Overage on part of the property

rugbywilld

Hi
I've looked over the overage queries on this forum, which all seemed to have slightly different issues, and wondered if somebody with experience might be able to give a view on our situation?

We are trying to purchase a house for which the current vendor's purchase an extra bit of land too extend their garden. This makes quite a difference to the property. Unfortunately, this came with an overage/uplift clause by the original land vendors (on value increase due to PP being granted - which we would never wish to do and I cannot believe anyone would, there is room for one house on the plot and it would be very hard to access). It appears this charge is remaining with the property. Our mortgage company is looking at whether they can lend at the moment with this in place, but we are concerned that, even if they do approve, are we storing up issues for the re-sale in the future?

Has anybody any experience that might be able to suggest a solution to this? It is rare for properties to come on in this area, so we are keen to find a solution if possible rather than walk away. It may help to know that the garden extension has a separate title, though the purchase would be for the overall property.

Thanks for any guidance you might give!

Will

AnotherJoe

If your lender is OK with it then you should also be OK when selling.
Does the overage have a time restriction on it?

rugbywilld

Thanks, for swift reply. There is still over 50 years left on it.

eddddy

rugbywilld wrote: »

We are trying to purchase a house for which the current vendor's purchase an extra bit of land too extend their garden. This makes quite a difference to the property. Unfortunately, this came with an overage/uplift clause by the original land vendors (on value increase due to PP being granted

So a previous house owner bought a separate piece of land with an overage clause?

If so, I would have thought it would be sensible to keep them as two separate titles. Have the titles been combined?

Also, if the titles were separate, I guess you would only be looking at mortgaging the title with the house on it. So the mortgage lender wouldn't need to know or care about the separate piece of land with the overage charge.

rugbywilld

Thank you.

That certainly seems a possible option to purchase the titles separately, though we hope the mortgage valuation will still hold good on the house section without the garden (the separate titles have only become clear during the process since the mortgage valuation, as has the overage).

A couple of questions on this, if I may - does it make it much harder to sell a property where the titles are separate in this way and where one would need a non-mortgage payment? Can one just pay a nominal fee for the land (so the mortgage and deposit still stand to the near-full amount onthe main property) and would one be able to tie the sale of the additional garden piece to the original garden?

eddddy

rugbywilld wrote: »

A couple of questions on this, if I may - does it make it much harder to sell a property where the titles are separate in this way and where one would need a non-mortgage payment? Can one just pay a nominal fee for the land (so the mortgage and deposit still stand to the near-full amount onthe main property) and would one be able to tie the sale of the additional garden piece to the original garden?

There should be no problem selling two titles together - although there will be some extra costs.

The seller could sell you the house title for, say, £500,000 and the extra garden for £1, if you want.

But the mortgage lender would value the house without the extra garden, so they might not agree that it's worth £500k.


Also, thinking about it, the extra garden would not be part of your main residence - so there may be capital gains tax implications.

For example, if you buy the land for £1, get planning consent for it and sell it for £200k, you'd have a big CGT bill. (Whereas, if the land was part of your main residence, there might be no CGT to pay at all.)

You'd also need to check the overage clause to see if it would inflate the overage payment in the same way.


Edit to add...

But if both titles have already been combined into one, and there is an overage clause - it might be difficult to separate them now.

rugbywilld

Thank you. This does make sense - I had wondered about the CGT, but I guess we would have to take that into account when selling. I think it would inflate the overage, although the wording is the value of land increases. That said, I don't see us getting PP for the land and I can't see anybody else every wanting to, but then stranger things have happened!

Certainly the mortgage valuation is one we need to consider and I hope they would be quick on this one.

One thing I think we would have to do is to ensure it separately as a piece of land (there is a footpath through the edge so we'd need some liability insurance).

Weeksie123

Hi Will, I’m currently looking at a similar thing and have been searching forums to discover more about mortgages on land with overage agreements.  I wondered which lender you were speaking too about this and could you let me know if they eventually did lend or not?  It would be very useful to ensure I can make sure I don’t waste time with a lender that wont lend!  Many thanks.

davidmcn

Weeksie123 said:

Hi Will, I’m currently looking at a similar thing and have been searching forums to discover more about mortgages on land with overage agreements.  I wondered which lender you were speaking too about this and could you let me know if they eventually did lend or not?  It would be very useful to ensure I can make sure I don’t waste time with a lender that wont lend!  Many thanks.

Given he hasn't even logged into this site since the posts above, I doubt he's going to be much help. You'd probably be best to start your own thread and see if anybody can assist.

rugbywilld

Hi. Well spotted David! Though having seen the email notification I'm quite happy to comment - I've just had no cause to comment recently hence no login. 
That said, I'm not sure I will be much use I'm afraid. Ultimately, we were facing a situation where we weren't going to get mortgage approval. However, our solicitor managed to arrange for the beneficiary in the overage agreement to make an amendment so they did not have first charge on the property - the lender did instead. This meant the lender was quite happy to lend. In our case it was NatWest at the time (arranged through L and C who I couldn't recommend highly enough). Si it was a case of amending the overage clause rather than finding a lender who would work with the overage. Hope that helps in some way, even if not the answer you were quite after. 
Will

[Deleted User]

Thank you for coming back and telling us how the situation was resolved.