Overage Agreement, Is this reasonable?
Discussion
blueg33 said:
The overage is paid by the land owner under which development takes place to the previous land owner who put the overage in place.
The overage is usually protected by an entry on the title (via the transfer). So whoever buys the land the pays the overage.
It get complex depending on the wording of the overage and whether:
a. The buyer has exchanged contracts or completed
b. Whether the buyer has obtained planning
But basically -
if the sale has completed and the land has planning the overage should have already been paid (if not then the landowner is a creditor, but a sensible lawyer would have put a charge on the land so that the overage can be recovered when the land is sold to settle the company's debts)
If the sale has exchanged , then usually there is a clause that means the contract falls away in the event of insolvency, so the land isn't sold and the overage is not due. If that clause isn't there, then the buyer will default on the purchase, or the administrators will progress the sale, add the land to the asset register and the overage should be paid.
But - there are many nuances depending on the wording of every agreement and the planning status and status of other events that trigger the overage.
The 1 word answer to the question is - MESSY
Thank you. The overage is usually protected by an entry on the title (via the transfer). So whoever buys the land the pays the overage.
It get complex depending on the wording of the overage and whether:
a. The buyer has exchanged contracts or completed
b. Whether the buyer has obtained planning
But basically -
if the sale has completed and the land has planning the overage should have already been paid (if not then the landowner is a creditor, but a sensible lawyer would have put a charge on the land so that the overage can be recovered when the land is sold to settle the company's debts)
If the sale has exchanged , then usually there is a clause that means the contract falls away in the event of insolvency, so the land isn't sold and the overage is not due. If that clause isn't there, then the buyer will default on the purchase, or the administrators will progress the sale, add the land to the asset register and the overage should be paid.
But - there are many nuances depending on the wording of every agreement and the planning status and status of other events that trigger the overage.
The 1 word answer to the question is - MESSY
The overage is on a plot of agricultural land with no permission at the moment. Money has been offered up front plus a overage. Haven't accepted at present.
Edited by Thundersports on Thursday 12th November 16:16
Overage agreements are common in commercial property.
Usually a halfway house between seller to claw back value and purchaser to avoid paying the full potential in the land at the outset.
A bit more tricky when it comes to residential as there's usually less ££ to pay when the clause is triggered, as others have said.
It is often a document you can drive a carriage, 4 white horses and an ailing Chimera through. You need to make sure your solicitor has experience of them, maybe ask if they can get a commercial property colleague to look over it.
The best approach (assuming you can't either get rid or negotiate it to impotence) would be to draft it such that if the land was ever sold, with planning, then the realisation is split 50% over the price paid for it, that means money only changes hands when there is money to change hands. If you can graduate it so that 50% up to year 5. 25% to year 10 and then 0% in perpetuity maybe.
Usually a halfway house between seller to claw back value and purchaser to avoid paying the full potential in the land at the outset.
A bit more tricky when it comes to residential as there's usually less ££ to pay when the clause is triggered, as others have said.
It is often a document you can drive a carriage, 4 white horses and an ailing Chimera through. You need to make sure your solicitor has experience of them, maybe ask if they can get a commercial property colleague to look over it.
The best approach (assuming you can't either get rid or negotiate it to impotence) would be to draft it such that if the land was ever sold, with planning, then the realisation is split 50% over the price paid for it, that means money only changes hands when there is money to change hands. If you can graduate it so that 50% up to year 5. 25% to year 10 and then 0% in perpetuity maybe.
Thundersports said:
blueg33 said:
The overage is paid by the land owner under which development takes place to the previous land owner who put the overage in place.
The overage is usually protected by an entry on the title (via the transfer). So whoever buys the land the pays the overage.
It get complex depending on the wording of the overage and whether:
a. The buyer has exchanged contracts or completed
b. Whether the buyer has obtained planning
But basically -
if the sale has completed and the land has planning the overage should have already been paid (if not then the landowner is a creditor, but a sensible lawyer would have put a charge on the land so that the overage can be recovered when the land is sold to settle the company's debts)
If the sale has exchanged , then usually there is a clause that means the contract falls away in the event of insolvency, so the land isn't sold and the overage is not due. If that clause isn't there, then the buyer will default on the purchase, or the administrators will progress the sale, add the land to the asset register and the overage should be paid.
But - there are many nuances depending on the wording of every agreement and the planning status and status of other events that trigger the overage.
The 1 word answer to the question is - MESSY
Thank you. The overage is usually protected by an entry on the title (via the transfer). So whoever buys the land the pays the overage.
It get complex depending on the wording of the overage and whether:
a. The buyer has exchanged contracts or completed
b. Whether the buyer has obtained planning
But basically -
if the sale has completed and the land has planning the overage should have already been paid (if not then the landowner is a creditor, but a sensible lawyer would have put a charge on the land so that the overage can be recovered when the land is sold to settle the company's debts)
If the sale has exchanged , then usually there is a clause that means the contract falls away in the event of insolvency, so the land isn't sold and the overage is not due. If that clause isn't there, then the buyer will default on the purchase, or the administrators will progress the sale, add the land to the asset register and the overage should be paid.
But - there are many nuances depending on the wording of every agreement and the planning status and status of other events that trigger the overage.
The 1 word answer to the question is - MESSY
The overage is on a plot of agricultural land with no permission at the moment. Money has been offered up front plus a overage. Haven't accepted at present.
Edited by Thundersports on Thursday 12th November 16:16
Thundersports said:
Thank you for the replies really helpful. Would any of you be able to recommend a Solicitor to deal with the process?
I can but they may be pricey as the ones I use do development work for large developers. My list in no particular order is:
Squire Patten Boggs in Manchester
Gowlings in Birmingham
DAC Beechcroft in London
Equus said:
An idiot's guide for others (I know that you certainly don't need one, Nick!) as to what can and can't be considered when determining Planning Applications is available here.
Thanks for posting that - I’d be interested in reading but the link doesn’t work for me. Does it require a subscription?Edited by Prawo Jazdy on Wednesday 18th November 22:34
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