Posted by Caroline Preist, Partner
Ransom strips: the bank balance burdens brought on by boundary blunders
When buying a property there are a many things to consider; the crime rates in the area, the surveyor’s report, the potential returns of investing in commercial property, the proximity of a river to name just a few.
In most cases, issues are resolved during a purchase, the purchaser moves in and lives happily ever after. However, as was the case recently with a professional gambler, a property owner may be shocked to later discover that their humble abode is surrounded by a strip of land they thought was theirs but is, in fact, owned by someone else.
The professional poker player and owner of a £5million London home, was recently reported to have offered his neighbour £2,000 for ownership of a strip of land forming part of the driveway leading to his home which would allow him access to the road. His neighbour has countered with a figure of £500,000.
In situations such as this, where a crucial piece of land is necessary to access or use a property or development site, it is called a “ransom strip”. Such a burden can reduce the value of the property affected to an astounding extent. Therefore, during a property purchase any actual or potential ransom strips must be identified and the purchase price reduced to reflect the cost of buying the strip if the seller cannot acquire it first.
If the above cannot be achieved it may be possible to obtain indemnity insurance to safeguard against future inference with the use of the land. This is particularly helpful if the legal or beneficial owner of the ransom strip cannot be found and the purchaser requires use of it in the meantime.
Purchasing a ransom strip
Of course, the position is entirely different if the ransom strip is discovered some time after the purchase.
It is always beneficial to try to negotiate with the owner of the strip, preserving a relationship of open communication, reasonable discussion and fair negotiation and doing so may mean the land is obtained for good value. If negotiations are possible the parties will often argue about the so called ”one third rule” which comes from the case of Stokes -v- Cambridge. That case is in legal terms of very little importance as it relates to a compulsory purchase valuation carried out in the Lands Tribunal. However it does provide a sensible starting point or mechanism for a negotiation.
Sadly, it is all too tempting for the current owner of the land to demand an extortionate sum, “the Ransom” knowing that the prospective purchaser is desperate to own the land. An owner cannot be forced to sell, even by the courts and if the owner will not pay what is demanded he may have to look for an alternative. At this point the professionals who acted on the purchase will usually check that their insurance indemnity cover is in place.
Easements, prescriptive rights of way and other options
If the seller does not wish to sell the strip of land and the main user only requires use of it, an easement may be granted by the owner for an agreed value. Again if the parties are negotiating the Stokes -v- Cambridge principle may provide a starting point.
Alternatively, if it can be shown that the land has been used for 20 years for access then this can serve as evidence to claim a prescriptive right which will not require a payment at all.
If the land has been enclosed with the current owners land for at least 10 years then an application to HM Land Registry for adverse possession of the land may be possible.
If you need advice on property queries or disputes, particularly if you think you own land in use by someone else, call a member of our Property Disputes team
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