|The article below follows on from our series of seminars for Junior Land Buyers. Click here to read the previous article.|
It is not uncommon for a land buyer to come across a 'ransom strip' when undertaking development of a site. A ransom strip is a strip of land that has been retained when a larger piece has been sold, this may be deliberate or may be accidental. It is often a thin section around the boundary, at a potential access, in between parcels of private land or between private land and public highway. The width of the ransom strip can be as narrow as 150 millimetres and can potentially hold a huge development to ransom.
What issues can this pose?
The existence of a ransom strip often causes huge problems for a developer and can carry significant profits for the owner of the strip at some point in the future.
Where the site to be developed has been granted planning permission, it may not be possible to develop this land without crossing the ransom strip or acquiring it. Therefore, forcing the developer to pay the hefty price ('the ransom') to purchase the strip of land to enable development to go ahead. The owner of the ransom strip often charges a disproportionately high cost for this small strip of land, hence the name. Simply acquiring planning permission for a development will not remove the restriction caused by the ransom strip.
How are ransom strips valued?
There is no formal framework for the valuation of a ransom strip. The starting point for landowners and valuers alike is the principle arising from the case of Stokes v Cambridge Corporation , which held that the owner of the strip is entitled to one-third of the increase in the value of the adjacent land just for providing access to the development.
For example, where the land is worth £2m and the value of the development site is £8m, the valuation of the strip would be £2m (1/3 of £6m).
This is a precedent followed to an extent, but there is no concrete rule for valuation and a strip will be valued on a case by case basis in negotiations between land buyer and landowner.
How can you tell if a ransom strip affects your site?
If the land is registered at the Land Registry, it may become apparent from title documentation. However, if the land to be developed is unregistered or the strip is part of adjoining land that is unregistered, it may not be quite so clear. In these circumstances, it would be appropriate to conduct a site visit to determine precise boundaries.
What can you do if you find one?
In a best case scenario, where a ransom strip is identified early and before purchase of the land the strip affects, the land buyer may be able to demand the required sum from the Seller be deducted from the purchase price. This will ensure that the land is released from the constraints the ransom strip may cause later on, prior to acquisition of the site.
However, a private owner of a ransom strip may wish to keep the land for various reasons, including to prevent development. Equally, a ransom strip may only be identified after the adjacent land has been acquired. In these scenarios, negotiations between the land buyer and land owner would have to take place - in the hope of either agreeing on the purchase of the land or the grant of a right of way over it.
In the event that the owner of the ransom strip is still reluctant to sell or grant rights, in exceptional circumstances local authorities may issue a compulsory purchase order. This will mean the owner of the ransom strip will be forced to sell, but will be offered a 'fair and reasonable' level of compensation. Of course, it is worth noting that the course of action to be taken will be determined on a case by case basis.
|Ashfords run a series of seminars for anyone involved in the world of real estate development who would like to learn more about the legal process behind the deals. The seminars are led and organised by our team of residential development solicitors, providing an opportunity to share knowledge and build lasting connections in an informal and friendly environment. Here are a list of future seminars for Junior Land Buyers, please let us know if you would like to receive notification of these events.|