Overage agreements

This type of contract is used where the seller believes that there is potential for development of the property in the future, and wishes to take a share of any increase in value as a result of work that the buyer might carry out (typically gaining planning permission).


    Overage agreement: buyer version; simple

    This is a complete and practical overage agreement for a property buyer to put to a seller as an incentive for the seller to sell his land.

    The agreement can be as soft as the buyer wishes. The document is drawn as a simple version so that the buyer can minimise his future obligations.

    This is a comparatively simple version in which the seller’s rights do not pass from the present buyer to a future buyer. The effect is that the present buyer is bound for the overage period, but can sell a title “clean” of the attached overage.

    The calculation of the overage payable is simple, in that it bites only when a planning consent increases the land value by a given sum. It thus avoids the possibility of multiple small overage charges.

    The aim of this agreement is to provide a framework which entices the buyer to develop and not one which ensures that he does not develop.

    Overage agreement: seller version

    1 Review

    This is a powerful overage agreement for a property seller to put to a buyer.

    As every property professional knows, an overage agreement is a useful device to obtain the maximum value from the sale of land. The buyer can buy at a low risk cost and the seller will ultimate share the future development value in the agreed proportions.

    The deal can be softened as necessary in order to accommodate the buyer.

    The document is suitable for any site or plot with possible future development value.

    You could incorporate the terms into the contract for sale or use this document as a stand-alone agreement.

    Overage agreement: buyer version; concessionary

    This is a fair and practical overage agreement for a property buyer to put to a seller in response to seller's request for an overage payment. It can be used for any transaction, large or small.

    It is strongly in the interest of the buyer to produce the first draft of the contract. The parties can then negotiate the finer points based on that contract.

    This agreement provides for payments on repeated sales over however many years you wish. However, the buyer should avoid being drawn in to a long overage period, because a future owner of a developed part, such as a house of workshop owner, may have difficulty in finding a lender on “overaged” property.

    The aim of this contract is to provide a framework which entices future owners to develop and not one which ensures that they do not develop.

    The advantages of the agreement to the buyer are:

    • interest is not payable from the moment planning permission is granted
    • overage does not bite on the value of buildings but only on an increase in the land value
    • there is no obligation for the buyer to try to register the agreement at the Land Registry
    • in calculating overage, credit is given for money expended in obtaining the permission, such as professional and planning fees, ecological report and so on

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