Overage arrangements are quite common in relation to the sale of agricultural land, since the price often relates to the land’s current value, but there is also the possibility of a more valuable use being made of the land at some time in the future. This could be on anything from a very small to a very large scale.
On a small scale, it might involve the purchase of a garden extension or pony paddock by an individual householder, with the possibility of an extra dwelling being put on that land later. On a larger scale, it could be the sale of land for development with the benefit of a new planning permission, but the possibility of a more valuable planning permission being obtained before the currently permitted development is fully built out.
The overage mechanism usually comprises a positive covenant by the buyer to pay an agreed percentage of the uplift in value created by a later obtained planning permission. The scheme will last for an appropriate fixed period, with that period depending on the circumstances and bargaining strengths of the parties.
Because an overage obligation is not based on a restrictive covenant, it does not run with future ownerships of the land; it is, therefore, important (except where the overage period is minimal) that the buyer enters into a covenant (for himself and his successors) not to dispose of the land or any part of it or any interest in it without obtaining for the original owner an overage covenant from all successors, matching the one originally given.
It’s important from the buyer’s perspective that he’s released from the overage obligations once he has parted with all interest in the land and obtained an appropriate covenant from his successor. If this does not happen, then he and his estate will be bound for the full overage period. Further protection is desirable by one or both of the following means:
Overage provisions have sometimes been based on restrictive covenants, under a scheme prohibiting any further development of the land without the original owner’s consent (and with him retaining neighbouring land taking the benefit of the covenant), linked to an obligation on the original owner to give that consent if an appropriate payment is made.
There are three main problems.
For further information contact Christopher Wacher on 01227 763939.