Giving land to children? Be careful. Giving property to children can cause many problems if you haven’t done your research.
Q: My parents have agreed to deed two acres of their property to me plus an easement for the driveway back to the future home site. The land was surveyed. The county has confirmed that I can build on the land. What is the process to have land deeded to a family member? What should I know about my parents’ current mortgage?
A: We think you may be missing some other important considerations and legal issues in your decision to accept land from your parents.
First, you mention that your parents have a mortgage on the property. You may find it quite difficult to have that lien removed from the title to the land your parents plan to give you. If your parents have one mortgage on all of their land, you would need to have their lender agree to release their lien on that part of the property they intend to convey to you.
If you are paying your parents for the land, your parents can use that money to pay down the debt and at the same time have the lender agree to release part of their lien on the property. But if they are simply giving you the land, you might find it has title issues that will complicate your ability to get a mortgage on the property.
A second issue is making sure that the land configuration, along with the easement you will receive, are properly drawn and the future construction of your home is carefully managed.
You will need to have an attorney draft the easement right for you to access your land, but should also consider whether the easement will reduce the overall value of your parents’ land. Your parents appear to have quite a bit of land for their home, and we’d hope that they have carefully considered how the conveyance to you would affect the value of their entire parcel.
In some situations, your parents might be better off selling the land as a whole to a homebuilder that can develop the entire site. But if they want to continue to live there, they need to understand that carving off two acres might affect both the current and future value of the property.
As to your question about conveying title, the easy part of a transaction like this one is usually receiving title to the property. Some states and municipalities have rules that govern how and when properties can be subdivided. You might need to work with the surveyor and an attorney to work through the process. If the process in your state is simple, you might only need the legal description of the property and your parents can convey that legal description to you by deed. In other states, you might have to go through a more tedious process of preparing subdivision documents and having those documents approved by various governmental agencies. Once the subdivision is approved, you’d have the property conveyed to you.
The subdivision process can be simple and inexpensive where the restrictions are minimal on subdividing. Where the process is more involved, you might find that the costs are quite high. Still, this is a process that is typically governed by the local municipality.
Another item you need to consider is how you plan to service your new home with utilities. Two acres is a lot of land. You might have to bring in your own sewer, water and other utility services from the street all the way to your home. If you’re required to bring those services to the home from the municipality or public utilities, you’d better have a good estimate of what it will cost you before you set your construction budget.
If your home is in a more rural area, you might only need to bring electricity, phone and cable service to the home. You might have to dig your own well for water service and create your own septic system for waste. Again, these items can be expensive and in some states you might have to obtain a permit to dig a well and for your septic system.
You also need to make sure whether any part of the parcel you are buying is in a wetland area. Wetland areas can cause you a huge headache when it comes time to build the home. In addition, if there are bad building soil issues in your area, you should see if the land you are getting would be suitable for building the home.
In summary, you would need to make sure that the land parcel your parents wish to convey to you can be given to you free and clear of their current mortgage, that the land configuration for your parcel and your parent’s parcel makes sense, that you know what it will take to service your parcel with utilities and other services. You also need to know whether the land is suitable for building, whether the subdivision process will be easy or hard and then make sure that the land parcel has all the rights any future buyer would want for access to the land.
You should talk to a real estate attorney in your area to help you sort out through these issues and work with you during the entire process. You’ll want to protect yourself, and your parents.