Top Ten Tips with Ransom Strips – How to keep a ransom handsome

Keeping ownership of a small section of land along any boundaries that could in future form a route for access or the supply of services to adjoining land can be good way of realising further land value.  If development of the “ransomed” land becomes possible in the future, the developer will need to pay to cross the ransom strip.  Here are a few helpful tips to maintain a valuable ransom:

1. Take steps to reduce the risk of ownership of the ransom strip being lost through adverse possession (for example by granting a lease of the ransom strip or consider overage as an alternative to the ransom).  Check whether the ransom strip is registered and ensure details are correctly recorded. If unregistered, make a voluntary application for first registration;
2. Consider whether there is real value in the ransom.  For example, can the ransom strip be disregarded by a developer securing alternative access to the adjoining land?
3. Where the ransom strip is across an existing access, rights will need to be granted for access and possibly services. Expressly limit such rights to the current use.
4. Is the ransom ransomed? Consider what rights need to be granted over adjoining land to utilise the ransom strip if the ransom does not directly abut adopted highway;
5. Restrict rights granted over the ransom strip land. If rights are granted to install services within the ransom strip, the ransom may be circumvented once those services are adopted.
6. Should the ransom land be transferred or is it better to retain ownership and grant the necessary rights?  Retaining ownership may prevent the developer proceeding with a more valuable form of development when payment has been based upon an assumed value of the developed land. Ensure that the wording of rights granted relate specifically to the form of development in respect of which the payment has been calculated, negotiated and agreed.
7. Consider the timing with planning. The ransom owner’s negotiating position is enhanced if planning permission has already obtained. The developer will therefore want to agree terms in advance of obtaining planning permission.
8. Decide when ransom payments should be made. If the developer wants to complete the release of the ransom strip ahead of obtaining planning permission (or it has obtained planning permission), the developer should pay the agreed sum at that time.
9. Take the advice of an experienced surveyor, especially in relation to valuation. After reviewing calculations, comparable evidence, construction costs and projected profit, is there a fair windfall?  One-third of the increase in value is often a good starting point for negotiation.
10. Register a ‘Property Alert’ against the ransom land and/or adjoining land to be developed. When a party registers some form of notice at in relation to a land agreement at the Land Registry, parties can be notified automatically.

This article was written by Julie Sharpe and Phil Webb in our Real Estate team. Please do contact us if you require assistance.