Doing a good deed - gifting property
Ever thought about gifting property? Agricultural law solicitor Joanne McKenzie explains issues to consider before handing over the deeds.
It is common place for property owners to make a gift of property to a family member/third party. However, there are a number of issues to consider before handing over the deeds:
Rights to be granted/reserved
In some circumstances, a transfer of land or buildings to another party will not include the whole area that is owned. Therefore, it is vital to assess what rights need to be granted in favour of the property being disposed of, as well as what needs to be reserved for the benefit of the retained land. Such rights can include, amongst others, access, drainage and light and air (i.e. the right to a view).
The person making the gift may wish to consider imposing certain restrictions upon the area being disposed of, for example, on the future use of the property.
It is essential to discuss any proposed gift of property with your accountant prior to instructing a solicitor to action the transfer as there could be significant tax implications.
Once a gift has been made, the donor does not usually retain any control over the asset in question. However, with property, an element of control/interest can be retained by means of pre-emptive rights or overage/development claw-back. The former enables the person making the gift to have the benefit of “first refusal” to purchase it should the beneficiary sell the property in the future. Overage provisions usually cover a set period of time during which the benefactor will be entitled to a percentage of the uplifted value of the property (such as when planning permission for development is obtained) when the beneficiary sells the property.
The most common pitfall with property gifts is that the benefactor assumes that the status quo will continue i.e. a family member occupying property gifted to them will live in harmony with the donor without any future transfer, development or nuisance arising. The reality can be quite different and such arrangements can become acrimonious. It is therefore important to consider all of the potential implications and seek advice from your legal and financial advisers before making a gift.
About the author
Joanne is a Partner and head of the firm's Agribusiness team.
Published: Wednesday 11th February 2015