What is strategic land?
Strategic land is land which has development potential in the medium to long term.
What are ransom strips and what do they look like?
A ransom strip is a narrow (typically no more than 300mm - 750mm wide) strip of land running along one or more boundaries of a development site.
Because of their physical characteristics it’s often difficult to physically demarcate them on the ground. Therefore, they may not be easily discernible on a site inspection but should be clearly apparent on the relevant Land Registry title plans.
How and why are ransom strips created?
In the context of strategic land, ransom strips are intentionally created when a seller on the sale of a development site retains a strip along one or more of the site boundaries.
The rationale for doing so is either:
- to prevent any future development of adjoining land by imposing a physical impediment to the use of the access and services on the development site; or
- more often in my experience, they are used to extract further value on the future development of the adjoining land as the developer of it will need to pay the ransom strip owner in order to either acquire the ransom strip or to acquire access and service rights over it to enable connection into the first development site.
What are ransom strips worth?
This is a question for an experienced valuation surveyor. If a ransom strip is a true “ransom” in that there is no other viable means of accessing and/or servicing the relevant land then, dependant on the particular circumstances, a ransom strip could be worth between 33% and 50% of the value of the relevant land.
Sometimes there is agreement for the ransom strip owner to share any realised value with a promoter or developer. In such circumstances, the value of the ransom strip is effectively co-owned.
How should ransom strips be protected?
The title to all ransom strips, irrespective of their underlying purpose, should be properly registered at the Land Registry. Once the title to the development site has been registered in the developer’s name a check should be made to ensure that it makes specific reference to the existence of the excluded ransom strip both on the register and the title plan.
If possible, they should also be somehow physically demarcated on the ground although this is often difficult to achieve due to their length and/or narrow width.
If the purpose of a ransom strip is to extract future value on the development of adjoining land, then the following should also be addressed on the sale of the first development site in order to create and protect the value of the ransom strip:
- the ransom strip should be excluded from the red line of the developer’s planning application so that control of it is not inadvertently lost.
- appropriate rights to connect into and use the estate road and services should be reserved for the benefit of the ransom strip.
- the developer should be obliged to construct a suitable adoptable standard estate road and services as close as possible to the boundary with the ransom strip within a specified time frame and the ransom strip owner should reserve step in right in the event of default.
- the developer should be obliged to endeavour to have the estate road and services adopted as soon as possible.
- consider whether the developer should be obliged to implement a particular layout so that the purpose/value of the ransom strip cannot be circumvented by clever design.
Conclusion
Ransom strips are very useful and potentially very valuable tools and are often used in strategic land sales but they do need to be very carefully created and properly protected.
About the author: Claire Waring is a senior lawyer specialising in residential development and advises on all aspects of both instant and strategic land acquisition, development, disposal and promotion. Her clients include developers, promoters, land owners and Registered Providers.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
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