Overage / Restricted Covenant

70sthrowback

Hi all,

looking for advice from those in the know. I am in the process of buying a house which has a roughly half acre of woodland to the side of it. This woodland is owned by the previous owner of the house, and was part of the original house deeds, however he kept and seperated it when he sold the house some years ago and inserted a right of access through the property to the woodland.

Due to this right of access and reluctance of buyers to proceed with the house purchase, myself included, the owner has agreed to sell the woodland to whoever buys the house.

The woodland owner has stated there is a restriction on development of this land already, he also wants to insert a further restriction in the form of an overage so should planning permission ever be granted then he will receive an uplift. I understand this is pretty common.

The woodland is in a conservation area, and we have no intention of developing it at all, even if we could get planning permission. That said who knows what can happen in the future, we may want to build houses for our children? I dont know. Having never dealt with this kind of situation before, I wondered what type of overage would be considered to be normal and/or fair?

I have spoke to my solicitor and they have basically said exact terms and conditions would be down to us negotiate, but they will explain and advise with all the legal stuff.

Has anyone been in this situation or can offer advice on what to expect. I am yet to hear back from the seller, so I have no idea what conditions are going to be asked for. I just want it to be fair and reasonable, as mentioned we do not want to develop the land anyway, but just thinking about the future and our kids.

Thanks for reading

AdrianC

It's unlikely the overage clause would be open-ended, with no time limit.

What's "fair"? Whatever you agree between the two of you.

mchale

A uplift clause could be valid for up to 50yrs and up to 40% of value increase of land, as stated above negotiate hard.

70sthrowback

thanks for the replies so far, looking on the web I have seen differing %uplifts from 20% to 70% of the increase so there really is no standard.

I guess its down to my negotiation, and the sellers starting point.

Thanks again

Annie1960

The overage could be in two stages, (a) uplift percentage (when planning consent is granted) followed by (b) net development profit (when the dwellings have been built and sold). I understand that the maximum time for an overage can be up to 80 years (unless this has changed recently).

Don't forget that you can offset any costs you have in getting consent and the building costs before you would need to pay any of the uplift/net development profit.

It is usual for the seller to come up with a proposal about this which will be sent to your solicitor, and you can then negotiate it from there.

Richard_Webster

In this kind of case when you buy SDLT is assessed on
1. the price you are paying for the property plus
2. the best estimate of the overage payment that you would have to pay if the planning permission were obtained now.

When the overage is actually paid you have to contact HMRC again and pay any extra due because the overage was more than the earlier estimated amount or to seek a refund if it is less.

When the overage period expires if no overage has been paid you can ask HMRC to refund the SDLT paid in respect of the overage when you bought the land.

Moral - overage payments are a bad thing and should not be agreed. The land owner should use a restrictive covenant and then later agree to release it when permission is obtained.

70sthrowback

Thanks again. In response to Richard, perhaps I have confused the matter here. Below is exactly what the seller said,

"Include in any sale a restrictive covenant against building, which would only be lifted for a substantial share in the uplift in value of the land if it were to be developed subsequently"

Like I said before we have no intention of developing, so this is largely academic.

AdrianC

So he's suggesting a covenant preventing you building, but he would lift that in return for an overage.

If you think there may _ever_ be development, then it's probably worth going for the overage now, so that it expires (or is very short-life) when your heirs consider developing.

70sthrowback

Good idea, he is going to send the terms soon, so once I have them I will put them on here.

Thanks