Clarification of an Overage Clause

Mr_Fishy

I purchased a horticultural nursery three years ago at an auction in full knowledge the Sale of Transfer included an Overage Clause.  Having completed the development of the agricultural building that was present on the land but excluded from the triggering the clause, I am now looking to move forward with the development of the remainder of the site, to which the clause applies.  I understand the principles, the triggers, the payment percentage etc. but if possible I would like to seek guidance as to the specific definitions used in the calculation of any payment. 

In the definitions stated in the Overage Provisions section, the Overage Payment is defined as:
(A-B) x 40% 
Where:
A = Enhanced Value; and 
B = Base Value

The definition of the Enhanced Value is:
The Market Value of the Development Land at the Trigger Date with the benefit of the relevant Planning Permission and assuming that the Development Land has the benefit of any easements, wayleaves, sight-line covenants and other agreements necessary to provide access, visibility splays or services to or from the Development Land (whether or not this is the case).

The definition of Market Value is:
The estimated amount for which the Development Land should exchange between an willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.

The definition of Development Land is:
The whole or such part or parts of the Property in respect of which Planning Permission is granted during the Overage Period.

The definition of Base Value is:
In relation to a given Trigger Date the greater of:
a)  The Appropriate Proportion of the Transfer Value, and;
b)  The Market Value of the Development Land at that date.

The definition of Appropriate Proportion is:
The proportion which the area of the Development Land at a given Trigger Date bears to the whole area of the property.

The definition of Transfer Value is:
The consideration paid for the Property in this Transfer.

It is my intention to only seek development on a small part of the Property and should I be successful in securing permission, would the Enhanced Value element of the calculation be based on the new Market Value for the proportion of developed land only, or the whole of the Property?

Furthermore, what would be the element used for the Base Value, depending on which is the greater of course?  Would this be the price paid at the time of Transfer, the Market Value of the Development Land at the Trigger Date without Planning Permission, or just the part of the land which is being developed?

I appreciate that these things are not clear cut when presented with just a small section of the Provision but I am hoping someone can provide clarification in layman's terms what elements would be likely used for the Base and Enhanced Values when calculating the Overage Payment, i.e. is this the new valuation with planning less the price originally paid, or the new valuation of the part of land being developed less the same when purchased, does the original purchase price paid not enter into it since valuations are taken at the Trigger Date for part and the whole of the Property with and without Planning, or some other combination? 

I have approached three Conveyancers on this and other questions concerning this Provision so far, none of  which have provided any answers.  I therefore thank you in advance for any guidance, advice or opinions anyone may provide.  

trex227

I don't know about the overage but from my experience working at a solicitors if you are approaching the conveyancing department of solicitors you won't get an answer. At least in the firm I worked at the commercial property department would be the one to draft these types of agreements and provide advice on them. Expect to pay for this advice.

davidmcn

Mr_Fishy said:

It is my intention to only seek development on a small part of the Property and should I be successful in securing permission, would the Enhanced Value element of the calculation be based on the new Market Value for the proportion of developed land only, or the whole of the Property?

Furthermore, what would be the element used for the Base Value, depending on which is the greater of course?  Would this be the price paid at the time of Transfer, the Market Value of the Development Land at the Trigger Date without Planning Permission, or just the part of the land which is being developed? It's the proportion on which you've got planning - these all refer to "such part or parts of the Property in respect of which Planning Permission is granted" in the definition of Development Land.

I appreciate that these things are not clear cut when presented with just a small section of the Provision but I am hoping someone can provide clarification in layman's terms what elements would be likely used for the Base and Enhanced Values when calculating the Overage Payment, i.e. is this the new valuation with planning less the price originally paid, or the new valuation of the part of land being developed less the same when purchased, does the original purchase price paid not enter into it since valuations are taken at the Trigger Date for part and the whole of the Property with and without Planning, or some other combination? The original purchase price (i.e. the Transfer Value) only comes into the "Appropriate Proportion of the Transfer Value" bit of the Base Value definition.

It's reasonably straightforward if you just work your way through it.

Mr_Fishy

Thank you both for your advice.
Having gone for an evening stroll yesterday to clear my head and think things through, I too came to the conclusion that the values used to determine any payment would be based on the parts or part to be developed, rather than the Property as a whole.  I think this works in my favour actually.