Overage agreement

waveneygnome

After some advice for elderly relative.

They bought a house 5 yrs ago, with a 15yr overage clause, that if the property was redeveloped/change of use, then 50% of the uplift value would be payable to the vendors.

My relatives have just been approached by a property developer who is interested in the house (to demolish & build more than 1 property on the site).

what happens about the overage clause if the original vendors have died? (They died 3 yrs after they sold the house to my relatives)

eddddy

Typically, when the property is re-sold the new buyer has to enter into a Deed of Covenant with the person who would benefit from the overage.

Put more simply, somebody can only buy the property if they sign a document to agree to the overage clause.

So the current owners are probably 'on the hook'.

(That assumes the overage agreement was set up well - but I guess it may not have been.)

Thrugelmir

waveneygnome wrote: »

what happens about the overage clause if the original vendors have died? (They died 3 yrs after they sold the house to my relatives)

Read the small print so to speak. What terms were drafted into the contract. If the vendors solicitor did their job they'll be comprehensive.

steampowered

If a payment is due to someone who is deceased, that payment is owed to their estate.

Any payments owed should be made to the executor and would form part of the estate.

The executor may be surprised to hear from you 3 years after the death, but it would be a nice surprise for the beneficiaries.

Have a search of probate records (https://www.gov.uk/wills-probate-inheritance/searching-for-probate-records) to see if you can find out who the executor is.

waveneygnome

Thanks all.

I’m trying to get. Copy of the TR1 form from them and will have a read.

If your right eddddy: then in say year 14 (within the 15 yr overage agreement), and the property was redeveloped, the clause triggered, payment needed to be made........this could have to be passed down through two or three executors, years after estates wound up.......and presumably could potentially trigger IHT issues? Is there not a duty on Executors to check the status of overage clauses when winding up estates?

konark

So first you need to find the previous owner's executor.

You can get a copy of the will if probate has been applied for which will tell you who the executor is.

Assuming the executor is still alive.

Assuming the previous owner didn't die intestate, or their estate is insolvent or many other complications.

davidmcn

Would have thought this situation would be foreseen by someone!

Is the overage obligation secured in any way (e.g. a charge over the property)?

Do your relatives want to sell irrespective of the overage? If so then they'll be instructing solicitors, and the solicitors can sort out what needs to be done with any overage.

Riggyman

Surely the overage clause is associated with the property/title deeds and so when and if your relatives sell it is no longer their problem? The developer may not be as interested in buying the property when they find out about the overage?