Possessory title AND overage clause?

trakky14

We've seen a house we are interested in viewing with a view to purchasing...but it has a possessory title and a 30% overage clause...eek! It's basically a 60s bungalow with a 3.5 acre paddock next to it...the listing states that the vendors will pay for an indemnity for the possessory title. Not sure how long they've had the title, we will ask. The 30% overage is for 20 years. 

The value seems about what you'd expect for this sort of thing without any causes or funny titles...im concerned as we'd be getting a mortgage that this house is potentially a big can of worms?!  Thanks 

Slithery

trakky14 said:

The 30% overage is for 20 years. 

The value seems about what you'd expect for this sort of thing without any causes or funny titles.

In which case it's over-priced.

Find a different property to buy.

trakky14

That was my thinking, the paddock we'd use for horses/small animals...no plans to build anything other than a couple of stables and a few related outbuildings. The advert said they would permit Building of a stable, workshop or garage on a small strip near the house without triggering the clause but the rest would be liable for the 30%. I'm feeling we should walk away it sounds like a headache!

GDB2222

It’s all negotiable. I’m sure the overage clause is really intended to catch bigger fish than a couple of stables. So, say that, and see what they say.

And 20 years seems very long for an overage clause. 

trakky14

GDB2222 said:

It’s all negotiable. I’m sure the overage clause is really intended to catch bigger fish than a couple of stables. So, say that, and see what they say.

And 20 years seems very long for an overage clause. 

We've checked with the agent and yes it's non negotiable at 30% and for 20yrs. The title deeds are all lost. 

j2009

It is a weird one though because by the sounds of it they will allow you to build in one area with no overage (maybe to discourage having things visible to neighbours?) but you can build elsewhere if you're prepared to pay.

Are there specific details on what would invoke the overage outside of the small area they allow you to build? Based on the overage on my land I'd have to pay when planning permission is granted and the overage is a percentage of the increased value at the current market rate.

Without knowing the exact wording it's impossible to tell how yours works, but building a stable may not invoke it or may be small as unless it's a plush stables I'm guessing the value is low and would be hard to calculate (but maybe it's a blanket 30% of the original price paid or variant thereof).

Also, if it's linked to planning permission then you may be able to use permanent structures.

Have you got the exact overage wording (can you paste in if so) or are you being told there will be one and are sharing the rough details?

If it is already in place how far into the 20years are they?

GDB2222

trakky14 said:

GDB2222 said:

It’s all negotiable. I’m sure the overage clause is really intended to catch bigger fish than a couple of stables. So, say that, and see what they say.

And 20 years seems very long for an overage clause. 

We've checked with the agent and yes it's non negotiable at 30% and for 20yrs. The title deeds are all lost. 

Tell them that you are still interested, but not with those terms, and continue looking. 

ProDave

The overage clause is clearly to profit from housing development.  The vendor feels there is a reasonable chance that within the next 20 years someone might get planning to build a small housing estate there, either through a change in planning law or luck or persistence.  30% seems fair as the new owner of the land would get a load of building land at only 30% of it's market value, so very worthwhile doing if you think you can get planning.

The stables are a distraction from this, so the vendor is saying yes to those, on the assumption if the "big plan" ever happens, they will be gone as well.

Countrysider

In the last couple of years i've noticed a number of houses with large back or side gardens and potential independent access where it has been stated that the vendors want to secure an uplift/overage clause. I suspect it's on the advise of the estate agent as a tactic to secure the commission, and is probably something that they can get away with in a buoyant market. 

I am however surprised mortgage companies will lend on a house with an overage clause. The problem is that the current vendors are not subject to an overage clause so they can do what they like. However, when / if you come to sell then you don't have the power to negotiate the overage with your buyer and in a less-frantic market with more property options, something with an existing overage will be hard to shift.

trakky14

j2009 said:

It is a weird one though because by the sounds of it they will allow you to build in one area with no overage (maybe to discourage having things visible to neighbours?) but you can build elsewhere if you're prepared to pay.

Are there specific details on what would invoke the overage outside of the small area they allow you to build? Based on the overage on my land I'd have to pay when planning permission is granted and the overage is a percentage of the increased value at the current market rate.

Without knowing the exact wording it's impossible to tell how yours works, but building a stable may not invoke it or may be small as unless it's a plush stables I'm guessing the value is low and would be hard to calculate (but maybe it's a blanket 30% of the original price paid or variant thereof).

Also, if it's linked to planning permission then you may be able to use permanent structures.

Have you got the exact overage wording (can you paste in if so) or are you being told there will be one and are sharing the rough details?

If it is already in place how far into the 20years are they?

I don't have the wording, we've not been to see it yet I've just been doing some preliminary questioning. The agent says she doesn't want anyone to build on the paddock full stop.

No it's not in place, the 20yrs will start from when it is sold. The possessory title will also start from the day of sale (so 12 more years until we could apply for absolute). They don't have deeds for it but have apparently lived there since the bungalow was built by the vendors father. 

We've decided to leave it for now and keep looking at other things and see if the price comes down etc. Sounds too complicated for us to be honest!

ProDave

Countrysider said:

In the last couple of years i've noticed a number of houses with large back or side gardens and potential independent access where it has been stated that the vendors want to secure an uplift/overage clause. I suspect it's on the advise of the estate agent as a tactic to secure the commission, and is probably something that they can get away with in a buoyant market. 

I am however surprised mortgage companies will lend on a house with an overage clause. The problem is that the current vendors are not subject to an overage clause so they can do what they like. However, when / if you come to sell then you don't have the power to negotiate the overage with your buyer and in a less-frantic market with more property options, something with an existing overage will be hard to shift.

The overage clause does not devalue it as a single house, so why would a mortgage company be worried?