What is a Transfer of Part (Form TP1)? Land or Property

• A transfer of part involves dividing land legally and registering the new title at the Land Registry.
• The process involves getting compliant plans, consent from your lender with a valuation of the proposed new boundaries, an experienced conveyancer for the legal transfer, and creating easements to provide access and protect any specific rights.
• Gifting a part of your property or land may incur Capital Gains or Stamp Duty Land Tax; whereas gifting certain land held by a business may qualify for tax relief.
• Be aware of ransom strips which may impact the legal right to access a part of land.

Tired of a sprawling garden you can't manage? Or perhaps you see the potential for development on your land? If you have a large plot of land, selling part of your property can be lucrative but even if the purchase price is nominal, there's a complex legal process to follow.

Transfer of part - in a nutshell

A transfer of part is selling a portion of your land or property. This process involves dividing your existing property or land into two separate titles, allowing you to sell a portion while retaining ownership of the rest.

• Get a precise land survey to define the boundaries of the portion you're selling.
• The new title must be registered with the Land Registry.
• Ensure the sold portion has access to utilities (if selling part of a property) and any necessary easements.
• If your property is mortgaged, obtain your lender's consent before proceeding.
• Both the seller and buyer should have independent legal representation.

You have to ensure that you have an accurate diagram of the portion of land/property you're selling then the conveyancing process can proceed as normal.

When you've completed the process, you inform the Land Registry and a new - and separate - registration is made of the new title with an appropriate and publicly obtainable Land Registry title plan.

You cannot transfer a part of land or property to yourself in law

There are various ways in which this could be abused. If you are transferring part of a property, the part being sold must have its own separate utilities to qualify for a new and separate title with the Land Registry. If you're transferring part of your land, like a strip of your garden to a neighbour, you need to ensure that access is arranged.

This is likely to require the appropriate planning permission approval and building control sign-off when the necessary works have been completed.

NB - The person you're selling to requires separate independent legal advice for conveyancing purposes.

Thinking about creating multiple leasehold titles from splitting a freehold title? Read our article on creating a new leasehold title from a freehold.

What happens if one of the titles has a charge on it?

You'll need to obtain lender consent to transfer part of the title. The lender may charge a fee for this decision and request for the property to be valued. It isn't guaranteed they'll agree to it.

If consent is granted, a Deed of Substituted Security will need to be drafted for £360 INC VAT. The deed updates the title to reflect the charge on the new title.

Tax implications on gifting a part of property or land

Capital Gains Tax (CGT)

If the land was purchased at a lower value than its current value, there could be a capital gain when it is gifted. The current annual exempt amount for Capital Gains Tax (CGT) in the UK for the tax year 2023/24 is £10,600. This means you can sell assets (including land) up to this value without paying CGT.

However, it's important to note that this is the annual exempt amount. If you have sold assets and used up your exempt amount, further gains will be subject to CGT.

Stamp Duty Land Tax (SDLT)

If the recipient of the gift sells the land within five years of receiving it, they may be subject to SDLT on the sale proceeds, even if they didn't pay any SDLT when the land was gifted.

If land is transferred from a deceased person to their beneficiaries, no SDLT is generally payable.

Business Asset Disposal Relief (BADR)

If the gifted land is part of a business and certain conditions are met, the donor may be eligible for BADR, which reduces the potential CGT liability on the disposal of the land.

For example, you own a 100-acre farm which has been in your family for generations and includes various agricultural assets like land, barns, and farming equipment.

You may consider gifting a portion of the farm to your son or daughter who has been actively involved in the family farming business for the last five years. This could make you eligible for BADR and a reduction in the capital gains tax liability on the transfer.

To be eligible for BADR, the following conditions must be met:

• Ownership: The asset must have been owned by the individual for at least two years.
• Active involvement: The individual must have been actively involved in the business for at least two years.
• Business criteria: The business must meet certain criteria, such as having assets of less than £2 million and employing fewer than 250 people.
• Disposal value: The disposal value of the asset must not exceed £1 million.

If these conditions are met, the individual may be eligible for a reduced CGT rate on the disposal of the business asset. The exact rate depends on the length of ownership and involvement in the business.

Inheritance Tax (IHT)

If the total value of the gift exceeds the annual exempt amount (currently £275,000 for individuals in the 2023/24 tax year), it may be subject to inheritance tax (IHT). The relationship between the donor and recipients (for example, grandparent and grandchild) also determines the IHT rate.

If the donor is still alive, the gift may be considered a "lifetime transfer" and subject to IHT rules. If the donor dies within seven years of making the gift, the gift may be brought back into their estate for IHT purposes.

How do I transfer part of a property?

• 1

  Create a Land Registry-compliant plan

Firstly, you'll need to confirm the part of the land being transferred. You can print off a copy of the title plan from the Land Registry (download here for £3) and draw the boundary being sold.

You will need accurate plans outlining the proposed boundaries. This will enable a surveyor to create Land Registry-compliant title plans.

You have two options here: either a) have a surveyor visit your property or b) provide the required information yourself to a surveyor working remotely.

• aSite visit - The surveyor attends your property and uses the existing title plans to create a new plan that can be registered at the Land Registry. The title plan does not include measurements within the document, but measurements are taken of the physical boundary, not the legal boundary.

• bNon-site visit - You can survey without a site visit by creating a title plan, which is then used to generate the new Land Registry title plan.

• 2

  Value the land/property being transferred

This stage of the process is optional and will only happen if you haven't already agreed a price with the buyer or if you want an independent valuation.

Known as a 'red book valuation', a qualified RICS valuer visits your property to work out a current market valuation for the whole property and gives an estimate for the land/property being sold. The official RICS report provides a comparison of 3 recently sold properties similar in nature and type (if available).

Please note that the valuation isn't a structural assessment or defect survey such as a Level 2 or 2 Home Survey.

• 3

  Mortgage lender consent

If you have a mortgage on your property, you must get consent from your lender to sell the portion of land/property. This is because you will effectively reduce the total value of your property by selling part of it, potentially affecting your mortgage terms.

Failure to do so can have significant consequences, including potential mortgage defaults.

Your mortgage lender typically has a first charge on your property, meaning they have a priority claim in case of defaulted payments. This is called a mortgage lien.

If you fail to make your monthly repayments and the lender repossesses the property, they're likely to get a lower return because the property has decreased overall in size.

• 4

  Instruct your conveyancing solicitor

Next is instructing your solicitor to complete the transaction and register the new title with the Land Registry.

They will need the new plans from step one of the process, information on access to utilities (water, electricity, gas etc.) and the plot itself to proceed, and written consent from your lender if applicable.

From then on, the conveyancing process is the same as a standard sale or purchase. Contracts are drawn up and drafted (whether freehold or leasehold) to send to the other party's solicitor, and then enquiries are raised where appropriate. Your conveyancing solicitor will also be able to help you if you run into any problems with consent from your mortgage lender.

Your solicitor will handle the progress of the transfer from the exchange of contracts to completion and payment. They will also check with the Land Registry to ensure that the new parcel of land/property is correctly registered.

• 5

  Establishing easements - if required

Depending on the individual circumstances of your property and plans, concerns about rights of way, easements, and/or restrictive covenants might materialise.

• The party you're selling to might need clearly defined legal rights of access (which will be covered by easements) to the land/property.
• You may want to reserve certain rights for the land you continue to hold.
• You might also choose to impose one or more restrictive covenants on the land/property sold. For example, you can ban the keeping of pets.

The form your conveyancing solicitor submits to the Land Registry, detailing the transfer of the newly-created land or property title, is called the Transfer of Part of Registered Title Form, or TP1 Form. This TP1 form references any rights of way, easements, or restrictive covenants.

What is a ransom strip?

A ransom strip is a narrow piece of land, sometimes as narrow as 6 inches, that separates a property from a public road, route, or another property.

It can significantly impact property value and owner access, if, for, example, the ransom strip must be crossed to reach a public road or utilities.

Because you need the permission of the ransom strip owner to gain access by right of way or to lay services under it (mains water and gas for a new development), the owner of the ransom strip can hold these permissions 'to ransom'.

If they simply don't want the land developed they can refuse entirely, which is why it's important to find out if the land you're buying is affected by a ransom strip, or if you're inadvertently creating one by splitting the title without proper easements (legally protected permissions over the land) in place.

What usually happens is the owner of the ransom strip wants to be paid for allowing access. These negotiations can be drawn out and expensive, as the owner of the ransom strip has little to lose and a lot to gain.

If a development is worth a lot of money, the developer may be willing to pay to move things forward. The owner of the ransom strip may use this to secure a higher settlement for granting permission, or a higher price for selling the land to the developer, who may then combine the titles.

If easements are not in place, the value of the land will be affected as its access and development potential hang on the whim of the ransom strip owner. A plot of land is worth a lot less if you can't get a vehicle and materials onto it, let alone use or develop it as you'd like to.

The Royal Institution of Chartered Surveyors recommends that property owners identify and evaluate any ransom strip on a property and deduct the cost to release the "ransom" from the overall purchase price of the property. The agreement to access these ransom strips is registered with the Land Registry.

An owner is entitled to use the disputed property without payment if there has been 20 years of uninterrupted access.