Title Splits – what are they, when do you need them and what needs to be done?

What is a title split and when would this be required?

A title split occurs when you separate a portion of the legal title to a property to achieve a purpose. This could be because you wish to split a parcel of garden land, for example, from your existing property to create a plot for development purposes.

Another example would be that you own a building, e.g. a block of flats and only the land and building are currently registered at Land Registry under one single freehold title. You may wish to split the freehold title, this way separating each flat and creating new leasehold titles.

What is the purpose of a title split?

Each client, whether these are individuals or companies, will have different goals in mind.

Some clients may wish to create a plot of land to enable them to build a dwellinghouse.  In this scenario, the client may require development finance and some lenders will insist on the title being split and registered at Land Registry before drawdown of funds can take place.

Other clients may wish to split the freehold title in a block of flats with the intention of selling each flat independently in the future or perhaps, because they wish to raise mortgage finance and may be able to get the most value out of the building by creating the individual leasehold titles.

What documentation is required to enable the title split

If you are looking to separate a plot of land/building from an existing freehold title, you will need a Transfer of Part (“TP1”).  If on the other hand, you wish to split the flats within a building, you will only achieve this by creating long leases of each flat.  Regardless of the transaction, any rights to be granted or the reservation of rights over any retained land or other parts of the building will need to be considered carefully by your lawyer.

Important matters to be considered prior to a title split

Often, clients will instruct us in connection with a title split and if they are not familiar with the process, there will be a number of matters which will need to be assessed and advice sought before the legal process can commence. This can take time and will require advice from a number of professionals. Some of the points you will need to consider early on are as follows:

• Do you have a mortgage on your existing freehold title? If so, formal consent or discharge of part will need to be sought from your existing lender before any documents can be finalised and registered at Land Registry. We can deal with this on your behalf as part of the legal process, but it may assist if you put your lender on notice.

• Parties involved in the title split – This causes real issues and will delay the legal process considerably if you have not considered the structure. You cannot transfer a piece of land or grant a lease to yourself, i.e. the entity that owns the existing freehold title must differ from that entity that is acquiring the property following the split.

• Deciding on the structure of the deal is likely to come with tax implications. It is therefore crucial that you consult with a tax specialist or accountant at the earliest opportunity so that they can advise you on any tax implications whether these relate to Stamp Duty Land Tax, Capital Gains Tax or other. We cannot advise you on this and we will only reflect in the documentation what has been instructed by the client/their tax advisor.

• Are you looking to refinance the property(ies)? As mentioned earlier, depending on individual circumstances, some lenders will insist that the title split has taken place before they will lend. Other lenders may be able to lend simultaneously with the title split but this can come with other complications. Are the new titles created in such a way that will be valuable and mortgageable by a lender?  Again, we are not valuers so you will need to liaise with a valuer and/or the lender and provide your solicitors with clear instructions.

• Last but by no means least, we will require Land Registry compliant plans whether this is to separate a building plot or lease/floor plans to show the extent of each demise under the Lease and any communal areas. You should therefore have an architect/surveyor on board early on. It is very important these plans are accurate and reflect the position on the ground to avoid any issues on registration or even title defects to be rectified down the line.

If you are considering this as an option for your property or land and need any advice or help then please contact Helena Palomino and the Commercial Property Team at Bradley Haynes Law on 01905 900 919 or email helena@bradleyhayneslaw.co.uk