Selling Residential Development Properties

Are you a property developer wondering what your options are for selling a residential property or development?

Are you a property developer wondering what your options are for selling a residential property or development?

Before selling any new development, whether that be one new build or refurbished house, 10 flats in a building or 30 new houses it is a good idea to prepare for sale as much in advance as you can. You should take legal advice on the possible ways to sell the properties and, once you have decided how to proceed, you, together with your solicitor, should begin to compile the legal documentation.

There will be numerous certificates and documents that your solicitor will need to be ready to supply to a potential buyer plus, of course, the formal sale documentation. The better prepared you are in advance the easier and quicker your sales will be.

Are you going to sell the freehold or leasehold estate?

The first question you should answer is whether you should sell the freehold of the properties or whether you should retain the freehold and grant long leasehold estates. If you sell the freehold, the whole of the property and its curtilage is transferred to the buyer and you retain no interest in the land at all. This is the normal situation where the development comprises one or more houses. The developer has done his job and can hand over the whole property to the buyer without the worry or need of future management, work or cost.

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However, if the property comprises a flat or apartment it is more likely that you will have to sell a long lease of the property (see Residential Leases), which is usually a lease of at least 99 or 125 years.  If the flats are being sold on long leases then the developer will initially retain ownership of the freehold of the whole building. That freehold can either be retained long term by the developer, sold to a third party, or transferred to a management company which the owners of the flats control. The ground rents paid by the leaseholders, although sometimes very small, represent a certain income for the freeholders. However, the freeholder will also be responsible for insurance of the building, and its repair and maintenance in accordance with the terms of the lease. Although the costs of doing this work should be recoverable from the leaseholders, the obligations on the freeholder may be more trouble than the ground rent is worth, which is why many freeholds are transferred to a management company owned by the residents of the flats. In addition, even if you would prefer to retain ownership of the freehold, the right of Leasehold Enfranchisement gives qualifying tenants of long lease interests the right to purchase and control the freehold if they want to, whether or not the freeholder wants to sell. See: Leasehold Enfranchisement.

Occasionally, developers will sell individual houses on long lease interests. This, however, throws up many of the same issues as selling long leases of flats, and the tenants have even stronger rights to buy their freehold, so should be carefully considered with your solicitor before proceeding in this way.

Are you going to sell the properties off-plan?

Selling a property off-plan means that someone else buys it from you before the construction has completed and there is therefore usually no detailed plan of the property’s lay-out. It is typically sold at a discount and often with a small deposit requirement, which means that a buyer has the potential to make a good return on the property very quickly. Certainly in the London market selling and buying an apartment off-plan has become very popular. If you want to sell off-plan then you need to ensure that your solicitor knows this well in advance as the form of sale documentation will be very different to a sale of a completed property.

Our dedicated team of solicitors, based in Witney, Oxfordshire, would be happy to answer your questions.

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