Development clawback on land

Daisy8ham

Can anyone please explain how a development clawback on land works in practice? I’m looking at buying 10 acres of grazing land for £50,000, where I would keep my horses. There is a clawback for any change of use other than agricultural or equine which will be calculated on the uplift in value, to be split 70:30 (purchaser:vendor). My dream is to have my horses at home but there’s no way I can afford to buy a house with land, they are always ridiculously expensive, so I’m wondering if it would be affordable to build a house on the land even with a clawback (PP permitting obvs).

My scenario is this: section off 0.2 acre for the house and garden (value of 0.2 acre = £1,000). Build little eco bungalow (nowt fancy). This is a cheap part of the country so a guess at the value of my completed house on the 0.2 acre plot is around £250,000. The other 9.8 acres is still grazing for horses.

Does the clawback only apply to the 0.2 acre or the whole 10 acres? Does the uplift include the value of the house or just the increased value of the land with a house on it? Any advice gratefully received.

davidmcn

The answers depend on the exact wording of the agreement, there aren't generally applicable rules. Are you talking about an existing agreement or something the vendor is proposing to put in place at the time of sale?

SmashedAvacado

This is called overage.

If they are asking for this, then you have the ability to negotiate with them - ie not to have it at all or to have it for a limited period of time or to restrict it to a sale for example. The exact terms will depend on what you agree and how carefully it is put into the documents.

These are very tricky clauses to agree and it will very much depend on exactly what the wording of the clause is.

If the clause already exists - then one option you have is to try to buy them out of it before you do any work - on the basis that you will only do work if you buy them out so this is the only way they will ever see any money.

When they say clawback for change of use - is that on the grant of planning - or just changing the use? The valuation presumably is the value of the land before the planning grant when compared with the valuation of the whole land afterwards. Does it apply only once - to the whole site - these issues will depend on the wording.

Sachs

It likely only applies to the actual bit you change. Say it's worth £50k now but with planning permission for a house it would be worth £150k. That means you would need to pay the vendor 30k (30% of the uplift) when you gained planning consent.

However I would say that the mere presence of an overage suggests planning consent for residential is unlikely. If it was likely the vendor would do it themselves.

markin2

Is the Deed of covenant not lost when you split it off?

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https://www.ashurst.com/en/news-and-insights/legal-updates/a-restrictive-covenant-is-not-the-best-way-to-secure-overage/

https://thrings.com/blog/removing-restrictive-covenants-to-free-your-land