Many people don't think about the impact; they just see the pound signs," she continues. It's a delicate balance."

If handled improperly, practical issues with shared boundaries, drainage, and access rights can all have an impact on salability and mortgage chances.

You are eliminating an upside of the original property by selling off the land if your garden has development potential.

Additionally, you lose control over the design and materials used when you sell it to a developer who obtains planning permission and then sells it to a builder, which could negatively affect how desirable your home is.

According to Dainow, a competent developer will ensure that any new residences constructed on garden land are situated to preserve the privacy and property value of the homeowners.

However, you can include specific terms in the contract with the developer rather than relying solely on their word.

For instance, you may decide that you don't want to view any windows from a specific height or that the new owner is in charge of maintaining any newly created access.

Another option is to include an overage clause in your contract, which states that the seller will receive additional compensation if the land's value increases after the sale due to the construction of more homes than initially planned.

Before settling on any terms, independent counsel from a chartered surveyor and solicitor with experience in development land should be sought. This is because land values can differ significantly based on local demand and planning prospects.