Overage – Not Always a Good Idea

Rural and Agricultural Property Partner, Jonathan Midgley, discusses Overage and why it may not always be a good idea…

‘Overage’ is the legal term for an uplift in the price a buyer pays to the seller of land should the buyer or any other future land owner get planning consent, typically for residential or commercial  use. Planning consent triggers an obligation to pay the original seller a percentage uplift in the increased value of the land.

It sounds an easy enough proposition but is not always appropriate for the following reasons:-

  1. The imposition of overage may well  depress the value of the sale price of the land now
  2. It will add considerably to the cost of the sale and the time table, as these terms are often included in complex  documents which will drive the costs up, which may not be worth it if there is little prospect of a pay out in the medium term
  3. If there really is a very high likelihood of development one needs to ask whether you should be selling the land at all. There are other alternatives such as Promotion agreements or Options with developers which may better suit.

Therefore when considering selling off land of any size take advice from a specialist and a land agent before going to the market.

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