- Length:7 pages (1900 words)
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About this overage agreement
This document is for a property buyer. As every property professional knows, an overage agreement is a useful device for a seller to obtain the maximum value from the sale of his land. However, it is more likely than not that it is the buyer who initiates the deal. It is therefore strongly in the interest of the buyer to produce the contract in a version he can live with. The parties can then negotiate the finer points based on that contract.
This agreement could be used for any land deal, regardless of value. Use by incorporating in the contract for sale or as a stand-alone agreement.
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 agreement is to provide a framework which entices future owners to develop and not one which ensures that they do not develop.
Advantages of this agreement
The advantages of this overage agreement are with the buyer. In particular:
- 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. (That is likely to be impossible, but is nevertheless demanded by some solicitors).
- in calculating overage, credit is given for money expended in obtaining the permission, such as professional and planning fees.
When to use this buyer’s overage agreement
Use this agreement when you buy any land. The land does not have to be open land. It is just as binding when the land is an old industrial shed or a perfectly good office building which stands in the way of larger development.
The benefit of an overage agreement is that the buyer is not at risk of buying at a price which does not reflect current value, while the seller can look for a future share of future value without the expense and work involved in achieving that future value.
This document is in plain English. Nonetheless it is a sophisticated document drawn by a property specialist solicitor. It is suitable whether you are an individual or work through a company incorporated in the Republic of Ireland.
Contents of this overage agreement
- Overage Payment: payment terms
- The Overage Payment: Surveyor’s valuation
- Transferees’ continuing liability
- Release to enable Transfer
- Seller’s costs
- Miscellaneous matters