Extending your luxury property or building on unused land could be a great investment, but there are several potentially costly caveats to consider, explains Clare Andrews of law firm Barlow Robbins.
For some the search for a new property doesn’t extend further than their own back yard. If you, like many, have got the location right but need more (or sometimes less) from your property then you might want to consider realising the potential you already have by developing into the outside space and making the land work for you.
It’s quick to see the appeal because there are many practical advantages for doing this, such as selling their original property, building a new home for their adult children or the convenience of a “nanny annexe” to suit the needs of the modern day working family.
However, consider these 7 points before drawing up the plans.
1. Value
Assess how your plans might affect the value of your existing asset. 
Value is equal to your current property value plus estimated future value of the property less planning and construction for the new development. If the addition destroys value, then it’s not worth pursuing.
A valuer can determine the value of your luxury property with and without the development land and also with the finished product in place.
2. Mortgage
The lender’s consent will be required if you have a mortgage or similar charge over your luxury property. You may even be asked to repay part of the loan in advance.
3. Covenants
Ask your solicitor to check your Title Deeds to ensure there are no covenants registered against your luxury property which either prohibit more than one dwelling or the erection of additional buildings without the consent of another.
Whilst it might be possible to obtain consent or even secure a release of an onerous restriction, this can be a timely and costly exercise. A full risk assessment should be carried out ahead of approaching any third party with the benefit of the restriction as in some cases indemnity insurance might be an option.
4. Planning
Planning permission and building regulations are obvious considerations but if you live in a conservation area or the new property will be in close proximity to listed buildings then you may have additional hurdles to overcome.
So-called “garden grabbing” has been frowned upon in recent years and the previous Coalition government gave power back to local councils allowing them to deny permission for garden development where it was felt the proposals were not in keeping with the local area. Investing in a planning consultant is a good idea at the early stages to assess your likelihood of success with the planning department.
Planning enforcement in the form of fines and enforcement notices are common; however, few recognise that a breach can also lead to a confiscation order being served under the Proceeds of Crime Act 2004 to remove any financial benefits you may have made due to the offence.
5. Access
If you intend to use your existing means of access or require access over another’s land, you need to be sure this will not have a negative impact upon the current use and enjoyment or the value of your current home and to be certain you already have adequate rights of way. Otherwise, you may need to factor the costs involved in negotiating such rights into your budget. The resurfacing of access roads may be a condition of planning for your luxury property.
6. Tax
If you dispose of a luxury property which is not your primary residence there will be Capital Gains Tax to pay on the profit made. Also, should you rent out either property the income will form part of your income tax assessment. Seek the advice of an accountant to ensure you have the best possible arrangements in place taking into account all of your circumstances.
7. Future use
Whilst your plans may not result in an immediate disposal of the land you need to consider the impact upon both properties in the event of one being sold. Any Transfer Deed separating the title should impose restrictive covenants to prevent any future nuisance, you may even want to restrict further development. Obligations can also be imposed to repair and maintain the shared boundaries and any shared access and services.
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