Looking at buying some land..how confusing.
Discussion
We're looking at buying a plot of land and there are some clauses in it that I'm a bit confused about and whether it is quite normal. The land is being dealt with by sealed bid on Monday so it's a bit short notice.
Is the following unusual for a land purchase?
Overage.
In the event of planning consent, being
obtained for alternative uses giving rise to an
increase in value during a period of 30 years
following completion of the sale, the buyer or
their successors will pay 50% of the net
enhanced value on exercising the consent or
disposal of the property with the benefit of the
consent to the seller. The overage will be
protected by way of a restriction on the
property and the property will be sold subject
to it.
Thanks in advance for the advice!
Is the following unusual for a land purchase?
Overage.
In the event of planning consent, being
obtained for alternative uses giving rise to an
increase in value during a period of 30 years
following completion of the sale, the buyer or
their successors will pay 50% of the net
enhanced value on exercising the consent or
disposal of the property with the benefit of the
consent to the seller. The overage will be
protected by way of a restriction on the
property and the property will be sold subject
to it.
Thanks in advance for the advice!
Overage is a nice thought, but actually quite difficult to enforce. It needs to be looked at by a decent property lawyer that is comfortable working with such agreements. There are various critical components to enforcing a success overage provision, mainly how you choose to enforce it - you can add it as a covenant to the title if you retain land 'which touches and concerns' the land in question - i.e. a ransom strip, alternatively it can be secured as a 'charge' but this makes it difficult to raise funding on the site in the future, the best way in my opinion is to enforce it as a positive covenant on the title which should then allow it to run with successive purchasers.
The key points of overage are:
The method and assumption for determining the 'base value' - is it the actual purchase price, is it the price a cleared site would sell for in the open market on a date in the future, is the value of the site as it stands on a date in the future, how are purchasers improvements accommodated in this?
The method and assumption for determining the 'overage value' - that is to say the increased value at a time in the future, remember that overage may not be triggered by a sale, it may be triggered by gaining planning consent.
Triggering overage - when is the overage triggered, is it triggered upon planning consent, initiation of development, sale of the finalised property, occupation of the finalised property? (be very careful of the latter two!).
Do drop me a PM if you want/need any more info
I hope that helps - its not as complex as perhaps it sounds, but it is important to ensure its protected in the right way to protect all of the parties involved. We transact a lot of land in this way where it has potential future development opportunities.
The key points of overage are:
The method and assumption for determining the 'base value' - is it the actual purchase price, is it the price a cleared site would sell for in the open market on a date in the future, is the value of the site as it stands on a date in the future, how are purchasers improvements accommodated in this?
The method and assumption for determining the 'overage value' - that is to say the increased value at a time in the future, remember that overage may not be triggered by a sale, it may be triggered by gaining planning consent.
Triggering overage - when is the overage triggered, is it triggered upon planning consent, initiation of development, sale of the finalised property, occupation of the finalised property? (be very careful of the latter two!).
Do drop me a PM if you want/need any more info
I hope that helps - its not as complex as perhaps it sounds, but it is important to ensure its protected in the right way to protect all of the parties involved. We transact a lot of land in this way where it has potential future development opportunities.
Forgot to add, 30 years is a little long in time - typically overage runs for 21 years or shorter, but can theoretically run in perpituity.
I prefer to implement a sliding scale of reward - say 50% of the overage in the first 5 years, 40% in the next 5 years, 25% there after.
Its also important to ensure the overage is considered against site value and not finished product as the vendor shouldn't benefit to the tune of 50% of the build cost! (something we do see people try to push through!!)
I prefer to implement a sliding scale of reward - say 50% of the overage in the first 5 years, 40% in the next 5 years, 25% there after.
Its also important to ensure the overage is considered against site value and not finished product as the vendor shouldn't benefit to the tune of 50% of the build cost! (something we do see people try to push through!!)
Thanks Tim - that was excellent. Confusing, but excellent!
If we were to buy the land we'd be seeking planning permission literally as soon as the ink dries.
I think they are being a bit cheeky by selling it without permission and then expecting to get the rewards for someone else to do all work.
PH is such an amazing mix of people - Thank you!
If we were to buy the land we'd be seeking planning permission literally as soon as the ink dries.
I think they are being a bit cheeky by selling it without permission and then expecting to get the rewards for someone else to do all work.
PH is such an amazing mix of people - Thank you!
littlegreenfairy said:
I think they are being a bit cheeky by selling it without permission and then expecting to get the rewards for someone else to do all work.
Personally, I wouldn't consider bidding not even if the vendor was giving the land away. My take on this is very simple. You buy the land outright end of, no strings and you take the risks attached to gaining PP. Now, if it was mega expensive site with say potential for a commercial development and large profits were to be envisaged, it just might be a slightly different ballgame if the site was sold well below market value.Consider making a bid for outright purchase, no strings. Wish you well.
P.s. very possible there are few interested parties in making a bid, worth bearing in mind if nothing else.
Edited by Johnboy Mac on Wednesday 26th October 22:36
Johnboy Mac said:
littlegreenfairy said:
I think they are being a bit cheeky by selling it without permission and then expecting to get the rewards for someone else to do all work.
Personally, I wouldn't consider bidding not even if the vendor was giving the land away. My take on this is very simple. You buy the land outright end of, no strings and you take the risks attached to gaining PP. Now, if it was mega expensive site with say potential for a commercial development and large profits were to be envisaged, it just might be a slightly different ballgame if the site was sold well below market value.Consider making a bid for outright purchase, no strings. Wish you well.
Seller wants it both ways then. Can't be arsed and doesn't want to waste the time and effort of applying himself, cause he wants cash NOW, but if you take the risk he'll collect a massive portion of the increase in value.
Effectively you are buying a HALF share of the land. When you get the planning permission, you have to pay what the other half is then worth.
I'm thinking about selling a kidney, but if I ever find I want it back, then I reserve the right to have it back, no questions asked.
I'd like to sell my shares in Rolls Royce as I think they've peaked today, but if they go up tomorrow I'll have them back at the same price please.
I'd bid on the basis that there are to be no catches or small print and it's 100% yours.
Effectively you are buying a HALF share of the land. When you get the planning permission, you have to pay what the other half is then worth.
I'm thinking about selling a kidney, but if I ever find I want it back, then I reserve the right to have it back, no questions asked.
I'd like to sell my shares in Rolls Royce as I think they've peaked today, but if they go up tomorrow I'll have them back at the same price please.
I'd bid on the basis that there are to be no catches or small print and it's 100% yours.
littlegreenfairy said:
I just want a bit of land to put a little house on! Anyone would think I was asking for diamonds from far away planets. Nothing seems straight forward. Asking double to asking price to take the covenant off seems a bit of a cheek too. Perhaps it's just the way!
That's bloody land owners for you, nothing new there! Simply bid on it as an outright purchase at a reasonable market value taking into account no PP & poor access etc, etc. Don't be pushed by anyone into doing a deal you're not happy with, your the man with the money not the vendor! Good luck. 
te. anonymous said:
[redacted]
It currently has horses on it, and I want a house...so am assuming that the planners might notice house shaped horses.The agent told me in simpleton terms that if I was to get planning permission, I would have to get the land revalued at that point and pay half the difference to the old owner. That is how I understand it as a simpleton. Would that be a correct way of looking at it?
It's quite common. Basically, they want you to take all the risks (and pay them for it too), then should there be any reward, to pay more. This is not exactly fair in terms of risk/reward and investments.
I have refused to proceed with purchases on property which contain such clauses (including those which impose similar conditions on a garden).
As far as I am concerned, they either take the risk and obtain planning, whereby they sell the land with permission at the premium, or they sell the land without planning cheaper.
I have refused to proceed with purchases on property which contain such clauses (including those which impose similar conditions on a garden).
As far as I am concerned, they either take the risk and obtain planning, whereby they sell the land with permission at the premium, or they sell the land without planning cheaper.
Have you spoken with your planning dept yet to ascertain whether a planning app is likely to be approved? They'll offer initial advice for free and possibly even visit the site.
Buying a plot without planning in the hope of doing so and building a house is very risky IMHO, theres often a reason the vendors selling without it and thats often down to the fact they know they can't get it. The clause being there just in case.
Buying a plot without planning in the hope of doing so and building a house is very risky IMHO, theres often a reason the vendors selling without it and thats often down to the fact they know they can't get it. The clause being there just in case.
Zippee said:
Have you spoken with your planning dept yet to ascertain whether a planning app is likely to be approved? They'll offer initial advice for free and possibly even visit the site.
Buying a plot without planning in the hope of doing so and building a house is very risky IMHO, theres often a reason the vendors selling without it and thats often down to the fact they know they can't get it. The clause being there just in case.
Just been on phone- terribly helpful people. It seems like they've done some sort of deal to sell some off to a developer as it comes under a council planning scheme. I'm not entirely sure my nerves are up to this... Now waiting for a call back from the local chappy who apparently knows everything! Buying a plot without planning in the hope of doing so and building a house is very risky IMHO, theres often a reason the vendors selling without it and thats often down to the fact they know they can't get it. The clause being there just in case.
anonymous said:
[redacted]
I come from a farming family, this man speaks sense.Personally, I'd stipulate the deal you want and the price you're willing to pay and if it's rejected, walk, if the farmer is desperate to sell you might get lucky, otherwise I'd avoid the hassle and inevitable feeling of having been done over by him.
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