Property sale - ever heard of this before?
Discussion
We`ve found a property ripe for development on a large piece of land - but in the info there is this clause:
Development clawback
The sale will be subject to a clawback clause in respect of development on the property for a period of 15 years, with the vendor retaining 25% of any uplift in value.
Fairly obvious what it means but would it put you off?
Development clawback
The sale will be subject to a clawback clause in respect of development on the property for a period of 15 years, with the vendor retaining 25% of any uplift in value.
Fairly obvious what it means but would it put you off?
Yep, very common when land clearly has development value.
If you are looking at buying this sort of thing you will have to ensure that you have a very clued up solicitor, don't just go to C**trywide or a one man band.
Edit to add that the last one of these i delt with cost the client about £1,500+ vat and dsb.s and they got off lightly given the time that was put in on my part. I could have justified twice that.
Would it put me off - if I was looking at it from a business perspective not really, if it was to be my own home I'd look elsewhere unless I intend to live there for at least the next 15 years. The sort of properties that have these clauses attached attract the sort of buyers whose attitude is either you are selling it or you're not. My brother turned down a lovely house because of such a requirement and I know others who have walked away from them.
can also have an adverse affect on resale value.
>> Edited by rude-boy on Tuesday 24th May 15:28
If you are looking at buying this sort of thing you will have to ensure that you have a very clued up solicitor, don't just go to C**trywide or a one man band.
Edit to add that the last one of these i delt with cost the client about £1,500+ vat and dsb.s and they got off lightly given the time that was put in on my part. I could have justified twice that.
Would it put me off - if I was looking at it from a business perspective not really, if it was to be my own home I'd look elsewhere unless I intend to live there for at least the next 15 years. The sort of properties that have these clauses attached attract the sort of buyers whose attitude is either you are selling it or you're not. My brother turned down a lovely house because of such a requirement and I know others who have walked away from them.
can also have an adverse affect on resale value.
>> Edited by rude-boy on Tuesday 24th May 15:28
Not really my area but I have seen this before. It is something I would always resist of have nailed down to some very tight wording. For example, does the development mean the first time a spade is put in the ground, when the permission is granted (which would leave you with a funding issue?) or on sale of the land?
Also 25% is a big ask.
Also 25% is a big ask.
anonymous said:
[redacted]
Can usually be done with a charge, that is the Eversheds way anyway. Last one I did was with a restrictive covenant and restriction on the register, but that was unusual and in any event they have missed the gap in it which if my client wants to take will make the whole thing is void! (yes I can be a smart arse tricky git if wound up by some jerk on the other side)
As for who decides it's a question of how greedy the seller is and what the market will stand. 25% of the uplift is about right but it's how that uplift is calculated that is the real crux. Are we talking about 25% of the net or the gross and what heads of expenditure do we include in the net figure before the uplift?
As has been said the timing of the payment of the claw-back is also important. if on the granting of PP that clearly isn't good as there are too many variables to look at as to if it is even viable. I would be negotiating for it to be payable by instalments, pro rata on the sale of each individual new dwelling. I would also look at having that claw-back only apply to the grounds and not to the main building itself.
I could go on but then I'd have to charge you...
My boss bought a golf clubhouse and 8 acres of land (half the course) for the price of a 3-bed semi, with just such a clause attached. Not only that, but the location close to major industrial works limits what would be allowed anyway. Still, there was nothing to stop him running a business from the clubhouse, and what he's saved in business rent over the years must offset any future aggro... if push comes to shove, he could open a 9-hole golf course!
Tighter than a duck's butt is an understatement when it comes to these. The devil is in the detail more than you will ever know.
Oh and just to make you even happier, the SDLT form becomes a real b1tch as you have to defer the payment of the additional SDLT on the uplift and provide a reasonable estimate to the Revenue as to what that is likely to be. Added to that there is the potential that if the purchase price is, say £495K the uplift could mean that you jump a band for SDLT and end up paying another 1% on the total consideration (ie purchase price + up-lift) in SDLT if the claw-back kicks in (that's 5k+).
Edit cause accuracy is important for this one!
>> Edited by rude-boy on Tuesday 24th May 16:05
Oh and just to make you even happier, the SDLT form becomes a real b1tch as you have to defer the payment of the additional SDLT on the uplift and provide a reasonable estimate to the Revenue as to what that is likely to be. Added to that there is the potential that if the purchase price is, say £495K the uplift could mean that you jump a band for SDLT and end up paying another 1% on the total consideration (ie purchase price + up-lift) in SDLT if the claw-back kicks in (that's 5k+).
Edit cause accuracy is important for this one!
>> Edited by rude-boy on Tuesday 24th May 16:05
A local edge-of-town
development from the 70's featured at its edge, a parcel of land which we fancied for grazing horses on near home, trouble was, although it would have suited us at time, it was clear from its location, that it
COULD be suitable access for further housing, if conditions were favourable in future.
Sure enough local builders wished to include this clause in sale, so no grazing/ couple of new houses for us either.
development from the 70's featured at its edge, a parcel of land which we fancied for grazing horses on near home, trouble was, although it would have suited us at time, it was clear from its location, that it
COULD be suitable access for further housing, if conditions were favourable in future.
Sure enough local builders wished to include this clause in sale, so no grazing/ couple of new houses for us either.
The re-purchase agreement, seemed a bit flawed as it was intimated that should it take place, the price would reflect market value at that future time ?
If however, the proposed new houses/estate, hadent' been constructed, how would a guide price, be established anyway. My thoughts at the time were, fingers might get burnt, if say the developers felt that the original sale of say 15K for patch of land, had not increased or worse still had actually fell in some way, meaning we lose the land back, and decent profit in the process.
If however, the proposed new houses/estate, hadent' been constructed, how would a guide price, be established anyway. My thoughts at the time were, fingers might get burnt, if say the developers felt that the original sale of say 15K for patch of land, had not increased or worse still had actually fell in some way, meaning we lose the land back, and decent profit in the process.
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