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  • FIRST POST
    • mary
    • By mary 17th Mar 17, 11:32 AM
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    mary
    Overage clause
    • #1
    • 17th Mar 17, 11:32 AM
    Overage clause 17th Mar 17 at 11:32 AM
    An overage clause has been triggered by Planning Permission for change of use on part of a property from horticultural to commercial use.

    My question is, am I entitled (as a beneficiary) to a proportion of the increase in value of the land (from horticultural to commercial) only?

    or

    Am I entitled to a proportion of the new business being developed by the new owners of the property as well?
Page 1
    • martinsurrey
    • By martinsurrey 17th Mar 17, 11:34 AM
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    martinsurrey
    • #2
    • 17th Mar 17, 11:34 AM
    • #2
    • 17th Mar 17, 11:34 AM
    An overage clause has been triggered by Planning Permission for change of use on part of a property from horticultural to commercial use.

    My question is, am I entitled (as a beneficiary) to a proportion of the increase in value of the land (from horticultural to commercial) only?

    or

    Am I entitled to a proportion of the new business being developed by the new owners of the property as well?
    Originally posted by mary
    that is what the overage clause will tell you...?
    • davidmcn
    • By davidmcn 17th Mar 17, 11:35 AM
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    davidmcn
    • #3
    • 17th Mar 17, 11:35 AM
    • #3
    • 17th Mar 17, 11:35 AM
    You're entitled to whatever the overage clause says you're entitled to. It's unlikely that anything additional would be implied.
    • Rain Shadow
    • By Rain Shadow 17th Mar 17, 11:36 AM
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    Rain Shadow
    • #4
    • 17th Mar 17, 11:36 AM
    • #4
    • 17th Mar 17, 11:36 AM
    that is what the overage clause will tell you...?
    Originally posted by martinsurrey

    'shakes head'
    You can pick your friends and you can pick your nose but you can't pick your friend's nose.
    • Hoploz
    • By Hoploz 17th Mar 17, 11:50 AM
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    Hoploz
    • #5
    • 17th Mar 17, 11:50 AM
    • #5
    • 17th Mar 17, 11:50 AM
    Post the wording here and people will be able to interpret it for you. Pretty unlikely you'd be entitled to a share of the business!
    Last edited by Hoploz; 17-03-2017 at 1:25 PM.
    • teneighty
    • By teneighty 17th Mar 17, 12:37 PM
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    teneighty
    • #6
    • 17th Mar 17, 12:37 PM
    • #6
    • 17th Mar 17, 12:37 PM
    It is usually a proportion of the increase in the value of the land, usually 25% to 50% but I have seen them as high as 75%. But it is possible for the clause to be worded to include anything, whatever the buyer is daft enough to agree to.
    Last edited by teneighty; 17-03-2017 at 12:46 PM.
    • G_M
    • By G_M 17th Mar 17, 1:22 PM
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    G_M
    • #7
    • 17th Mar 17, 1:22 PM
    • #7
    • 17th Mar 17, 1:22 PM
    Provided you are not yet at the age where the clause kicks in, you'll be able to claim 50% of the profits of the business.

    (seriously - without seeing the clause not even I can interpret it for you!)
    • mary
    • By mary 17th Mar 17, 2:47 PM
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    mary
    • #8
    • 17th Mar 17, 2:47 PM
    • #8
    • 17th Mar 17, 2:47 PM
    It says:

    1. Upon the happening of one of the events ("a Trigger Event") at any time within a period of twenty years from April 2003 and on each and every Trigger Event the Transferee or his Successors in Title will pay to the Transferor or her Personal Representatives or her or their assigns an additional sum of money ("the Additional Sum").

    2. A Trigger Event shall mean
    2.1 the change of use of the Property or any part of it to a use substantially different from the present use as defined in the Schedule hereto on:
    2.2 the grant of a Planning Permission for a change of the use of the Property or any part of it.

    3. The Additional Sum shall be calculated by reference to the increase in the value of the Property or the relevant part of it resulting from such change of use or grant of Planning Permission for such change of use and shall be 50% of such increase in value if the Trigger Event shall happen at any time within ten years of the date hereof, 45% if the Trigger Event shall occur in the eleventh year after the date hereof and so on decreasing by 5% each year.

    4. The Additional Sum shall be paid
    4.1 within fourteen days of the Trigger Event if it shall fall within the scope of paragraph 2.1 hereof or;
    4.2 within six months of the Trigger Event if it shall fall within the scope of paragraph 2.2 hereof or if earlier within fourteen days of the date on which such Planning Permission shall be implemented.

    Provided that the Transferee may postpone payment until the date upon which he shall dispose of the Property or the relevant part of it and any transfer of ownership by a Transfer, Lease for a term of e=seven years or more, Mortgage or a Court Order of the death or bankruptcy of the Buyer shall constitute a disposal for the purposes of this proviso.

    5. The Transferee will not dispose of the Property unless there will be included in the instrument of disposition a covenant on the part of the person or persons in whose favour such disposition will be to pay the Additional Sum in accordance with these provisions, and such a covenant is to be included in each instrument by which the Property or any part of it will be disposed of effected within twenty years of the date hereof.

    The Schedule

    The present use of the Property is as to part a dwelling house with garden and outbuildings and as to the remaining part a commercial market garden and/or horticultural nursery including the sale of produce derived therefrom and any building constructed to facilitate the sale of such produce.

    6. The Transferor or her Personal Representatives will within seven days of receipt thereof acknowledge in writing that she has or they have received any Additional Sum in satisfaction of these obligations.

    Thanks for all your various points of view.
    Last edited by mary; 17-03-2017 at 3:03 PM.
    • eddddy
    • By eddddy 17th Mar 17, 3:02 PM
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    eddddy
    • #9
    • 17th Mar 17, 3:02 PM
    • #9
    • 17th Mar 17, 3:02 PM
    Based on the formula in para 4 (assuming the contract was signed in 2003), it sounds like you are entitled to 30% of the increase in the value of the property resulting from planning consent for change of use.

    The part of the agreement you posted doesn't seem to say how the change in value is to be measured...

    ... so I guess the sensible route would be for both parties to jointly instruct a RICS chartered surveyor to value the property, with planning consent and without planning consent.
    • martinsurrey
    • By martinsurrey 17th Mar 17, 3:17 PM
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    martinsurrey

    Provided that the Transferee may postpone payment until the date upon which he shall dispose of the Property or the relevant part of it and any transfer of ownership by a Transfer, Lease for a term of e=seven years or more, Mortgage or a Court Order of the death or bankruptcy of the Buyer shall constitute a disposal for the purposes of this proviso.
    Originally posted by mary
    ouch,

    they don't need to pay the overage until they dispose of it, without any increase for inflation...

    you could be waiting 30 years until they die!
    • mary
    • By mary 17th Mar 17, 3:28 PM
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    mary
    Thanks for that. Yes the document was signed in 2003. Yes I thought it would be 30%.

    What had been puzzling me was the fact that the current owners had contacted the 3 beneficiaries as they want to enter into a lease with a third party for Battery Storage and were suggesting that they would offer us a percentage of the rental they would get. This proposed lease for 30 years can be terminated with 6 months notice, so there isn't much security in it as I see it. We don't know any numbers at all but do know the name of the company they are dealing with. I wasn't sure in all honesty whether we are entitled to this anyway - as the document mentions only the increase in value (meaning from horticultural use to commercial use) not extra money from the new business venture they are starting.

    I've read this one page document so many times and what it seems to me is the fact that we are only entitled to a percentage of the increase in value. The solicitor we saw this week, described this document as very "woolly" as it doesn't mention any dates as to when the value should be based on.

    Unknown to us until very recently, we have discovered the new owners got planning permission in 2015 for the 24 shipping containers on site and in 2016 there was a second Planning Permission granted to increase the number up to 40.
    • mary
    • By mary 17th Mar 17, 3:35 PM
    • 1,553 Posts
    • 440 Thanks
    mary
    ouch,

    they don't need to pay the overage until they dispose of it, without any increase for inflation...

    you could be waiting 30 years until they die!
    Originally posted by martinsurrey
    That was my next question - I wasn't 100% clear as to the meaning.

    Well the overage bit runs out in about 5/6 years time. In a hypothetical case, they stayed there for another 30 years, and on the assumption that the grant of Planning Permission now has been triggered, does this mean that they would still be liable to pay the Trigger money and we'd just have to wait 24/25 years to get it?
    • martinsurrey
    • By martinsurrey 17th Mar 17, 3:39 PM
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    martinsurrey
    That was my next question - I wasn't 100% clear as to the meaning.

    Well the overage bit runs out in about 5/6 years time. In a hypothetical case, they stayed there for another 30 years, and on the assumption that the grant of Planning Permission now has been triggered, does this mean that they would still be liable to pay the Trigger money and we'd just have to wait 24/25 years to get it?
    Originally posted by mary
    Yes. Once triggered, its owed, they can just defer payment, not get out of payment.
    • D_M_E
    • By D_M_E 17th Mar 17, 3:56 PM
    • 1,153 Posts
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    D_M_E
    Unknown to us until very recently, we have discovered the new owners got planning permission in 2015 for the 24 shipping containers on site and in 2016 there was a second Planning Permission granted to increase the number up to 40.
    posted by mary
    Planning permission granted in 2015 means your entitlement would be 40%, provided the containers are not used for horticultural purposes.

    Also, you should explore whether the original containers were being used for such purposes too - that number of containers on a small plot suggests a substantial change of use and as such could have triggered the clause years earlier.
    • mary
    • By mary 17th Mar 17, 4:14 PM
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    • 440 Thanks
    mary
    Planning permission granted in 2015 means your entitlement would be 40%, provided the containers are not used for horticultural purposes.

    Also, you should explore whether the original containers were being used for such purposes too - that number of containers on a small plot suggests a substantial change of use and as such could have triggered the clause years earlier.
    Originally posted by D_M_E
    Thanks for that observation, that the earlier permission would be 40%. In support of their 2nd Planning Application for 40 containers, they included a spreadsheet with names of current users of the containers - it seemed to be largely domestic use and also surplus stock from small local retail outlets. I don't think in any way they were used for horticultural purposes - plants would die enclosed!!!
    • D_M_E
    • By D_M_E 17th Mar 17, 6:30 PM
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    D_M_E
    Thanks for that observation, that the earlier permission would be 40%. In support of their 2nd Planning Application for 40 containers, they included a spreadsheet with names of current users of the containers - it seemed to be largely domestic use and also surplus stock from small local retail outlets. I don't think in any way they were used for horticultural purposes - plants would die enclosed!!!
    So they are, and have been for some time, in breach of clause 2.1 - the above quote gives you the evidence for the breach.

    You should check when the containers first appeared as that is what would have triggered the overage clause with or without planning permission and therefore your entitlement could be a lot more as a result.

    I wonder if their breach negates clause 4 - the bit about a lifetime to pay up - you need to consult a solicitor specializing in enforcing covenants.
    • Hoploz
    • By Hoploz 17th Mar 17, 7:34 PM
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    Hoploz
    It refers to the increase in value of the particular section of land which is changing use. Some is already commercial. So iit might not be worth a huge amount more? It's going to be tricky to calculate, I think.
    • mary
    • By mary 17th Mar 17, 8:52 PM
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    • 440 Thanks
    mary
    It refers to the increase in value of the particular section of land which is changing use. Some is already commercial. So it might not be worth a huge amount more? It's going to be tricky to calculate, I think.
    Originally posted by Hoploz

    I did manage to get a guestimate from a Chartered Surveyor/Valuer - horticultural use is about £20,000 per acre and commercial use is £200,000 in the area.

    The land previously was previously considered horticultural as that is where plants were grown and sold in the local market.

    We have crudely estimated that the site is about .8 of an acre
    • Hoploz
    • By Hoploz 18th Mar 17, 7:54 PM
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    Hoploz
    But surely that difference in value is applicable where there is an individual site. Is the land in question one part of a whole site? By which I suppose I mean could it actually be sold independently for commercial use in future?

    Anyway, sorry, bit off topic as that isn't what you were asking about.
    • D_M_E
    • By D_M_E 18th Mar 17, 8:34 PM
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    D_M_E
    20 containers on a site of about .8 acre sounds like a major change of use from horticultural to commercial.

    There probably would not be much, if any, horticultural operations being undertaken given that access to each of the existing 20 containers used for storage would be required - this would be another point indicating the .8 acre is, and has been for some time, commercial and no longer horticultural.

    Means that the overage clause would have been triggered long before the application for the extra 40 containers.

    Also you say they are in negotiation to grant, or have already granted, a lease to a separate company for further commercial expansion.

    You need to see a solicitor with a view to getting the clause enforced and, as has been said, get the land surveyed and valued as commercial and work from there.

    You are possibly looking at a share of around £100,000 or more, given the figures you already quote above - you really need to see a solicitor.

    Also, there may well be other terms in the overage clause which would mean not having to wait a lifetime for payment.

    See a solicitor.

    EDIT - under clause 2.2 if there was in existence planning permission for the original 20 containers, then that means that payment should have been sorted and agreed when that was granted.
    Last edited by D_M_E; 18-03-2017 at 8:38 PM.
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