By James Mitchell

Overage (sometimes referred to as uplift or clawback) is a legal mechanism that requires a buyer of land to pay an additional amount to the seller if a specified event, or “trigger”, occurs within a specified period after completion of the sale/purchase. It is used to ensure that the seller shares in any increase in the value of the land involved in the transaction if they were not aware of its true value or development potential or if there is a change in planning policy.

Overage is most commonly encountered in sales of agricultural or “bare” land, particularly where that land adjoins existing development or the buyer is a developer. However, it can be imposed in connection with any land sale, for example, the sale of a house with the potential for extension or modernisation or the sale of part of a garden.

Some common triggers include a sale of the land subject to the overage, the grant or implementation of planning permission (whether for any or a specified type of development) relating to that land, or a sale of that land following the grant of planning permission.

Overage periods are typically between 5 and 20 years but can be longer.

The additional amount payable can be fixed or can be calculated in accordance with a formula, for example, an agreed amount per additional unit or additional internal area constructed on the land subject to the overage, or a proportion of the increase in the value of that land as a result of the occurrence of the trigger. If the parties cannot agree the amount payable within a specified timescale, it is usual for either of them to be able to request that an independent surveyor be instructed to determine it.

The appropriate trigger, overage period, calculation method and timescale for making the payment will need to be negotiated between the parties at the same time as the other terms of the sale/purchase. The agreed terms will depend on the nature and development potential of the land in question and the relative bargaining strength of the parties.

Given the complexity and potentially significant financial implications of overage, it is always advisable for both the seller and the buyer to instruct a suitably experienced surveyor or land agent to negotiate the terms on their behalf. Once the terms have been agreed, the parties’ solicitors will draft and negotiate the documentation required to impose them.

If you are considering selling or buying property subject to overage or need any advice about it, please get in touch.