Overage Clause

mechtec

Thank you Tbagpuss for your comments.

Our Solicitor who was recommended to us by the Estate agents acting for the seller advised that we reject the overage terms and conditions as they are over-burdening, unfair and penalize any buyer from converting the school buildings or developing the site.

The overage T&C was a 14 page document originally full of indexing and reference errors these after 9 months were finally corrected however despite much lobbying and requests by our solicitor to make the terms more reasonable and fair by having the overage payable on implementation of a planning application, move the overage onto the surrounding land which holds the development potential, have the overage payable on residential development only they were all rejected.

The Church insist that whilst the school is redundant and sold without planning in place for residential use the granting of change of use from educational to residential will trigger an initial and immediate overage payment. The overage will then be triggered again by each and every subsequent planning application being granted on the premises or surrounding land irrespective of already being triggered until the 25 year term expires. The terms basically state that they can have multiple bites of the same cake irrespective of any overage already being paid.

You are right of course that they want 50% of any increase in value, have capped any expenses deductible incurred during the application process, want us to be liable for all costs in pursuit of the overage ie: valuation surveyors fees and legal costs for both parties. In real terms this ends up with my 50% being eroded considerably and the Church walking away with all the profit.

agrinnall

mechtec wrote: »

Our Solicitor who was recommended to us by the Estate agents acting for the seller advised that we reject the overage terms and conditions as they are over-burdening, unfair and penalize any buyer from converting the school buildings or developing the site.

Well, they seem to be doing the right thing, but I don't think you'll find many people on here who would ever suggest that you go with EA recommended solicitors as they may not be working entirely in your interests, and there will be a kickback of some sort to the EA that eventually will be paid for by you. Much better to find an independent solicitor of your own.

moneyistooshorttomention

Those terms are so onerous that I wonder whether, in actual fact, there is pressure on them to sell that redundant property - but they don't actually wish to sell it.

So - in theory - it's on the market for sale.

In practice - they've quite deliberately put in every obstacle they could conceivably think up quite deliberately in order to ensure they never do actually get a sale ever to anyone.

Sort of equivalent to putting a £200,000 house on the market for £500,000 and then deliberately making a point of telling the buyer every defect it has etc etc and all done with deliberate intention of never selling it - but, in theory, they can say it's up for sale.

Perhaps they've got some committee or something somewhere that put it up for sale - and there is infighting on the committee and those who don't intend to sell have agreed to sell and hope the others don't realise they've built in all this stuff to ensure it doesnt sell iyswim?

Okrib

This sounds like an area where you need specialist legal advice, which you might not get from a solicitor recommended by the agent.


We had a sale recently where there was a similar clause with a church commission, it delayed the sale hugely but eventually the solicitor was able to resolve it by negotiating with the church's solicitor. This was to do with the removal of a covenant when additional space was added and the cost of doing it.


From my limited understanding of this area, the clauses seem extremely onerous and I would not buy it. I think the overage would be fine, if it was a one off triggered by the change of use.

Hoploz

In fairness to the OP, their actual question was, whether anyone reading had actual experience of this and could tell them whether it sounds normal or not. So opinions, although they might be interesting, weren't really what they were looking for.

Just a little thing to throw in which could be useful - currently, there are certain temporary additions to Permitted Develeopment to increase availability of housing, and one of those is the ability to change use from certain types of business use to residential without a requirement for Planning Permission. I haven't read it recently myself, but do investigate whether this would apply as it could be useful to you if you go ahead. The document for Permitted Development is available to read online, or your local planning dept staff would presumably be able to confirm one way or another.

Document here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/516238/160413_Householder_Technical_Guidance.pdf

Fuzzyness

mechtec wrote: »

We placed an offer in against an old School house being sold by the Church in Wales and were told by the estate agents that an overage of 50% would have to be paid to the Church on the granting of a planning application for change of use to residential. Our offer reflected that allowance.

However the full terms and conditions which the Churches Solicitors say are "STANDARD" seem appalling as follows:
1)Overage term is to be 50% of uplift for 25years
2)Overage is triggered by a planning application (not implementation) which can be made by absolutely anyone regardless of not owning the premises or having an interest in the premises.
3) We would be liable for all legal costs of both parties in the event of a overage trigger point.
4)Any planning application be it for residential, business or maintainance ( tree presevation pruning works) regardless of not increasing the property value would still trigger the overage situation and require valuations by surveyors and legal costs at our expense.
5)A cap on expenses deductable from any overage payment of £5,500 for the next 25 years for obtaining any planning application, this would include architects fees, environmental surveys (wildlife and trees) planning fee.

Now our Solicitor who ironically was recomended by the selling agent has advised us to pull out of the sale and not accept any of these termsas being unfair and overburdoning. Also a financial advisor also reccomended by the sellers agent said that no bank, building society, or broker would ever be able to secure a mortgage against the property as it could never be classed as a "secure Asset"".

So the question is as the Churches solicitors state that this is a standard contract has any other reader come across similar penalties.

why not ask for a conditional contract instead i.e. you say you'll pay X if planning permission is granted for a change of use to residential. if you dont get planning permission you can walk away but if you do, you know what you will be paying.

Thrugelmir

With 1.9 acres someone could spend 25 years developing the site on a piecemeal basis. With each developed plot self funding the next.

unforeseen

Hoploz wrote: »

In fairness to the OP, their actual question was, whether anyone reading had actual experience of this and could tell them whether it sounds normal or not. So opinions, although they might be interesting, weren't really what they were looking for.

Just a little thing to throw in which could be useful - currently, there are certain temporary additions to Permitted Develeopment to increase availability of housing, and one of those is the ability to change use from certain types of business use to residential without a requirement for Planning Permission. I haven't read it recently myself, but do investigate whether this would apply as it could be useful to you if you go ahead. The document for Permitted Development is available to read online, or your local planning dept staff would presumably be able to confirm one way or another.

Document here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/516238/160413_Householder_Technical_Guidance.pdf

Unfortunately D1 to C3 does not appear to be covered under permitted development

patman99

Would some of the T&Cs breach the UTCR?.

davidmcn

patman99 wrote: »

Would some of the T&Cs breach the UTCR?.

UTCR isn't really relevant for contracts for land, on the assumption that (as here) both sides have the benefit of independent legal advice and the freedom to negotiate the terms.