Dealing with an Overage of Payments…

What are overage payments?

Overage payments enable a seller to share in any increase in value in land/property that is realised after the property has been sold to the buyer.

Why would a seller want to negotiate an overage?

The seller may have an interest to negotiate an overage payment with the buyer where the land has scope for redevelopment in the future.

How do overage payments work?

Overage obligations are drafted within the contract for sale of the land between the buyer and the seller. The provisions normally require the buyer to make a further payment to the seller after an agreed “trigger event” has taken place.

The trigger events can include the grant or implementation of planning permission for development or the sale of the land.

Are there any disadvantages or risks with overage payments?

Overage provisions are notoriously complex. As the parties are attempting to predict future events, the provisions need to be carefully drafted and accurately reflect the parties’ agreement.

A seller should also consider whether the inclusion of overage provisions in the contract will affect the purchase price the buyer is prepared to offer at the outset.

If the buyer agrees to an overage, the seller needs to then ensure that any future payment to which it is entitled is also adequately protected.

Overages are a complex area of law. If you wish to discuss further, please contact Foskett Marr Gadsby & Head LLP’s Property Teams, based in Epping and Loughton, on 01992 578 642. Further details on https://www.foskettmarr.co.uk/index.php/our-team/commercial-property-solicitor-essex/ and https://www.foskettmarr.co.uk/index.php/our-team/residential-conveyancing-essex/