looking at buying some land however...
Discussion
hey, ive been eyeing up some land for a business idea.
However recently there has been an update to the advert
"Purchasers will also be obliged to enter into a formal Agreement with the sellers to allow the sellers to have a share in any uplift in value arising out of the granting of planning permission for residential or commercial development on any lot."
WTF
Is this normal?
this is some random land about half an acre on a slope.
However recently there has been an update to the advert
"Purchasers will also be obliged to enter into a formal Agreement with the sellers to allow the sellers to have a share in any uplift in value arising out of the granting of planning permission for residential or commercial development on any lot."
WTF
Is this normal?
this is some random land about half an acre on a slope.
In some ways it is bit of a piss take but has become pretty much the norm. Generally they’re either aimed at preventing development, or used where people are scared/concerned that there are people out there who can monetise them land in ways they’ve not thought of/been able to, or simply there’s so much demand for land that they know the property will sell to someone willing to accept such a provision.
Your options are either:
1) negotiate it away
2) make the terms acceptable (there are many ways to do this)
3) live with it
4) walk away
What the advert says and what happens in practice can be quite different. I bought some land just before Christmas and know that there were two interested parties. The other purchaser was going to be hit with an overage provision, whereas it never even came up in my discussions with the vendor.
Buying another property where part of it has an overage clause but the wordings such that provided I use it for what I’ve told the vendor I intend to use it for he won’t get a penny more. Both parties are fine with this.
Your options are either:
1) negotiate it away
2) make the terms acceptable (there are many ways to do this)
3) live with it
4) walk away
What the advert says and what happens in practice can be quite different. I bought some land just before Christmas and know that there were two interested parties. The other purchaser was going to be hit with an overage provision, whereas it never even came up in my discussions with the vendor.
Buying another property where part of it has an overage clause but the wordings such that provided I use it for what I’ve told the vendor I intend to use it for he won’t get a penny more. Both parties are fine with this.
NDA said:
Ask the vendor to agree to share any loss - see what he says.
As others have said, it's fairly common. You could try capping it or putting a price hurdle in there.
If the original sales materials didn't mention this uplift clause, might there be an angle there?
Once people have got it into their head that it’s a clever thing to do, provided it’s all still prior to an agreement being reached, you can pretty much forget the fact that the original advert didn’t mention it. Unless nobody bites, or someone is prepared to pay more to have it removed, it’ll end up in the final agreement. As others have said, it's fairly common. You could try capping it or putting a price hurdle in there.
If the original sales materials didn't mention this uplift clause, might there be an angle there?
The best way of addressing it is usually to carve out specific use cases to which it doesn’t apply and/or look at the amount payable tapers over time.
You can get more creative but you have to remember that the mindset of vendors including these clauses is that they’re being smart (irrespective of whether or not they actually are) so they don’t usually give them up easily. It can be quite astonishing at times, as some vendors genuinely believe they hold all the cards and don’t recognise that someone with the money needs to find the terms acceptable if there’s to be a deal.
It might be common but it’s taking the mick!
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
CrgT16 said:
It might be common but it’s taking the mick!
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
You won’t be buying any land if you’re not prepared to negotiate. It’s as simple as that.Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
CrgT16 said:
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause?
I suppose there are different market values depending on how things might play out. The owner could hang on to the land and see how it goes, or sell it now, but cover themselves to some extent with an overage clause.Would they accept selling their house with a similar clause?
In another thread on here there’s someone trying to sell a house that has a pre-existing overage clause on the garden, and the vendors (probate) of a house we were offered in our village said they’d be putting an overage clause in as they didn’t want the site developed.
Sheepshanks said:
CrgT16 said:
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause?
I suppose there are different market values depending on how things might play out. The owner could hang on to the land and see how it goes, or sell it now, but cover themselves to some extent with an overage clause.Would they accept selling their house with a similar clause?
CrgT16 said:
It might be common but it’s taking the mick!
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
These clauses are very common in land purchases, simply because land is such a valuable commodity.Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
You can say that you wouldn’t accept it, but the reality in that case is that you wouldn’t be able to obtain any land.
I looked at buying some fields near me. The vendor asked me for such a clause. As I didn't intend to develop the land (I was buying it to protect my borders), I was happy to acquiesce.
This. Imagine having to track down the interested parties after 20 or 30 years.
costsmonkey said:
springfan62 said:
Or you could put a time limit on it, say 10 years.
This - overage clauses are becoming increasingly common but most I have seen are time limited, although the time limit is often longer than ten years. CrgT16 said:
It might be common but it’s taking the mick!
Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
If we all understand that land increases in value with planning permission, groundworks in, and fully developed, these clauses can make sense where the vendor doesn't have skills / funds / time to develop land, so shares in upside with the purchaser, who acquires the land at a lower price to recognise the risks attached at such an early stage in the development.Are they selling at a discount from market value? If not walk way, I wouldn’t buy that.
Would they accept selling their house with a similar clause? They want the cake and eat it.
You are buying at current market value, why pay more if you develop it? Why don’t they develop it?
Like I said it may be common but on principle I would not accept.
sideways sid said:
If we all understand that land increases in value with planning permission, groundworks in, and fully developed, these clauses can make sense where the vendor doesn't have skills / funds / time to develop land, so shares in upside with the purchaser, who acquires the land at a lower price to recognise the risks attached at such an early stage in the development.
I don't have skills/funds/time to develop a lump of steel into a Rolex.sideways sid said:
If we all understand that land increases in value with planning permission, groundworks in, and fully developed, these clauses can make sense where the vendor doesn't have skills / funds / time to develop land, so shares in upside with the purchaser, who acquires the land at a lower price to recognise the risks attached at such an early stage in the development.
I purchased some land from a very large reinsurance company who certainly did have the skills and funds to develop it.They too wanted a claw-back agreement.
When I asked why, their land agent said that it would not be viewed well in the eyes of their shareholders if I flipped it with planning shortly after the sale to me.
I negotiated a deal where they got 90% of the uplift in year one, tapering to zero after the number of years that fitted my long term plan.
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