Page 4 - Demo

1. Introduction
In this age of uncertainty overages have come into their own as a possible way of securing more money from a land sale one way or another. Developers often view them as a way of deferring payment or sharing risk. During negotiations they can change and evolve into a quasi joint venture or funding agreement. Even if they are not triggered, they are sometimes “bought out” before the expiry of the overage period, frequently on the grounds that they are unclear or unworkable!
Public bodies find them useful so as to ensure that they comply with section 123 of the Local Government Act 1972 and their duty to sell for a consideration no “less than the best that can be reasonably obtained” or (and this would include charities and trustees) their general obligation to obtain “best value”.
Overage is easy to refer to in the heads of terms; it is not simple to draft and cover all eventualities; often the drafting will have layers of complexity and alternatives and as a result take longer to agree than the rest of the contract. (See Appendix 1 for an example).
Parties have fallen out over the overage rather than the main body of the deal, sometimes not proceeding and sometimes renegotiating the terms; in this situation the price can go down as a result of a perceived onerous overage clause or go up with overage being dropped. If the parties want a quick deal to be done then they are not off to a good start with an overage deal, despite best intentions.
Both parties need to consider at the outset what they are seeking to achieve with overage and it may be that, having considered the matter, a conditional contract, option or planning promotion agreement is more suited. From the landowner’s perspective, do they view overage as a “good to get” or an absolute requirement; from the developer’s perspective do they expect to pay overage or is it a “long shot”?
Despite what landowners’ surveyors may say to the contrary, an overage clause can affect value as it has associated with it restrictions on what can be done with the land, obligations on the developer to obtain certificates/approvals on any disposal, as well as various “management” obligations; as a result, a buyer may offer less.
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