Overage Agreements- The Basics


Increasingly, undeveloped residential garden land and commercial properties are being sold on the basis that the Purchaser enters into an Overage Agreement.

An Overage (sometimes referred to as an uplift) requires the Purchaser to make a further payment to the Seller. The further payment represents a share of the lands increased value and payment is only due if the value of the property has increased during an agreed period of time. Each Overage Agreement will specify what action triggers this payment known as a Trigger Event.

Some Sellers such as charities and public bodies are obliged to try and obtain the best price for the property being sold which may include an Overage, other Sellers may simply believe there is an opportunity for the property to be developed and want a share of the increase in value.

The usual Trigger Events, triggering payment from the Purchaser to the Seller include;

1. The grant of planning permission
2. The implementation of planning permission
3. Disposal of the property with the benefit of planning permission
4. The implementation of planning permission or disposal of the property with the benefit of planning (whichever happens first)
5. Disposal of the property at an increased value (within a certain limited timeframe)
6. Disposal of a completed development

Which type of Overage Agreement is suitable depends on the circumstances of the sale, however, some are geared in favour of the Seller and some are geared in favour of the Purchaser and advice should be taken at the point of negotiation to ensure that your best interests are being met.

The amount due to the Seller upon a Trigger Event may be a percentage split of the increased market rate value or a pre-determined sum or some other arrangement. Overage Agreements usually reflect complex agreements made between the Seller and the Purchaser and so it is vital that they are drafted correctly to avoid a dispute.