Clawback & Overage Agreements

Overage & clawback provisions

If you are selling a property or some land, it can be possible to stipulate provisions in which you will be able to gain financially if, in the future the land or property gets planning permission and as a result of this goes up in value.

An example of this would be if you where the owner of some farmland on the outskirts of a town which you needed to sell immediately but that you thought might increase in value in the future. You can base these thoughts on other developments that you have seen around your town. Although you need to sell the land, you might worry that by selling the land now, you stand to lose out on the increase in value that would occur if the land somehow got planning permission.

There is a way in which you can profit from any increase in value to land that you sell and which subsequently gets planning permission. This comes in the form of a contract which specifies that as a part of the sale, the original owner is entitled to a part of any future financial increase in the value of the property. This can be specified not just for the current new owner but for all subsequent owners of the land until an increase occurs as a result of planning permission being granted. This example is appropriate as residential land tends to be a lot more valuable than land with a designated agricultural use put in place. There are however other situations that will also be appropriate for an overage agreement.

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