Fact 25. Planning Permissions - how might they affect your sale or purchase?

Planning permissions can affect your sale or purchase by impacting property value, legal obligations, and buyer interest, often increasing value but requiring careful checks and documentation.

When buying or selling property, understanding planning permission is crucial. Planning permission governs how properties can be developed, altered, or extended and it profoundly affects the conveyancing process, property value, and the legal obligations attached to the sale or purchase.

What is Planning Permission?

Planning permission is a formal approval from a local authority allowing property owners to carry out specific development works such as building extensions, loft conversions, or even new builds. This system ensures that developments comply with local policies, preserve community interests, and maintain safety standards.

Planning permission is attached to the land itself, not just the owner. Therefore, it transfers automatically to any new owner when a property is sold, making it a significant factor in property transactions.

How Planning Permissions Affect Property Sale or Purchase

1. Impact on Property Value and Marketability

Properties with granted planning permissions often have enhanced value because they offer potential for development or improvement. For example, a house with planning permission to add an additional bedroom or an extension will generally command a higher price compared to a similar property without such permission.

Conversely, properties with planning breaches—where extensions or alterations were done without permission—can have their sale price reduced by 10-20%, as buyers and lenders see them as risky investments or legal liabilities. These breaches also often deter buyers leading to longer times on the market.

2. Legal and Contractual Considerations

- Planning permission transfers with the property upon sale, meaning the buyer will inherit all rights and responsibilities associated with it.

- The sale contract should carefully address planning related issues. It should specify that the seller must provide necessary documentation such as architectural drawings (copyright licenses to reuse these drawings), consultant reports (letters of reliance confirming report validity), and any obligations related to Community Infrastructure Levy (CIL) payments that may be applicable.

- Transfers of ownership may require complex arrangements about rights over retained land, such as rights of access, maintenance, and use of shared services to enable development aligned with the planning permission.

3. Due Diligence and Searches

Before proceeding with a purchase, thorough searches and investigations should be conducted to understand the status and history of planning permissions. Questions to explore include:

- Has planning permission been granted? For what works and for how long is the permission valid? (Planning permissions typically last for three years from the date of approval.)

- Has any work started within the duration to keep the permission valid?

- Are there any breaches or retrospective applications pending?

- Are the necessary building regulation approvals also in place? (Separate from planning permission but equally important for legal compliance and safety.)

- Are there any restrictions or covenants affecting development potential?

Conveyancers play a pivotal role in advising clients about these issues and ensuring that contracts protect buyers and sellers appropriately.

4. Mortgage and Financing Implications

Lenders scrutinize planning permissions closely. Properties lacking valid planning permission for recent developments are often harder to finance, as lenders see a risk that unapproved works might have to be removed or result in legal action.

If planning permission is in place, it can facilitate mortgage approval, especially if the purchaser intends to develop the property further.

5. Risks of Planning Breaches

If planning permission was not correctly obtained for alterations or extensions, the local council can take enforcement action, which may include:

- Imposing fines

- Ordering removal or alteration of works

- Refusal or withdrawal of mortgage offers

Buyers should be wary of purchasing properties with known breaches unless the seller has applied for retrospective permission or there are legally sound Certificates of Lawfulness, which validate that the work is acceptable.

How to Handle Planning Permissions in Conveyancing

- Verify planning permissions and building regulation compliance early in the process.

- Include conditions in the sale contract relating to compliance, documentation handover, and liabilities.

- Ensure that the seller discloses all relevant planning information and any ongoing enforcement notices.

- If planning permission issues exist, negotiate solutions such as price adjustments, indemnity insurance, or seller actions to rectify problems.

- For properties with planning permission to develop, ensure the buyer obtains all required rights over neighbouring land to implement the scheme effectively.

Common Planning Permission Scenarios

- Buying a property with planning permission granted but no works started: The buyer should confirm whether the permission is still valid or if re-application is necessary.

- Purchasing land without planning permission: Buying land without permission limits development potential and mortgage access, requiring additional planning applications which take time and incur costs.

- Properties with retrospective planning applications: Some sellers attempt to regularise breaches after works are done; buyers should assess the risks and council responses.

- Extensions or alterations done without permission: This can delay or derail transactions, cause mortgage refusals, and lead to enforcement notices.