SPECIAL FEATURE: The art of a title split – what do you need to know? – Adkirk Law

Anna Sparrow, a solicitor at Adkirk Law, is Inside Conveyancing’s latest guest article-writer, and gives her insight into the art of a title split and what you need to know.

Over the past few years with the pandemic disrupting the property market and then the Stamp Duty Land Tax (SDLT) suspension causing a boom in property sales, it seems that more so than ever before property owners are turning to existing assets to see how they can maximise value and enhance long-term investments.

For people who own surplus land or a large property, a common thought is to split up the plot to create multiple smaller dwellings, such as converting a house into a number of flats. Such transactions, also known as a ‘title split’, have boomed over the course of the pandemic but, before looking to undertake one, what do property owners need to know?

Preparation is paramount

Title splits have the potential to be lucrative, however, it is essential that the correct preparatory work is carried out to ensure that there are no stumbling blocks. Some basic research will reveal whether the idea is feasible. This can be vital to finding out if there are any restrictive covenants affecting the existing land that hinder the proposals or if there are restrictions on development that have already been imposed. This could be by way of an absolute prohibition or the requirement to seek third party consent.

When conducting a title split, it is also essential to look at Planning requirements and restrictions. A property owner may wish to apply for Planning Permission before splitting the land to ensure that the proposed works are going to be authorised. The same applies if there are to be any conversion works to an existing building to be turned into flats. Sometimes Planning may not be required but Building Regulation approval most certainly will be. It is essential to instruct a good surveyor who can prepare the necessary plans needed for any applications and should be able to advise on which permissions needs to be applied for.

Specifically in a situation where a house is to be split into flats it is very important that the Leases are drafted properly. A new Lease would need to address issues such as the granting of essential rights of way to and from the property, over common areas, reserving rights to the other residents, ensuring parking arrangements are dealt with, ensuring that the insurance and maintenance of the building is appropriately organised together with rights for the Landlord to enforce the necessary covenants if the leaseholder fails. Thankfully most Leases are now properly drawn and include the essential clauses due to the prevalence of expertly written precedents.

Can restrictions be imposed?

It is also an important consideration for the property owner doing the split to decide on whether they wish to impose any restrictions on the land being sectioned off in terms of what the property can be used for either now or in the future. This will usually depend on the owners plans for the land to be retained. If someone is selling off some surplus garden land, they may wish to restrict the future usage to garden land or they may wish to impose an obligation on the neighbour to maintain the boundary dividing the two properties.

Property owners may also wish to impose a restriction on any future development of the land. If the area of land is substantial enough to accommodate other properties it is possible to include provisions whereby the owner gets a kickback on the profit made once the land is developed and resold.

In the context of splitting flats and what restrictions to impose, the owner needs to decide what the intended use of the properties is likely to be. Some properties authorise short-term holiday lets allowing purchasers to use the flats as an Airbnb type business. Other residents might object to this and not want the building to end up with a continual stream of people coming and going. Depending on what the owner wants, restrictions on use can be included accordingly. Balance must be struck however between preserving the value of the property and the estate against rendering the property unmarketable due to onerous restrictions.

Amending leases in title splits

In situations where Leases have already been granted but they need to be amended either to include a permission to permit certain activities, e.g., short-term lets or to use the property as a business, this is possible by varying the Lease. This method however relies on the landlord agreeing and there will need to be a variation document drafted and legal fees incurred. This method can also be used if certain permissions need to be removed, such as to remove the right to use the property as a business. Due to the complicated nature of trying to vary the Lease once drafted, it is therefore important to think carefully about what the purpose of the split is and what the intended use of the properties are to be.

Overall, splitting properties can be financially rewarding if done correctly. However, it is essential that thorough consideration is given to what is trying to be achieved and all potential issues are carefully considered beforehand. If not, a title split can turn out to be rather problematic and costly indeed.