Sales of part of an estate – improving your heads of terms

With the frenzied country house buying of 2021 calming down before the inevitable springtime pick up, let us take a moment to pause and consider a few (hopefully helpful) tips to improve your heads of terms for the sale or purchase of a country house which forms part of a wider retained estate.

The plan

Now, it may seem obvious, but the starting point is the annexing of a Land Registry compliant sale plan showing the extent of the property being bought or sold (“Property”).

We solicitors have had heaps of fun over the years trying to persuade the Land Registry to accept plans. With the pandemic-induced backlog still dramatically slowing registration time frames, the Land Registry are taking a more robust approach now than ever before. Getting the plan right at the outset saves time later in the run up to exchange.

The Property needs to be clearly identified (for example) as edged red and scaled with a north point. The Land Registry preferred scales are 1:1,250 to 1:500 for urban properties and 1:2,500 for rural properties. If a new boundary does not follow an existing OS feature, you need metric measurements from the nearest one. Don’t forget T marks for boundary responsibilities on any sale of part.

Retained land

If you are acting for an Estate on a sale of part, you need to consider the extent of the retained land.

The retained land will benefit from (and will therefore be able to enforce) restrictive covenants imposed on the Property and may need to benefit from rights granted over the Property. As with the plan of the Property, the retained land must be clearly defined either by reference to a plan or Land Registry title numbers.

Rights granted and / or reserved

The almost inevitable aspect of rural conveyancing is cross-rights. Country houses, in their pretty settings, are very often on private drainage, use private water pipes or have long accesses away from the hustle and bustle of a main road. So, the selling agent needs to consider at the heads of terms stage:

1. What rights the Property needs to benefit from over the Estate out of which it is sold.
   
   
2. What rights the retained Estate may need to have over the Property once the sale has completed.

The following is a non-exhaustive list of some of those rights and a few pointers to consider:

Access

• Can the buyer access the Property directly from the highway or does a right of way need to be granted? If the latter, think about who will be responsible for repair. To what standard and / or what basis will the other party be contributing to the cost of that repair? Will there be a right to upgrade the access?
  
  
• Conversely, does the seller need access over any part of the Property to continue to access its retained land?
  
  
• In limited cases, for example where the seller’s retained land may have potential for later development, a “lift and shift” clause may be necessary. This permits the grantor to vary the location of a right of way, usually conditional on any variation being no less convenient to the grantee. This is obviously undesirable for a buyer so should not be used without consideration.

Services

• If the Property is not connected to mains services, then the preparation of a services plan showing the location of the service media is immeasurably useful : it will then be abundantly clear what cross-rights are necessary and for whom.
  
  
• Rural properties often connect to a private water supply or, if they are on mains, then the water supply may be via a distribution network of private pipes. Given how burdensome maintaining the source of a private supply that supplies numerous residential properties can be, it is very important to have clarity on the location of the pipes, the source, and which properties are supplied. Consideration also needs to be given to maintenance and consumption costs. The extent to which private water supplies can cause difficulties in the sale process should never be underestimated, so early troubleshooting is essential.
  
  
• Private drainage is another aspect of country house conveyancing whereby you need to know at the outset what type of system is used, where and by whom, and whether it is compliant under the environmental permitting regulations.

Restrictive covenants

Estates routinely apply restrictive covenants to a property to preserve the character and amenity of the area within which it sits. Understandably, buyers are not fond of anything that constrains their ability to develop their property into their dream home, so it’s important that if restrictive covenants are to be imposed, they are clearly set out in the heads of terms.

As mentioned above, the extent of the retained land that will benefit from the restrictive covenants also needs to be clear and located nearby to avoid issues of enforceability later down the line.

Overage and other unusual clauses

Setting out unusual clauses at the heads of terms stage removes any surprises down the line. Overage is a good example: clarity on the trigger for payment and the percentage payment of the difference between the base and enhanced value of the Property is important. If overage is being imposed, you would be wise to discuss this in advance with solicitors and perhaps make the overage clause available during marketing so that buyers make their offer on the basis of what they have seen. The same goes for mineral and sporting reservations, which are so often a feature of sales off by an Estate. If the wording of these is provided at the beginning of the process, it is difficult for buyers to backtrack.

The more points clarified in the heads of terms, the fewer points of contention there tend to be once the legals get under way.

If you require further information about anything covered in this briefing, please contact Rose Gurney or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, May 2022