Development/Uplift Clause

Jaxson13

We’ve had an offer accept on a property but are now panicking about our mortgage eligibility due to a development clause attached. The clause itself reads;

‘ Reservation of Future Development Rights: The property is sold subject to a reservation of future development rights whereby the vendor reserves the right to 50% of any increased value for a period of 80 years in the event that planning consent is obtained for residential development over and above the present residential dwelling or dwellings permitted under the existing planning consent. Payment is due when either the planning consent is implemented or the site is sold with the benefit of planning consent’

What I’m asking is; has anyone had a successful mortgage application with similar clauses in place?

jaybeetoo

i assume your offer was based on knowing this clause existed?

Jaxson13

Yes, we were full aware of the clause but hadn't anticipated any issues with the lender.

jaybeetoo

I assume the property is being sold at a lower price than it would have done had that clause not existed?

Jaxson13

Slightly it’s a development project and local authority owned. Hence the clause.

Thrugelmir

Jaxson13 wrote: »

Yes, we were full aware of the clause but hadn't anticipated any issues with the lender.

What issues have been raised?

Jaxson13

A free brokerage service had initially told us high street banks wouldn’t lend with this clause in place. I have contacted both Halifax and Barclays who have said they don’t see any problems but it would be down to the underwriters decision.

....there seems to be no definitive answer :eek::eek:

davidmcn

Jaxson13 wrote: »

A free brokerage service had initially told us high street banks wouldn’t lend with this clause in place. I have contacted both Halifax and Barclays who have said they don’t see any problems but it would be down to the underwriters decision.

....there seems to be no definitive answer :eek::eek:

Have you tried a broker with knowledge of non-High Street options?

The difficulty is that the overage is intended to last 80 years (which is absurdly long), which means it will be a problem for every future buyer and lender too.

I take it you don't have any immediate intention of applying for planning?

Also, what you've quoted isn't "the clause itself", it looks like the marketing precis of what the clause will say. Do you have the draft which actually has the clause? Does it fly off on the first planning consent granted, or stay in force for the whole 80 years even if the site is developed?

Jaxson13

As you can tell I’m a total novice with buying property so haven’t even realised this wasn’t the full clause.

We don’t intend to build on the land and would use for ‘garden’ purposes only.

Haven’t look into non high street options/ brokers - can you suggest any who may be able to help?