Overage on larger part of garden

benweston

Hi all,

We've just had an offer accepted on a cottage in two thirds of an acre. The house sits in the 'top' one third of an acre and the bottom two thirds are restricted by an overage clause of 30% uplift in value for 30 years, triggered only if planning permission is granted and building commences. This is non-negotiable as it was part of the previous owner's will. We've absolutely no intention of developing on that land and, if circumstances did change, would stomach the 30% uplift.

Having spoken to Land Registry, our plan was to split the title on purchase so that the house in its one third of an acre, and the 'Restricted Land' in its two thirds, are separate; the idea being to keep the overaged Restricted Land separate from the house to make the house easier to mortgage in future (this is a cash purchase).

The deed of covenant (overage) clearly highlights the Restricted Land in red, which is evidently separate from the house and its land. However, there is one line – the definition of Original Use – that is concerning me: "Original Use means the use of the Restricted Land as one residential dwelling with garden land and outbuilding used as ancillary to the residential dwelling". With this definition, if we split the titles, I'm of the opinion the overage would still remain on the house too. It would be useless and unenforceable, but it makes reference to the house and therefore remains, I think?

My question is whether it is reasonable/normal to ask our solicitors to request the definition is altered so that the overage clearly only applies to the Restricted Land only, with no reference to the house? We are happy with the terms, we've no intention or desire of negotiating a reduction in their uplift potential and, in practical terms, I can't see it would make any difference to do this and split the titles on purchase.

AdrianC

From what you've said, I think you're over-worrying and over-reacting.

If you want to mortgage the house in the future, you don't know for sure a lender will have an issue (I can't see they will - they'll simply value it as house + 1/3ac garden + 2/3ac non-developable land). If they do, you can split the title as you're proposing at that time...

user1977

benweston said:

there is one line – the definition of Original Use – that is concerning me: "Original Use means the use of the Restricted Land as one residential dwelling with garden land and outbuilding used as ancillary to the residential dwelling". With this definition, if we split the titles, I'm of the opinion the overage would still remain on the house too.

What's your solicitor's opinion? They have presumably seen the whole deed - we haven't.

benweston

Thanks for the replies.

The deed was forwarded to my solicitor a couple of hours ago so unlikely to hear until early next week; I may very well be over-worrying and over-reacting (it wouldn't be the first time), but I know from others' experiences how nit-picky these overages can be and our purchase does hinge on this. Prior to deciding to offer cash (it's a full renovation project so we need as much as possible to do that!), our broker had attempted with a whole load of lenders, including specialist ones, to get a mortgage in principle: all refused on this specific overage. They are just not interested on a title with 30% uplift over 30% years.

ProDave

KEEP the land as one title.

If you ever seek PP to build, the fact that the land is "garden ground" of the original house is in your favour.  If you split the title, just what "use" will the separate bit of land have?

A 30% uplift is not bad and the land is still probably viable as a couple of building plots even with having to pay that.

AdrianC

30% uplift, of course, means you keep 70% of the value uplift...

How many of the 30 years have passed?

benweston

Yes, I completely agree. We have no issue with the 30% uplift. This is a new overage that'll be added to the register on our purchase so the 30 years start when we buy. We've no plans to seek planning permission in the initial 10 years or so – we want the garden for our children to enjoy – but part of its attraction is knowing there are potentially two plots down there that could be exploited once the children leave home (Ha!)

Our concern was about the mortgageability and the fact that we've found that mortgage companies just don't want to know. We'd ultimately need to mortgage it once we've renovated. It's a bit of a paper-shuffling exercise but if we could split off the garden and its overage from the house, we'd solve that problem. As it stands, the deeds seem to reference the house even though it's not part of the overage itself.

I guess this can only really be answered by a solicitor poring over the deeds; thought I'd ask in case anyone's had a similar experience.

user1977

benweston said:

I know from others' experiences how nit-picky these overages can be and our purchase does hinge on this.

Yes, which is why it's important for us to see the whole deed to give an opinion, not just selected bits. Where is that definition of "Original Use" actually used, for example?

K_S

@benweston Even with an overage clause, there are a handful of lenders (most building societies) who will consider lending subject to the exact wording of the clause.

These are the kinds of lenders who require a fair bit of legwork and chasing to get a response from so may not necessarily have been looked into by your broker if it's one of the volume broking ones. For valuation purposes, it will usually be valued at the lower amount without the land.

AdrianC

benweston said:

Yes, I completely agree. We have no issue with the 30% uplift. This is a new overage that'll be added to the register on our purchase so the 30 years start when we buy. We've no plans to seek planning permission in the initial 10 years or so – we want the garden for our children to enjoy – but part of its attraction is knowing there are potentially two plots down there that could be exploited once the children leave home (Ha!)

So you're buying a place with an overage until 2051, with the intent of triggering that overage around 2031...?

Our concern was about the mortgageability and the fact that we've found that mortgage companies just don't want to know.

The overage is not in place yet, though. Cross that bridge when you come to it.

MX5huggy

Currently the proposal stops you demolishing the existing property and building 2 on the existing plot. Your proposal removes this restriction, I think. You may consider it an impractical proposal but others may not.