When to split deeds

[Bournbrook]

Hi all. I hope this is in the right section of the forum. 
we have got permission to build a new house in our current back garden which we will then move into and sell the main house. We have a mortgage on current house but only about 30% LTV and estate agents don’t feel that the smaller garden will cause a huge devaluation. I appreciate I need to check with my current mortgage provider whether we can build, but can anyone advise:

 

a) whether we need to apply for the mortgage provider to drop having a  charge on that piece of land?

b) whether we need to apply to split title deeds with land registry before selling main house? I have read they can be funny about doing it unless there’s a change of ownership. 
 

Many thanks 

[Mr Punter]

You will need your mortgage provider to agree your scheme.

 

You can then go on to build the new house, sell your existing house as a new title, retaining the land on which the new house is built.

[Bournbrook]

2 hours ago, Mr Punter said:

You will need your mortgage provider to agree your scheme.

 

You can then go on to build the new house, sell your existing house as a new title, retaining the land on which the new house is built.

Thank you for this. I came to roughly the same conclusion having been on the phone to land registry and the bank since I wrote this post. 
 

presumably when selling existing house with a new title, this is all dealt with by a normal conveyancing solicitor as part of the normal sale process?

 

thanks again

[Mr Punter]

Yes.  They use a different form.  https://www.gov.uk/government/publications/registered-titles-part-transfer-tp1

[Bournbrook]

Further to this. We contacted our mortgage company and they have refused to let us build a new property on the land. It’s crazy as our mortgage is pretty small in relation to the value of the land (about 30%). Seems to just be a blanket Lloyds policy although I have asked for them to highlight where in the policy it says this (although each request takes 3 weeks to reply to!!). 
Someone at the bank said I could actually transfer out the plot of land and ask the bank to accept keeping the existing mortgage on a smaller plot? Does anyone have experience of this and how it works in reality? Any tax implications?

[Temp]

The mortgage needs to be secured on the land. They can't do that as it's effectively undefined until you split it. You don't want it secured on the whole plot either, only on the bit where the new house will be.

 

This is all normal and will apply to all lenders

[G and J]

Regardless of the size of mortgage it sounds like the whole plot is against a single title.  The charge against that title is the mortgagee’s security so they’ll be loath to release it, understandably. 
 

If you are going to sell your main home then the spilt will happen then and it’s nothing to do with the mortgage company as your mortgage will need to be redeemed at that point.  

[Bournbrook]

6 minutes ago, G and J said:

Regardless of the size of mortgage it sounds like the whole plot is against a single title.  The charge against that title is the mortgagee’s security so they’ll be loath to release it, understandably. 
 

If you are going to sell your main home then the spilt will happen then and it’s nothing to do with the mortgage company as your mortgage will need to be redeemed at that point.  

That’s what I thought. However, they have said that essentially we are not allowed to create another habitable dwelling on the plot whilst it has the mortgage on

[Bournbrook]

8 minutes ago, Temp said:

The mortgage needs to be secured on the land. They can't do that as it's effectively undefined until you split it. You don't want it secured on the whole plot either, only on the bit where the new house will be.

 

This is all normal and will apply to all lenders

Sorry, I should have clarified. This is mortgage company for existing house. We fortunately do not need a mortgage for the building of new house 

[Temp]

That's ok but the mortgage still needs to be secured against the correct bit of land. 

 

There can sometimes be issues with the land registry if you split land but want to own both plots. Depends if there are any covenants or easements.

[G and J]

7 minutes ago, Bournbrook said:

This is mortgage company for existing house.

I’d assumed as much.

 

When in the process are you intending to sell the current house?

[Bournbrook]

1 minute ago, G and J said:

I’d assumed as much.

 

When in the process are you intending to sell the current house?

At the end, once new house is built. Then we’ll move into new house. Had planned on the split during sale, but now looks like mortgage company won’t allow us to build another dwelling on the land they have a charge on. Seems strange as surely this would only increase the value! They have suggested transferring out the garden plot and requesting the existing mortgage to stay on current house with smaller garden. Seems to be an issue transferring part of a title deed to yourself though….

[G and J]

5 minutes ago, Bournbrook said:

At the end, once new house is built. Then we’ll move into new house. Had planned on the split during sale, but now looks like mortgage company won’t allow us to build another dwelling on the land they have a charge on. Seems strange as surely this would only increase the value! They have suggested transferring out the garden plot and requesting the existing mortgage to stay on current house with smaller garden. Seems to be an issue transferring part of a title deed to yourself though….

Certainly possible, but arguably unnecessary.  
 

I suspect had you just gone and done it it would have been fine, I’m sure many have in the past.  
 

Simplest above board way may be to pay off your mortgage and if you need that money to finish the build then raise a self build mortgage against the new pad.   Shame about the fees.

 

Of course you could decide to abandon the whole plan, then tell the mortgage company so (to their relief).

 

They don’t often pop round to check that you are looking after their asset, do they?

[G and J]

12 minutes ago, Bournbrook said:

Seems strange as surely this would only increase the value!

Remember that they have seen all sorts and it’s not safe for them to assume you are competent and will complete the build.  Worst case is you bugger up the whole thing and leave the house unsellable and then default, leaving them with nothing.  So they simply can’t actively agree to your plan.  

[Bournbrook]

3 minutes ago, G and J said:

Remember that they have seen all sorts and it’s not safe for them to assume you are competent and will complete the build.  Worst case is you bugger up the whole thing and leave the house unsellable and then default, leaving them with nothing.  So they simply can’t actively agree to your plan.  

Yes true. I think the best option is to transfer out the plot. Just need to figure out the transferring to myself issue. 
I know we could just go ahead and they would never know. Just more stress though….