Overage and Clawback

Farmers and landowners who sell surplus land for development can access additional revenues when that land appreciates in value through an overage and clawback provision sale contract.

When you sell land, you can agree with your buyer that additional payments – overage and clawback – will be due to you, if and when the buyer obtains planning permission to develop the property, or when such a planning permission is implemented. These payments are in addition to the agreed purchase price and are usually expressed as a percentage of the increase in value of the land.

At Coodes, we have extensive experience of advising on and drafting overage and clawback provisions for farmers and landowners. Overage and clawback is a complex area requiring the expert legal advice of a professional who understand both property and commercial matters. Our Rural team will help you understand all aspects of overage and clawback and support you in drawing up a suitable provision to ensure that your interests are covered and you are maximising the potential value of your land.

There are a number of important issues to consider before agreeing any provisions. These include:

• Period of time: how long should the overage provision last?
• Percentage: your share of the increase in the value of the land from the agricultural value to the value with the benefit of planning permission. The percentage must be sufficient to justify imposing the overage or clawback provision. For example, it could be 30%.
• Trigger: when the payment will be triggered. This is often on a sale of the land with the benefit of planning permission or implementation of the planning permission i.e. construction and sale
• Protection: ensuring that you have a mechanism for capturing the payment in the future, particularly if the land changes hands again.
• Tax: there are Stamp Duty Land Tax implications for the buyer, which will impact the price and terms over the Overage negotiated.