Overage agreement

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Tessa K
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Overage agreement

Post by Tessa K » Sun Jul 25, 2021 12:23 pm

Has anyone here done an overage agreement when selling a property? I've just found out about it and it may well be something I need to talk to the lawyers about when it comes to selling my parents' house. I've done some research and it looks complicated so any tips on pitfalls and thing to take into account would be useful.

This: https://www.taylorvinters.com/article/f ... ermission.

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Martin Y
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Re: Overage agreement

Post by Martin Y » Sun Jul 25, 2021 12:45 pm

It's something Mrs Y and her brother are looking into now over their father's house, which is built on a plot-and-a-half and might best be sold with permission for another house on the half plot (much of the street is semi-detached houses on that size of plot). I've not paid close attention to the process but will ask.

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Re: Overage agreement

Post by Lew Dolby » Sun Jul 25, 2021 1:53 pm

Didn't know they were called that.

Last year we bought an empty plot same size as ours next door. There's an ancient covenant on it so it can't be built on.

The sale includes a stipulation, if we get the covenant overturned and get planning permission within 20 years, the seller gets 50% of the increase in value. Since we've no intention of doing so, we didn't care how big the penalty might be. [Part of the reason to buy was to stop any build overlooking us.

Pretty sure our agreement says we pay at getting planning permission not after build and selling on.
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Martin Y
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Re: Overage agreement

Post by Martin Y » Sun Jul 25, 2021 2:18 pm

Okay, I asked and they decided against an overage agreement, mainly because it would tend to make it harder to find the right buyer now, even though it might not maximise the land's value in the long term.

Their late father often fretted that if he ever sold, a developer would raze the house, grub up the apple trees and build a cluster of 6 houses. He didn't want to impose that on his neighbours. The advice Mrs Y and her brother got from solicitors and estate agents was to consider every option (including that one, though they'd prefer not to). It would be possible to put conditions on the sale to try to prevent that kind of development but a family friend estate agent advised that such things somehow tend to be got around one way or another. They were advised by a local estate agent that the house would easily sell as-is, or on just its single plot with the other half plot sold separately. Planning permission for a new house on the half plot would not only make that more valuable but would also reduce its appeal to a developer who might buy the whole thing to nuke and pave.

An overage agreement might make it possible for a potential buyer to afford the whole site, with a further payment to come from the sale of the new-built house, but the hassle of having an ongoing contract between buyer and seller is as offputting to a buyer as it is to the seller and in this case at least it looks like an unnecessary complication as it appears it won't be too hard to find a buyer. If the potential value of the site was very much more than its current value then thrashing out a watertight overage agreement would make more sense but in this case not really.

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Re: Overage agreement

Post by Gfamily » Sun Jul 25, 2021 3:08 pm

Martin Y wrote:
Sun Jul 25, 2021 2:18 pm
Their late father often fretted that if he ever sold, a developer would raze the house, grub up the apple trees and build a cluster of 6 houses. He didn't want to impose that on his neighbours.
Of course, an alternative might be that a developer would look at the neighbours' properties as well and have made them an enticing offer too.

An uncle living in a short road with big houses was being offered a huge sum for his large house and garden if he and all his neighbours accepted the offer.
Some didn't want to move, so it didn't happen.

We know a few others where all the homeowners were offered a decent sum for their small street of thirties houses, with a custom built bungalow for them on their original sites.
As they were empty nesters in large houses and sizeable gardens it suited them very nicely.

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Martin Y
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Re: Overage agreement

Post by Martin Y » Sun Jul 25, 2021 3:38 pm

Gfamily wrote:
Sun Jul 25, 2021 3:08 pm
Of course, an alternative might be that a developer would look at the neighbours' properties as well and have made them an enticing offer too.
It's a good point.

It was suggested to Mrs Y that it would be significantly harder to get planning permission for multiple houses on the site even though she had assumed it would be easy (as a couple of bungalows opposite were demolished a decade or two ago and turned into a close with multiple bungalows). She is, consequently, very much an advocate of getting well informed local advice.

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Tessa K
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Re: Overage agreement

Post by Tessa K » Mon Jul 26, 2021 10:53 am

The house itself is in poor condition and would need to be gutted. There's room to build two on the land and many of the properties in the neighbourhood have sold chunks of their land to developers so there are houses round it now. There are only two neighbours up the lane, one is very old and frail and won't last much longer; there's room to build three on his land.

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Seagull
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Re: Overage agreement

Post by Seagull » Mon Jul 26, 2021 1:46 pm

We once bought a house where the seller wanted to impose an overage agreement (due to other houses further down the street having developments in their garden). We weren't keen on the idea and managed to talk the seller out of it with a strong letter. We had no intentions of selling any of the garden, we just didn't want the hassle of having that in the way when we would eventually and inevitably come to sell the house later on.

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Tessa K
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Re: Overage agreement

Post by Tessa K » Mon Jul 26, 2021 3:34 pm

Seagull wrote:
Mon Jul 26, 2021 1:46 pm
We once bought a house where the seller wanted to impose an overage agreement (due to other houses further down the street having developments in their garden). We weren't keen on the idea and managed to talk the seller out of it with a strong letter. We had no intentions of selling any of the garden, we just didn't want the hassle of having that in the way when we would eventually and inevitably come to sell the house later on.
One thing I've learnt from my research so far is not to be greedy. If I did it, then it would probably only be for 10 years rather than a much longer term. Maybe even five.

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Seagull
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Re: Overage agreement

Post by Seagull » Mon Jul 26, 2021 3:45 pm

Yes that sounds reasonable. I can't remember the details with the one we argued over, but I think it was 20 years+. Enough that it was definitely not going to fall away under our ownership.

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