Clawback and Overage Payments- Legal advice in England and Wales from expert solicitors.
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It is possible when selling land to include provisions that allow you to gain from any future uplift in value that may occur if the land gains planning permission and increases its value.
Clawback and Overage, Illustration:
Imagine you are trying to sell some agricultural land near to a village but you suspect that one day the land may be more valuable.
Perhaps you have seen similar land developed around the village for residential use.
You are afraid to sell the land now in case you lose the opportunity to gain substantially from the increase in value that a residential planning permission would undoubtedly bring. Nevertheless, you have decided that you need to sell the land now.
There is a way forward which allows you to sell now but still gain from any increase in value if the land gains a more valuable use in the future.
The Contract and other legal documents can be prepared to allow you to claw back more money if the land gains a more valuable use in the future. This is the principal of claw back that allows the seller to bind the buyer and other future owners to pay overage if the land becomes more valuable as a result of a new use arising from the grant of a future planning permission.
The value of residential land is far greater than the value of agricultural land so the above illustration is a common example, however, there are other situations where the same principals can be applied.
Clawback and Overage, The Principle:
The claw back principle can be applied to enable a selling owner to enjoy future uplifts in value provided the appropriate legal machinery is incorporated into the documents at the time of the sale so that it binds the purchaser.
The principal of obtaining a right to overage can be made to apply to all of the land being sold or only a part of it or it can be limited in time for say 15 years or for a longer or a shorter period.
The amount of any overage payment can vary depending on what the parties agree, for example, if a grant of planning permission led to an increase in value of say £300,000. The seller and the buyer may agree to share the uplift overage amount equally and the vendor would therefore claw back £150,000. Much depends on how likely any proposed future increase in value is likely to be.
It usually costs the new owner a considerable amount of money to obtain a new planning permission or change of use so the gain in value is often reduced by such cost of obtaining the planning permission before any overage payment is calculated.
If you need advice on this interesting aspect of property disposal we would be happy to discuss this with you to ensure that you sell your property on the best possible terms and do not lose the opportunity to gain in a future increase in land value, if that situation arises.
Please feel free to telephone and our specialist solicitor will be happy to discuss your problem and try and offer advice to a solution, where possible.
telephone: 01670 789 731
Land Law Solutions,
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