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Land purchase: A guide for first-time buyers

Isla King offers some insights into land purchase to help the growing band of newcomers to the market.

Our analysis of Aberdeenshire shows that the demand from first-time buyers is growing and there is certainly no reason to be unnerved if you find yourself considering land, or a property with land, as your first purchase.

Here we take a look at some of the things to consider before purchasing land. As the saying goes there is no such thing as a stupid question! 

Maps

A map can be an important tool, especially if you are unfamiliar with the location. Some of the benefits of a clear boundary plan are: 

• A general indication of the lie of the land and index of fields.

• The location of any buildings in relation to the land for sale. 

• Access routes. 

• The proximity of any privately-owned residential properties. 

Viewings

Use your viewing as an opportunity to learn from the hosting agent or seller’s wealth of knowledge of the land and property. Review the brochure and be prepared by thinking of questions before the viewing. 

Documentation

There are many documents that you should be awear of ncluding the below:

Entitlements

Basic Payment Scheme is available to farms which have been allocated payment entitlements as a result of the Common Agricultural Policy. There will be a flat rate entitlement value for each region from 2019 but there is some uncertainty regarding future subsidies. Details can be found on www.gov.scot. For example, to participate and receive subsidy the farm must have a minimum of three hectares of land that is being used for agricultural activities. An agent would be able to advise you on this.

Planning consents and building warrants

It is important that the correct consents and completion certificates are in place, and your solicitor should consider this when creating the contract. If the correct consents aren’t in place and building regulations have changed since the time the building was established, additional works may be required to meet the current specification to obtain a building warrant. This could be time-consuming and costly.

Septic tank registration certificates

Private septic tanks must be registered with SEPA.

Energy Performance Certificates (EPCs)

these give the property an energy efficiency rating from A (most efficient) to G (least efficient). Properties let privately after April 1, 2019 will need a minimum standard of band E.

Home report

A survey of the property showing the current market value and schedule of condition. Are there any areas of concern or potential liability visible? 

Private water supplies

It is important that any private water supplies have been tested by Environmental Health to ensure the water is fit for human consumption. Some banks won’t advance lending without a guarantee of adequate water. You should also consider who has ownership of the water supply and if any third parties have a right to the supply. It is also important to consider that the local council must be notified of any let properties with a private water supply by January 1, 2019. 

Existing leases

Be cautious of any ongoing leases – residential, agricultural, sporting, etc, and any conditions or clauses, especially informal agreements. Always seek legal advice. 

Ongoing obligations or payments

For example, Agri Environmental Climate Schemes, Woodland Grants and wayleaves payments for utilities.

What is the value? 

If you are unsure of the value of the property you could instruct an agent to act in an advisory capacity. However, it is important that you determine the price you are willing to pay based on your objectives and planned use for the land. There may be additional factors influencing value: 

• Existing grants and subsidies.

• Sporting potential. 

• Any income from utilities. 

• Any third party rights and accesses.

Legal process elements

Arrange your finances and appoint a solicitor at the very beginning.  It is never too early to arrange your finances to ensure you are in a position to make an offer when the land and property that’s right for you comes to the market or a closing date arises. If you are prepared it may put you in a stronger position compared to other buyers. 

Note interest

Meaning the agent is obliged to advise you of a closing date. 

Make your offer

Remember to consider how the property has been marketed – for example ‘offers over’, ‘guide price’, ‘fixed price’ or ‘offers in the region of’ – as this may influence your initial offer. Your solicitor will be able to advise you. 

The contract

Once a written offer has been accepted the sale is not binding until the purchaser’s solicitor and the seller’s solicitor have reached a formal agreement on all terms of the contract. This agreement is known as Conclusion of Missives. 

The conveyancing

The title deed will need to be examined by the purchaser’s solicitor to establish the extent of the property and any obligations, such as maintenance of a shared access. Once the searches are complete the solicitor will create a Diposition (title deed) transferring ownership. 

Settlement

Transfer of funds meaning you become the new owner of the land and property.

Tax implications when buying land

Land Buildings Transaction Tax (LBtt) is proportionate to the price of the property. The tax payable is calculated based on residential and non-residential bands. The percentage rate for each band is applied up to the threshold with the remainder in value charged up to the next threshold. 

Non-residential property transactions: lBBT rates and bands 

Purchase Price

LBBT Rate

Up to £150,000

0%

£150,000 to £300,000

3%

Above £350,000

4.5%

 

Residential property transactions: lBBT rates and bands Purchase 

Purchase Price

LBBT Rate

Up to £145,000

0%

£145,000 to £250,000

2%

£250,000 to £325,000

5%

£325,000 to £750,000

10%

Above £750,000

12%

 

Additional Dwelling Tax of 3% may be applicable to some purchases. More information on the tax band thresholds and calculator are available here.