Uplift conditions

[Four Cofffee]

I am not sure I have these clauses in the sale of houses with a bit of spare land/barns under my belt.

As I read it the typical clause is that the existing owner claws back 25% of (or more) of an uplift in value as a consequence of the later granting of planning permissions to convert barns or build on land for a set period (often 15-30 years).

Is that irrespective of whether that barn/land is then sold on? I have looked at a few places with the uplift clause applied but it is often unclear as to whether you could develop it for your own use without paying any uplift, and then pay on sale.

How on earth could you agree the value of the uplift?

Not to know in advance how much the uplift might cost seem a risky business. For example, I buy a house with a barn for £400K and get permission to convert the barn ( at a cost of £150k) it to an annex for disabled relatives. If that adds £200K to the value of the whole property (now worth £600k) and I have to pay 25% uplift ( £150K) it means the whole lots has cost me £750K which m,ay be more than it is worth. OR is the uplift applied just to the barn itsef, in wwhich case surely you have to agree at sale what the value of the barn is in an undeveloped state.


IMHO they should just set a price and sell, or get planning permission themselves rather than hanging about waiting for you to improve it. How would they ever know? At what point would you value the uplift (e.g. I do a very basic fit, get it valued and then finish it to a higher standrad. Almost worth dropping a Wickes bathroom and 2nd hand kitchen it until valuation)?

[dugt]

Wouldn't they want 25% of the added value, is 25% of £200,000?

Personally i'd be wary of getting into a contract like this.

[Stevenj214]

Surely you would be paying on the difference between house and land (no permission) and house and land (with permission). Whatever you then go on to do (or not) is entirely up to you.

So if the house and land (with permission) was worth say £50k more, you would be liable to pay £12.5k.

[davidjpowell]

It would normally be % of the increase in value, not a % of the new value.

Typically most of these type of clauses will kick in after Planning Consent has been obtained. Realistically it is not 25% of the uplift after completion of the project, but 25% after planning has been granted.

If value cannot be agreed there would normally be some sort of Arbitration / Third Party Expert to set the value.

You cannot set the value at the start, as it would be the different between land with / without planning consent at the time to be taken into account.

[Four Cofffee]

davidjpowell said:

It would normally be % of the increase in value, not a % of the new value.

Typically most of these type of clauses will kick in after Planning Consent has been obtained. Realistically it is not 25% of the uplift after completion of the project, but 25% after planning has been granted.

If value cannot be agreed there would normally be some sort of Arbitration / Third Party Expert to set the value.

You cannot set the value at the start, as it would be the different between land with / without planning consent at the time to be taken into account.

I was reasonmably happy to pay a % on sale, but not to pay as soon as I had thought about moving my Mum into the barn.

[Dr_Rick]

My folks had something similar written into the sale of their previous place. Developers were sniffing round their large garden for developable opportunities having infilled the other back gardens of neighbouring properties. My parents included a clause (that was accepted) that if the new owners sold off any/all the garden for development they would receive 50% of the sale value of the land. Now given that it is rural Kent (garden of England etc etc) the value of the land would have been a good couple of hundred thousand.

The percentage all depended on how bad they wanted to protect the land vs actually getting a sale including the clause.

Sale of house went fine, sale of land never happened.

Dr Rick

[Four Cofffee]

Dr_Rick said:

My folks had something similar written into the sale of their previous place. Developers were sniffing round their large garden for developable opportunities having infilled the other back gardens of neighbouring properties. My parents included a clause (that was accepted) that if the new owners sold off any/all the garden for development they would receive 50% of the sale value of the land. Now given that it is rural Kent (garden of England etc etc) the value of the land would have been a good couple of hundred thousand.

The percentage all depended on how bad they wanted to protect the land vs actually getting a sale including the clause.

Sale of house went fine, sale of land never happened.

Dr Rick

I can understand thwe 'asold off the land for developmnet' cluase. Its the 'if you get planning permission clause' I hate because anything I do on that land to increase the house vale (e.g. extension) seems to fall under the clause. The typical one is that if you get permission to convert outbuildings it attracts an uplift. Again, if it is an sale of that land to convert but not if I just want a granny annex.

[SJobson]

If you are going to be bound by one of these overage clauses, you *must* take proper advice on the specific wording of your contract/clause. There is invariably a loophole; what matters is whether to use it costs more than just paying the overage.

I would never advise anyone to agree overage which is payable until the gain has been realised - i.e. the money has been received. Though in those circumstances, the beneficiary won't get anything if the land is developed but not sold on... In the majority of cases, you're better off paying a bit more for the land and not having overage, generally.

[Four Cofffee]

SJobson said:

If you are going to be bound by one of these overage clauses, you *must* take proper advice on the specific wording of your contract/clause. There is invariably a loophole; what matters is whether to use it costs more than just paying the overage.

I would never advise anyone to agree overage which is payable until the gain has been realised - i.e. the money has been received. Though in those circumstances, the beneficiary won't get anything if the land is developed but not sold on... In the majority of cases, you're better off paying a bit more for the land and not having overage, generally.

Yes people seem to think that magic PP is worth a mint. One I looked at added £250K when PP was granted to convert the barnm to a 4 bed house, but I see now that it is back to almost the original price

[mk1fan]

I agree with SJobson.

You need specific advice on the specific clause. As you are not sugesting that the barn be redeveloped as a separate plot of land / dwelling and sold on, merely an annex to the existing property the clause maynot be relevant.