Uplift clause - is this reasonable

waveneygnome

I am in the process of buying a delapidated house on a 2/3rd acre plot through a private sale (not through estate agents).

I received a letter today from vendors solicitor informing me of their wish to add an uplift clause.

Clause states: we have to pay 50% of any uplift in value as a result of a planning permission change of use from single residential dwelling for a period of 20 yrs from completion. Uplift payable upon granting of change of use (as opposed to any actual development) .

I have heard of uplift clauses, but wanted to know:

a) is this a reasonable %
b) is this a reasonable time period
c) the vendor is elderly (in seventies), what would happen if she were to pass away before the 20 year term?
d) can these things usually be negotiated
e) can these clauses be challenged in say 10yrs time?

I would obviously ask my solicitor, but he is away for a weeks ski-ing, and I wanted to get some views.

I am not planning on doing anytihng other than use it for single dwelling/occupancy, so am not overly concerned, but 20yrs is a long time and I am concerned that it may put off people if/when I come to sell in say 15yrs time.

Yorkie1

I have no idea but I'd be well cheesed off at being faced with this out of the blue. It sounds like a rip-off % and duration.

But then I have no idea of what is usual!

DVardysShadow

1] If the price has been negotiated, then, as already said, that is the price with no uplift clause. I would reduce the offer substantially if I still wanted the place with an uplift clause.
2] You are buying a dilapidated property. If youaccept the uplift clause, you should make sure that you are not paying uplift on the renovations you may do on the house! Say you doubled the value by renovating the house and added the same value again with planning permission. You should only pay 50% in uplift, not 100%!

Strapped

DVardysShadow wrote: »

1] If the price has been negotiated, then, as already said, that is the price with no uplift clause. I would reduce the offer substantially if I still wanted the place with an uplift clause.
2] You are buying a dilapidated property. If youaccept the uplift clause, you should make sure that you are not paying uplift on the renovations you may do on the house! Say you doubled the value by renovating the house and added the same value again with planning permission. You should only pay 50% in uplift, not 100%!

^What he said. Also, if you were to accept an uplift clause (with an associated reduction in purchase price) then it needs to be clear about how the property is to be valued.

david29dpo

I have too come across this with my present house. I insisted it was removed or i walked. My bluff worked. I recommend you have them removed or pullout, you don't know what plans you may have in the future.

Richard_Webster

I agree generally with TimmyT and there is another nasty:

Stamp Duty land Tax - as I understand it because there is a contingent liability HMRC charge you SDLT NOW on the price being paid plus a reasonable estimate of the amount of uplift that would be payable if planning permission were obtained now. As and when permission is obtained you then submit a revised return (as you would with income tax) with the correct figures paying the =extra or seeking a refund. At the end of the 20 yaers if no uplift has been collected you claim a refund!

So the moral is either to reduce the period if you can, or better, suggest a restrictive covenant instead preventing building without consent from the seller. Problem for seller with a restrictive covenant is that it only binds successors if the seller has retained some land nearby capable of benefiting form the covenant. Seller can get round that by imposing a requirement that his consent for registration at the Land Registry of a transfer of the land is required, which he is bound to give if the transferee enters into a direct covenant with him to comply with the restriction.

waveneygnome

Thankyou all.

I will chew/stew(?) on this over the weekend and have another viewing on Sunday.

DVardysShadow

IanManc wrote: »

... I wouldn't buy a property which had the encumbrance of an uplift clause attached to it - and anyone you tried to sell it to during the operative period of the clause is likely to feel the same. Its existence would substantially affect your capacity to sell the property on, in my opinion.

Actually, I might buy a property with an uplift clause. It has a potential upside for a buyer, which is this:

When people see property with some sort of potential arising from getting some planning permission, something in their mind goes 'kerching! Property!". So the value goes up on the strength of potential. And the uplift clause is intended to tap some of that potential for the seller. So it tends to knock the value of the property down. Now, if you see a potential in the property without the planning permission, the uplift will actually reduce the price for you.

chris_m

waveneygnome wrote: »

Clause states: we have to pay 50% of any uplift in value as a result of a planning permission change of use from single residential dwelling for a period of 20 yrs from completion. Uplift payable upon granting of change of use (as opposed to any actual development) .

I am not planning on doing anytihng other than use it for single dwelling/occupancy, so am not overly concerned, but 20yrs is a long time and I am concerned that it may put off people if/when I come to sell in say 15yrs time.

Looks to me as if the clause would only take effect should you decide to do a garden split to build a second property on part of the current garden.

If your concern is not that you might do that but that it might put off a future buyer - how about suggesting that the uplift clause is only incumbent upon the current buyer (i.e. you) and lapses if you should sell the property intact, so the clause does not pass on to any future buyer?